By Bob House of BizBuySell
More than one-in-three American workers today are Millennials, defined as those between 18 and 35 years old. In April, this young group finally surpassed Baby Boomers as the largest living generation in the U.S., according to U.S. census data. Although still relatively young, millennials have already had an outsized influence on the business world and on consumer habits and preferences.
Millennials are rethinking everything from the way we hail cabs and shop for groceries to how we communicate with one another. With more Millennials entering the small business market, it’s only a matter of time before they also redefine what it means to purchase and run a company.
According to BizBuySell’s recently released 2016 Demographic Report, five percent of today’s prospective small business buyers are between the ages of 18 and 29 years old. While that number may seem small, millennials are already bringing a fresh perspective to the market. And as more Boomers exit their companies for retirement, the number of millennial owners taking over these businesses will continue to grow. Here are three characteristics to know about this next crop of small business owners:
1. Millennials Are More Diverse
Today’s small business owners are largely comprised of white, college educated, married men over 50 years old. However, Millennials are slowly bringing more ethnic diversity to the small business community. Fifty-one percent of 18- to 29-year-old buyers are Caucasian, compared to 61 percent in their forties and 81 percent in their fifties and sixties.
Millennial buyers are four times as likely to identify as African American than buyers in their fifties and sixties (12 percent versus 3 percent). Millennials are also significantly more likely to identify as Asian or Pacific Islander (23 percent versus 7 percent in their fifties and sixties). There is also greater gender diversity among Millennial buyers. Twenty-six percent of Millennial buyers are female compared to 22 percent among all buyers. As more millennial buyers enter the market in the next few years, the demographic make-up of business owners will likely change even more.
2. Millennials Want To Be Their Own Boss
The majority of young buyers are employed full-time (68 percent), and 11 percent are currently students. While most millennials haven’t been in the workforce for very long, they are the most likely buyer group to be motivated by the chance to be their own boss. Nearly three out of four (74 percent) of millennials cite this as their main motivator for purchasing a business, compared to 41 percent of buyers in their sixties. Older buyers are more likely to be driven by the opportunity to leave corporate America behind.
3. Millennials Are Driven By The Prospect Of Better Income
Perhaps due to lower household incomes, younger buyers tend to be more motivated to go into small business for the potential of better income than their elders. Two-thirds of millennial buyers report annual household incomes below $75,000 — notably higher than the 37 percent average across all business buyers. Therefore it’s not too surprising that 64 percent of Millennials view small business ownership as an opportunity to earn better income, compared to 49 percent of buyers in their fifties and 38 percent in their sixties. Almost three-quarters (74 percent) of millennial buyers plan to purchase a business within the next three years, and half will target operations between $50,000 and $150,000.
Our demographic report found that the small business world is a hard one to leave, with serial entrepreneurship being quite common. In fact, of those surveyed, 46 percent of all buyers have owned a business before, however, millennials are the notable exception to this rule. As you might guess, millennials are just launching their small business career with the vast majority (82 percent) being first-time buyers.
This young generation enters the small business market at a time when issues like minimum wage hikes, expanded overtime pay and the sharing economy are transforming what it means to run a business. Given how Millennials’ have already transformed businesses and consumer habits in the last few years, small business sellers and brokers should brace themselves for change as more millennials enter the small business world.
Bob House is president for BizBuySell.com and BizQuest.com, the internet’s largest and most heavily trafficked business-for-sale marketplaces.
The views, opinions and positions expressed within this guest post are those of the authors alone and do not represent those of CBS Small Business Pulse or the CBS Corporation. The accuracy, completeness and validity of any statements made within this article are verified solely by the authors.