Let’s face facts. Most owners in the label industry will sell or transition all or part of their businesses in the next 10 years. We’re an industry of owners old enough to get AARP cards. Many of us are past the age when our parents and grandparents retired. Admit it – you’re old!

What does this mean for the label industry? For our industry to survive, we need to attract younger owners. Yes, I’m talking about ownership, not just drawing a younger workforce. We need a generational shift.

According to “The State of Organizations 2023” from McKinsey & Company, tomorrow’s owners will need the skills and energy to adapt to a rapidly changing world: learning new technology, managing remote work teams, operating online and more.

For this to happen, you guessed it, we need young people. If we neglect the opportunity and don’t work to attract under-40 owners, what can we expect? First, we’ll all retire within a span of a few years of each other, so we’ll have a flood of label businesses for sale at the same time. A glut of similar businesses for sale – even good ones – drives down asking prices. Your life’s work could be dissolved and devalued because of timing. Second, having too many label businesses for sale will devastate the value chain. Lowball buyers will buy desperate-to-sell companies at a discount and run them into the ground (or dismantle them). This domno effect will impact customers and suppliers in the process. If your customer or supplier goes out of business because of a competitor’s actions, you suffer as well. Third, without a plan for bringing in young owners, we become an industry starved of innovation, vigor, and ideas. Without those, the label industry is at a disadvantage against other industries in the world of commerce. That’s the financial reality of an industry with aging owners.

And then there’s the legacy aspect of selling to young owners? Attracting young owners is necessary if we are to have any kind of continuity between the old ways and the new ways.

We’re already seeing disruptive technologies and upstart businesses trying to enter the label industry. These disruptors may have no context or understanding of why we do things the way we do. Crucial industry knowledge will be lost if we don’t pass to new owners our methods, intellectual property, and problem-solving techniques. Think of all the years we’ve spent modifying and perfecting materials, chemistry, logistics, software, equipment and more. We must transfer vital knowledge to a new generation of owners who can keep the label industry relevant and profitable while preserving the best of what we’ve already built.

Next, there’s the big business side of the equation when looking at the benefits of selling to young owners. If we can attract the best under-40 owners, we can push back on the wave of mega business consolidation sweeping the world. Do we really want our industry to be dominated by a handful of gigantic companies producing everything from shampoo to frozen chicken nuggets?

That’s not to say I don’t match sellers to private equity or large buyers – I do when it’s their goal and interest. However, I cultivate relationships with buyers who value what our industry offers: craftsmanship, creativity, quality, people skills, and providing jobs for our families and communities.

I know you’re thinking: I’ll just sell my business to another aging competitor. That’s fine, but your brand and your name will get tucked in, tucked away, and forgotten. Furthermore, strategic buyers may be unmotivated to act quickly. This puts you in limbo, waiting to sell until your buyer is ready. Can you wait that long?

It’s pretty clear: For those of us who want our business to carry on, the answer is to attract the under-40 buyers. I hope you see why we must recruit, cultivate, train, and transition our businesses to a younger generation of qualified owners – for our own sake and the sake of the industry.

Now let’s talk about the under-40 demographic, so we can think about how to attract these buyers. The buyers of today are not the buyers of yesteryear.

Despite the (incorrect) picture we have in our heads of young people being unprepared to lead, this new breed of under-40 buyer has the chops to step in and run your business.

Here are the characteristics of some of the qualified under-40 buyers in my network. To begin with, many under-40 buyers are well-funded and have access to capital. They see the multiples in our sector and are curious and excited. Many have launched and sold companies in other industries and want to try their hand at manufacturing. As far as money, they have it.

They may be: independently wealthy or have inherited money; looking for a marquee business to use as a platform to build their fortune; a son or daughter who has worked for years in leadership in a family business but is tired of waiting for the parents to retire; a groomed leader with equity stake from a family office; an ambitious front person backed by a private equity firm; a rainmaker who’s ready for ownership; a diversified investor who wants a hands-on role in a business with minimum risk and maximum potential; someone who has cashed out of a successful tech IPO and is looking for a place to deploy their knowledge and personal fortune; or someone who wants to acquire an established and recognizable brand.

Your under-40 buyers may even be your children or employees. Do you see why we must prepare our business to attract the next-generation buyer? How do we do it?

I know many of you personally, and in our conversations, you’ve stated bluntly:  “If buyers don’t like us the way we are, then screw them.” Your words, not mine.

