Why young North Carolina entrepreneurs are buying up Boomer businesses
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Rob Belk, left, stands with Ged King. Photo: Courtesy of Sales Factory
Rob Belk, 35, grew up in Charlotte, selling ladies' shoes at the SouthPark mall Belk, his family's eponymous department store — a grind that instilled in him an entrepreneurial bug. Earlier this year, he purchased Sales Factory, a Greensboro marketing and insights agency that's been around since 1984.
Why it matters: In North Carolina and beyond, young entrepreneurs are buying up small businesses from founders nearing retirement — part of a phenomenon dubbed the "silver tsunami" that's resulting in a massive transfer of wealth.
Zoom in: For an aspiring business owner, it may make good sense to buy an established firm with the fundamentals already in place — a proven business model, labor, community reputation, client relationships, and so on.
- It's like starting business ownership at third base, says Ben Engvall, a New York-based head of mergers and acquisitions at Palmer Advisors.
- He's handled about 20 deals that paired a younger buyer with a retirement-age seller, including the Sales Factory deal.
Between the lines: A young buyer, often with an MBA and business or tech savviness, sees a lot of opportunity to modernize the business practices of the older firm they're buying, Engvall says. Think pest management or industrial cleaning — industries with inelastic customer bases.
- "The revenue model for some of these businesses that don't sound fun and sexy is really strong," he adds.
Case in point: In 2017, Jerome Trehy, 41, bought Roland Black Heating and Cooling, a 53-year-old company that provides residential and light commercial HVAC services in North and South Carolina.
- Trehy describes the company as "flat but healthy" in the few years it was previously owned by a father-son duo who'd bought it from the founder, Roland Black, who's in his 80s and with whom Trehy still meets.
- Trehy, a Durham native with an MBA from UNC, had worked at Red Ventures in Charlotte, but has a background in the trades. Right away, he began to modernize the HVAC company by, for instance, implementing a fresh customer relationship management system and digital invoicing.
- "Done right, that's low-hanging fruit to build more value," Trehy says.
- Since 2017, he says, the company's revenue has grown five times over, while going from six employees to 23, and it has added plumbing services and a minority partner.
The big picture: Millennial and Gen Z buyers are scooping up retiring Boomers' businesses despite high interest rates, as the Guardian reported. Interest in such transactions is expected to accelerate further as rates fall.
By the numbers: Roughly half of small businesses in North Carolina have an owner age 55 or older.
- About 85% of those don't have a succession plan in place, according to the North Carolina Employee Ownership Center, a Durham nonprofit.
- That means these owners who don't have a child or an heir apparent may look to sell if they want to see their companies continue on.
What they're saying: "It's a perfect marriage of one generation that owns so many businesses, ready to exit, with another generation that's been educated so thoroughly in how to operate a business," Engvall tells Axios.
Zoom in: A Duke Fuqua School of Business grad, Belk worked for years in California for Call of Duty before moving back to Greensboro a few years ago to be closer to family.
- After buying Sales Factory, which has offices in Raleigh and Greensboro, he still regularly consults with previous owner Ged King, 58, who's staying on for now as chief revenue officer and equity partner.
The bottom line: Though they're in different industries, both Belk and Trehy separately say they are prioritizing being good employers as they grow their companies. "We've watched employees feel financially stable enough to have a kid or buy a car," Trehy says.