Baby Boomers own a majority of the estimated 15 million privately owned businesses in the U.S. Approximately 60 percent of these businesses are owned by people born before 1964. The oldest Boomers are already beyond retirement age, and more Boomers every year will transition from the workplace to retirement. Many business brokers are concerned that, even given an improving economy, Boomers will wait and retire in large numbers rather than retire steadily over time. This would create an oversupply of businesses available for sale relative to buyers. Fortunately, there is some evidence that another generation has an interest in owning their own businesses. We are talking about the Millennials.
For clarification, Millennials are the generation of people who were born from the early 1980s to the mid to late 1990s. They are tech savvy and confident, but they have somewhat of a mixed reputation as participants in the workforce. They’ve been accused of being lazy, self-absorbed, and wanting to have their hands held. As a generation they do not have the same interest in working for large corporations as the Baby Boomers and Generation X did. They have a number of reasons for this:
First, Millennials have seen older generations, including Generation X, pursue steady, reliable 9-to-5 employment – and get little for it in the long term. Wages have stagnated, benefits have disappeared, and Boomers haven’t been in a hurry to retire and give their corner office up. If getting laid off is the reward for decades of loyalty, that doesn’t seem all that enticing to many Millennials.
Secondly, Millennials want to lead, not follow, and they don’t want to wait for a decade or more to get a chance at leadership. They are willing to take chances and mistakes because they have less to lose than previous generations. Millennials as a generation have waited to purchase homes, marry or start families. Without those same responsibilities, they can afford to take on business ownership earlier.
When Millennials think of business ownership, many of them visualize internet startups and Etsy businesses. The more entrepreneurial Millennials are more aware of other opportunities out there, and many of them have already gotten their feet wet. According to a 2017 study done by America’s SBDC, thirty percent of Millennials have already been involved into some way in entrepreneurship. Twenty-six percent have already lived entirely off the income of a small business.
Millennials trust themselves more than they do other people or corporations. Sixty-one percent of Millennials believe that there is more job security in owning a business than in working for someone else. This is in contrast to 40 percent of Gen Xers and 36 percent of Baby Boomers. When asked, almost half (49 percent) of Millennials stated that, with the right resources, they would quit their jobs and start a business in the next six months.
Millennials’ biggest deterrent to purchasing their own businesses is the fact that such a large number are carrying significant student loan debt. However, there are now a variety of funding sources available to the would be business owner, and the corporate tax rate decreases that resulted from the reform of the tax code in 2017 has made business ownership even more attractive. Millennials should be seeking out SBA loans with their flexible terms, and some are.
Not every Millennial will be able to secure the funding to purchase a large company, but there are plenty of micro companies – businesses with sales from $100,000 to $500,000 – for sale. During the great recession, the owners of these companies tended to close their doors for good when they retired, but more and more are selling their businesses now. This is also true for small companies with sales of $500,000 to $2.5 million.
Seeing better a better market for sellers, Boomers are beginning to retire in greater numbers. This could create wonderful opportunities for Millennials who are confident and optimistic and who want to shape their own economic futures. Trends are converging to create ideal conditions for an unprecedented passing of the baton from Baby Boomers to a new generation of small business owners. Will Millennials take up the challenge?