The Silver Tsunami

Tsunamis are life altering events, sometimes for entire cultures or countries. 

There is a tsunami coming to the United States that has been widely forecasted, and yet preparations seem to be lacking. The tsunami I’m talking about, the Silver Tsunami, will lead to a business value transfer estimated at $10 to $14 TRILLION.

Preparing for Change

I sat down with Joe Surber from BluGrowth to discuss how small businesses can prepare for this transition, which we will discuss shortly, but first here are some numbers to show the extent of change:

• 2.9 million – Number of firms with owners aged 55+
• 32.1 million – Number of workers in these firms
• 1 in 6 – Jobs linked to boomer owned businesses
• $100 trillion — Combined personal assets and company net worth moving to successors or buyers as owners retire

That is some massive change.  Combine that with these workforce statistics:

• 25% of manufacturing workers are > 55 years old
• 7.2 million individuals out of the job market (not looking for work)
• 3.8 million manufacturing positions to be filled over the next decade

American small business and manufacturing sectors have an aging problem. This issue really has two fronts.  First, let’s look at the silver tsunami of ownership.  Then we will look at the aging workforce.

As I talked with Joe, he gave his unique perspective with a question for these owners who are looking to transition out, ​“Is a big fat offer from a PE firm best?”  He then walks through some steps to help the owner see the possibilities.  These are conditions all businesses need to consider, not just the ones ready for transition.

Taking the Next Steps

Step one: Get Your Company Bankable

Many small businesses have evolved from someone with technical expertise that needed to make some money and that job grew into a business. 

It isn’t clear when, but now there are employees and finances and often the owner is a great technician, just focused on keeping the doors open.  This often leads to liquidity problems and the potential to enter into some unfavorable financing arrangements because the business doesn’t meet traditional banking criteria for loan approval.  Focusing on building a financial system that meets these requirements takes the business to a level where outsiders see value.

Step Two: Make Your Company Buyable

According to Joe, this means creating systems that remove the concentration of influence from a single or a few major customers, vendors or even delegating business functions so the owner isn’t the lynch pin that holds it all together.  Concentration equals risk and risk is something investors don’t like.   Mitigate the risk and the company has a more sustainable and attractive future. 

In addition to removing risk, this stage is powered by setting growth targets and performance objectives.  When a business repeatedly meets these targets and objectives, it is now much easier to value.

Step Three: The Inflection Point

At this stage, the business owner has reached an inflection point.  Is it best to sell the business to an outside firm, use other tools to keep the business open but reap the financial rewards, or decide to build the business with improved systems, such as automation, robotics, or new business management software. Joe calls the business buildable at this stage.

Let’s take a look at the labor picture now and review the numbers from earlier: 

• 25% of manufacturing workers are > 55 years old
• 7.2 million individuals out of the job market (not looking for work)
• 3.8 million manufacturing positions to be filled over the next decade

In addition to the number of available workers, there is a skills mismatch for those that are entering the workforce as technical training programs have been defunded.  There simply aren’t enough training opportunities to equip the trade workers needed. 

To compound matters, the need for qualified manufacturing and trade workers continues to grow through government programs like SHIPS, government investment in energy supply chains and advanced manufacturing.  Add the expected increase in jobs resulting from onshoring and the numbers get daunting.

Finally, a negative perception around manufacturing jobs has swayed many to stay away from jobs in production.  The vision of dirty, repetitive jobs that are hard on the body and have an uncertain future removes manufacturing positions from the career path of many entering the workforce.

Don’t worry, this isn’t all bad news.  There is a solution that can help both the silver tsunami and the manufacturing labor crisis.

Bring in the Robots

I know.  I know.  Hear me out and I’ll show you they aren’t here to take over the world.

First, consider the employment gap of 3.8 million positions to be filled over the next decade and many those will be open because of retirement.  The strategic deployment of robotics won’t take jobs away from people, it will fill positions where there are not people to fill them. 

In 2020, there were two major studies on the relationship between implementing robotics and the number of human positions the robots replaced.  The MIT study showed about 3.3 jobs per robot and the NEBR gave a range of 3.3 to 5.6.  Apply this to the open positions over the next decade and about close to a million robots are needed to fill the gap left by missing human workers.  But robots can’t replace all human jobs, so where do they best fit?

Working Alongside Cobots

The jobs that tend to create the most negative perception for manufacturing are the jobs that are repetitive and precise where repetitive motion injuries are common.  Also, the manual ​“brawn” jobs like moving materials and the dangerous jobs that expose people to extreme conditions.  These are the same types of jobs where robots excel.  Deploying robots improves the working conditions by eliminating the risks to people.  And, since these jobs aren’t attractive to many people, the robots aren’t taking jobs away.

Additionally, as robotics change the work being done, there is the opportunity to change the perception of the manufacturing workplace.  Cobots, those that are programmed to work in conjunction with humans have shown to improve individual employee productivity by 4x, filling more of the employment gap.

Finally, there has been a massive shift in robotics programming.  Many are the examples where a human manually moves the robot through the production process and controllers generate the program by recording the movements and triggers for using the end of arm tooling.  Contrast this with weeks of programming by highly technical developers required by the previous generation of robots.  Technology is changing the look of the manufacturing job.

I can hear some of you now, ​“That’s great Dennis.  But I am just trying to grow the business and keep the doors open.  How does this help me?”  I’m glad you asked.

Bringing Robotics to the Shop Floor

I am a huge fan of Made in the USA, especially small and medium size companies.  You are the heart and soul of the economy.  Did you know manufacturing has the highest economic impact of all industrial sectors?  For every dollar spent in manufacturing, wages, equipment investment, materials, it generates an additional 2.5 to 3.0 dollars in economic activity.  Investing in your company makes the economy stronger. When you strengthen your local economy, you gain more options for getting the resources you need.

Whether you are an owner at the building stage, or looking to solve a labor gap issue, you are looking for something more impactful in the business NOW. 

Consider this: Robotics are simply better at precision manufacturing.  A customer of mine has their robots place product on an adhesive sheet within .005” of the customer spec.  Not sure I could even tell if it was .01” and that certainly is more consistent than any manual process.  With this type of precision, or other capabilities robotics bring, new markets can open up. 

Find out if robotics is right for your business by taking these few simple steps:

1. Target the worst jobs.  Identify those jobs that meet the criteria we discussed earlier: repetitive, precise, dangerous, ​“brawny.”
2. Look at the jobs where your primary workers are on the back end of their career.  They can be valuable resources to make sure any solution covers all the bases.
3. Talk to your line workers and see what they think.  It gives you a chance to hear from the people doing the work and even get their buy in.  How can robotics help them?  Remember the 4x increase in productivity?
4. Do a cost analysis. Look at acquisition and installation costs, but don’t forget about user training and even upskilling opportunities for your team.
5. Look for advanced manufacturing grants.  The government wants to invest in making the manufacturing base stronger at home.

While adding robots to the shop floor isn’t something to be taken lightly, I hope this gets you to thinking about the possibilities. 

Riding the Wave

The Silver Tsunami is coming whether we’re ready or not, but it doesn’t need to be destructive. By taking deliberate steps to make your business bankable, buyable, and buildable, you’re preparing for transition while also creating a more resilient operation. 

By strategically deploying robotics to address labor gaps and enhance productivity, you’ll position your company to thrive regardless of whether you’re strategizing an upcoming exit plan or building for the next generation. 

The businesses that will weather this wave successfully are the ones that see these challenges as interconnected opportunities to strengthen operations, improve working conditions, and build lasting value. The time to start preparing is today.