The retirement of baby boomers is a major demographic trend that's reshaping the small business landscape. Pew Research estimates that there are 74.9 million baby boomers today, and many are retiring, transitioning out of the workforce, selling their businesses, or taking alternative employment such as consulting.
More than half of Americans own or work for a small business. In fact, small businesses create approximately two-thirds of the new jobs in America each year. For the baby boomers who are facing retirement and own small businesses, what are their exit strategies and who is set to pick up the reigns?
Baby boomers are selling
In many cases, baby boomers are actively selling their businesses. In fact, according to BizBuySell.com, the number of small businesses for sale nationwide is at a six-year high. Pepperdine University research found that 65 percent of businesses sold in Q1 2014 were owned by baby boomers, and 67 percent of business owners want to retire in the next 10 years. In other words, baby boomers selling their businesses is a trend that's already underway and only expected to intensify moving forward.
Diversity in entrepreneurship
With all these businesses for sale, a new generation of entrepreneurs and business owners is emerging. In many ways, the face of small business is experiencing a dramatic shift. New generations of entrepreneurs include women, minorities, younger buyers such as millennials, and veterans. As a result, this diversity is driving new discussions around work-life balance, performance expectations, and management styles.
Will millennials be the main buyers of these boomer-founded businesses? According to Deloitte, 70 percent of millennials would reject traditional businesses to work independently. Twenty percent of millennials want to quit their current jobs to start their own projects. If the entrepreneurial drive translates into the desire to buy and run another person's business, it's great news for the business. TD Bank research found that 47 percent of millennial-owned businesses exceeded revenue goals compared to just 21 percent for boomer-led companies.
Meanwhile, across demographic lines, business ownership is changing. The CEB reports that 30 percent of U.S. small businesses are women-owned, and they're increasing 50 percent faster than the overall number of small businesses. Minorities are also making inroads into entrepreneurship. Among your buyers, BizBuySell reports that 19 percent were Asian/Pacific Islanders, 15 percent were Hispanic, and 12 percent were African-American. Veterans are playing a bigger role in the business landscape, as well, and are using access to loans to fund new initiatives. The Small Business Administration (SBA) found that veteran loans grew 101 percent in total dollars and 45 percent in number of loans year-over-year.
Understanding the impact on business ownership
What do these shifts mean for the future of the business landscape? A few distinct issues arise:
Work/life balance: One of the most important issues with younger workers is work/life balance. How can we use technology to get more done in the office, while leaving more time to do other things in our outside lives? Business owners are likely to continue to grapple with this, and are increasingly adopting streamlined workflow and mobility tools.
Performance management: Can less hands-on and process-driven work environments produce positive results? Evolving mindsets around performance management are likely to give us important insights.
Embracing HR technology: Managing a staff is often challenging for new business owners. As a result, tech-savvy entrepreneurs will be embracing HR technology to help them save time on routine questions. HR technology will also provide better reporting so that discussions about employee productivity can be anchored around data.
The face of small businesses continues to change. Learn about the influx of a younger, more diverse group of entrepreneurs and what that means for the future of business.