There’s an epidemic of current owners who don’t want to improve the business before positioning it for sale. Many owners – especially founders –  seem to think there are buyers lined up on the side of the road, drooling on themselves to acquire your business – maybe even fighting each other to pay you the highest price.

This is ridiculous. I’ve written extensively about preparation, pricing, and positioning, so I won’t go into that now. Suffice it to say, you should begin now to attract younger buyers so you are the plum target for the best who are coming up.

Tomorrow’s leaders in our industry are under 40. If we want the label industry to survive and flourish, this is where we must look as we build our bench and start our transition process. There’s an under-40 buyer out there who’s unsure which industry is best and where to head next. Do they want to buy a label company? Let’s make it happen!

Why we need knights in the label industry
When I think about young owners who are ready to lead, I picture the knight in the chess endgame. The knight is the most maneuverable piece on the board, able to jump over obstacles and defensive lines to get where it needs to go. It works collaboratively with other pieces to corner and trap. It is a powerhouse deep in enemy territory when paired with, say, a pawn that’s been promoted to queen.

As the most unconventional piece on the board, the knight offers enormous opportunities to surprise, intimidate, break through barriers, and change the course of a game. The brash knights of our industry – young men and women – are the unconventional players we need to carry on and transform the label industry.

Let’s be clear. I’m not talking about knights in shining armor designated to rescue the industry. No, we don’t need rescue. Instead, these are the bold knights of the roundtable – working together to strengthen us all. They are lifelong learners, creative thinkers, and tacticians with the timeline to devise and perfect their new ideas. With their knowledge and ability to take risks, they can help us elevate the industry, attract new types of customers, and keep us at the forefront as essential providers. Profile of the sophisticated buyer under 40:

• Has purchased a business before or has experience running one.
• Financially qualified and may be able to buy the business outright.
• Has reputable connections.
• Has personal, career, and wealth-building reasons for wanting to make an acquisition.
• Is not risk averse but weighs risk versus opportunity.
• Plans to work in the business – not run it as an absentee – and believes running a business is personally rewarding.
• Has a buy-side team running the deal by the numbers.
• Is aware of the business’s challenges and can capitalize on opportunities and minimize threats.
• Trusts the judgment of the professional matchmaker and is ready to pay a premium for an excellent candidate to acquire.

As buyers, these smart, young men and women scrutinize everything: where sales growth and operational efficiencies can happen, growing the bottom line from healthy to wealthy, company size and longevity, location, real estate, market conditions, customer concentration, account recency, factors affecting sales, earnings forecasts, cash flow, seasonality, diversified income streams, supplier reliability and diversification, intellectual property, equipment, inventory, buy-sell trends for similar companies and sectors, and, of course, your management team and employees.

In addition, buyers want to see that you’re positioned to take advantage of today’s technologies. These include automation in delivery, transportation, and warehousing; artificial intelligence; and programmatic ads that bring customers to your e-commerce portal 24/7.

For example, e-commerce is growing at two to five times the rate before Covid, according to McKinsey – which offers an opportunity for the label industry to attract customers. E-commerce merged with AI allows you to match customers with additional purchase options at checkout, answer questions from a pre-programmed chatbot, launch jobs in real time, sell more with less effort, and give customers the control to track purchases and follow the status of their orders. Could you realistically attract a third-party buyer who seeks this level of sophistication and potential for growth? For most mid-market label converters, the answer is probably not. Unless you are the cream of the crop, you’ll get the best ROI if you cultivate from within – a family member or an employee who’s interested in taking over the business.

No chessboard is complete without a knight, so it’s a question of where you’d like the knight to play. Can you prepare an under-40 person for a power position at your company? Could this young person grow into a leadership role? Can you choose and mentor a successor who will protect and invest in your workers and your brand? Would a youthful presence invigorate your business and attract new customers?

If you’re considering an exit in the next 5-10 years, the time is now to begin to attract the goldmine of talented leaders under 40.

Transitioning to a young, strong crop of owners is how industries stay healthy and vital. Securing young talent and promoting the best of them into leaders is how the label industry will compete.

Let’s invite young men and women with potential to play. Show them our game and give them room to improve it. Give them what they need to win. Build them into our transition plan. And then, let’s enjoy the next 5-10 years before we retire, knowing that we – and our industry – are in good hands.

Rock LaManna is The Deal Flow Guy. He helps qualified buyers and investors find businesses that are ready for acquisition or transition. On the sell side, he helps owners improve their businesses, increase value, and position strategically in anticipation of sale, exit or succession. Sign up for his newsletter at TheDealFlowGuy.com and start the process.