It is a well known belief that small businesses account for a large share of the economy. In fact, according to the U.S. Small Business Administration, nearly half of the national employment in the US is attributed to small businesses (less than 500 employees), and nearly 98% of the total number of businesses nationwide.
Many of these businesses are owned and operated by Baby Boomers (ages 51-69), as the average age of a small business owner is 50. As the majority of these aging owners contemplate retirement and executing their long held plan of selling their business to finance their retirement, the question of who will buy all these businesses may be one of pure demographics.
The logical buyer pool would come from the GenX generation, most commonly referred to as those Americans born between 1964 and 1979 whose current age would fall between 38-53. The problem is that there are significantly less GenXers than Baby Boomers, although that differential reduces with time. So then it may take looking beyond GenX to the mega-sized Millennial generation, who in 2015 surpassed Baby Boomers as the nation’s largest living generation.
So what about the Millennials? In large metropolitan areas centered around technology it would appear that they are the nation’s engine of entrepreneurship. Will they take over Main Street as well? Some studies show that Millennials as a whole are not as entrepreneurial as preceding generations. In fact, the age group where entrepreneurship is rising is 55+ perhaps out of necessity. There may several things at work to slow the Millennial drive such as large student loan debt, or perhaps in this wired world of today Millennials have access to more information than ever before and are more aware of the economic pressures that are reshaping how business is now done and will be done in the near future. Online sales continue to surge and put pressure on brick/mortar stores, big box retailers ramp up pressure on mom-and-pop shops, robotics and 3D Printing squeeze manufacturers, and even doctors and financial advisors are consolidating into larger and larger corporate offerings leaving the sole proprietor under severe pressure.
For Baby Boomer business owners, all is not lost. They have been under intense competition while running their businesses, and will find a very competitive market when it comes time to sell their business on the open market as many of their piers will be trying to accomplish the same thing. One strategy may be to sell sooner than later, thus beating many of their piers to market. Or others may choose to continue to run their businesses and improve on them in order to make them more attractive to a future buyer. The tried and true principles of exit strategy will always hold true – have your books in order, your management team in place, Standard Operating Procedures documented, a forward looking Business Plan that includes a growth strategy, and other loose ends tied down to make your business shine brighter than your competitors in the eyes of a buyer.