The business landscape is changing dramatically. Owners of small businesses across the United States look extremely different than those a decade ago. Millennials are now at the forefront of these companies, rapidly supplanting the baby boomer generation.
Earlier this year, the BNP Paribas Global Entrepreneurs Report 2016 indicated that millennials are launching businesses at twice the rate of baby boomers. This hasty growth is matched by the rise in household income among this age bracket, with a quarter of households with an annual income of over $500,000 headed by millennial breadwinners.
Times are changing, with a new breed of business owner quickly outstripping previous generations. Retiring baby boomer owners are set to sell assets worth up to $10 trillion within the next two decades, representing the value of approximately 12 million privately owned businesses. Evidently, the coming years are set to be a prime selling market for baby boomers with an eye on retirement (especially for those that plan ahead and act quickly).
Undoubtedly, there are some that might see this generational shift as problematic. Should you be worried about the difference in approach a millennial buyer would bring to your small business? Evidence suggests a millennial owner would make significant changes on a company’s existing structure, but this is not necessarily a bad thing:
This is not to say that businesses owned by baby boomers are backwards. There is plenty of evidence to suggest that while many boomers will be selling their companies in the coming decades, a significant number of these will be to investors in the same generation. Nevertheless, there is a pressing need to consider the future, as one day the current millennial generation will represent a majority of small business owners in the country.
The next 5-10 years represent an excellent opportunity for baby boomers considering retirement to recoup substantial capital by selling to millennials (or any buyer type for that matter). Stereotypes surrounding this generation’s ability to drive forward existing small businesses are being eradicated. Indeed, Chase for Business’ survey in December 2015 illustrated that 68% of millennial owners consider growth in their business a primary concern, compared to only 53% of baby boomers.
This focus on growth is key, as it indicates that many prospective millennial buyers would be interested in taking on an existing company and enhancing it, as opposed to starting from the ground up. This opens up opportunities for those looking to sell in the coming years in securing excellent returns. If an aspiring owner sees potential in pushing forward an active small business, they can spend to match this potential.
Many holding off on selling might be reluctant to break their emotional bond to their small business, wary of how it could change under completely different leadership. However, selling to a millennial owner could be beneficial in this regard, as these young adults will crave coaching, especially if this is their first foray into business ownership.
While millennial owners will undoubtedly introduce new ideas that they are more accustomed to (social media, digital technology, diversified workforces), they will also have a desire to learn and understand the heritage of their investment. This means baby boomers stepping aside can still impact the direction of their former company in the early stages, setting it up for sustained prosperity in the long-term (and maintain the legacy they have built into the business).
Clocks will continue to tick forward and with them a new generation of owners is emerging. Instead of dreading this imminent transition, there are numerous benefits, both in terms of company value and securing its legacy, that make selling to millennial investors a practical option for outgoing baby boomer business owners.
Carl Doerksen is the Director of Corporate Development with the Generational Group.
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