NBB Insights:

Are You Ready for the Silver Tsunami?

Brady Schmidt

A monster wave can crush you, or give you the ride of your life. Surfers will tell you that the difference often comes down to timing.

There is a monster wave coming for the auto industry and the media is calling it the Silver Tsunami. It is a wave of Baby Boomers hitting retirement age at a rate of 10,000 a day. Baby Boomers own almost half of all privately-held businesses in America, so that retirement wave will trigger the biggest sell-off of family-owned businesses this country has ever seen.

With proper planning, you can be ready to ride the front edge of that wave. If you wait too long, you risk being caught in a flood of sellers.

Aging Auto Dealerships

A dealership owner can effectively give a dealership a facelift with factory imaging, but there’s no way to turn back the clock on an owner’s age. The average car dealership owner in America is 71 years old -- the front edge of the Baby Boomer generation -- which means we are rising on an inevitable wave of dealership sales.

You might think that with so many dealerships being family-owned, these businesses will just pass down to the next generation. Think again. The rate of family-owned businesses that made it to the second generation dropped by half -- from 30% to 15% -- in the 20 years from 1984-2004. The number continues to drop, leaving many dealership owners without an exit plan.

In fact, according to Price Waterhouse Cooper’s 2019 US Family Business Survey, only 23 percent of family businesses have a formal succession plan in place. This trend is consistent with what we’ve seen serving family-businesses for the past 40 years at National Business Brokers.

Timing is Everything

There are plenty of eager buyers for auto dealerships -- we have a database of hundreds of qualified buyers, ready to jump on the right opportunity. But a glut in the market always means the same thing for sellers: higher competition and lower prices.

It’s a simple question of supply and demand. When the number of sellers is low, they can ride the wave while the buyers compete for the available stores. This is when sellers get the highest value for their stores.

When the number of sellers is high, the wave crashes and they flood the market. Buyers have lots of stores to choose from. Often the most desperate owner “wins” the deal because they are willing to sacrifice significant value to snag a buyer.

As a dealership owner, it’s not hard to see where you want to be on that wave. But that means you need to start paddling out into the ocean now, even if you think you are several years away from surfing the retirement wave.

Catch the Wave

Maybe you don’t like to think about retirement and selling the dealership you built. I understand that. It can feel like an overwhelming number of questions to answer and decisions to make. It can be frightening not knowing what will happen.

So how about we schedule a call to discuss “surfing lessons” instead? We’ll coach you through everything you need to know so you can catch the right wave at the right time.

Let's talk today.