Every year the Small Business Trends Alliance (SBTA) and Guidant Financial do a survey about the state of small business to gain insights into how business is changing and learn about millennial businesses in the U.S. Below we’ll recount their findings about how these young business owners work, their challenges, preferences and how this differs among generations.
Who are Millennial Small Business Owners?
A more diverse group than any other generation, a millennial entrepreneur is 77% more likely to be African American than a boomer business owner. A quarter of millennial small business owners are hispanic versus 11% in the boomer generation.
Women make up 28% of millennial small business owners, which is 12% higher than the national average and 22% higher than boomer small business owners. Whilst the majority of millennial small business owners are men at 72% there is a trendline of increasing female led small business.
Millennial Small business owners also showed university education isn’t necessary to be a successful owner operator. 45% of millennials surveyed reported only a high school degree or GED as their highest achieved education. Whilst only 28% of boomers had the same level of education.
Millennial Small Business Owners Sentiment
A majority of Millennial men who own their own small business are very happy in their chosen profession, with 53% reporting to be 9/10 on a happiness scale. Millennial women were less happy, with 10% fewer women rating themselves 9/10. In total 52% of millennial business owners are very happy versus 54% of boomers reporting the same level of happiness.
Confidence in the state of climate and politics averaged 7/10 (10 being the most confident) for millennial business owners, the same for boomers. The main difference was 19% more millennials (than boomers) answered in the 1-5 range, showing that more millennials had lower confidence . Conversely 3% more millennials answered in the 9-10 range which indicated more confidence, so there is more variance in millennial sentiment. Female millennial business owners were 13% less confident than their male counterparts.
Millennial Businesses Characteristics
Millennial owned businesses have higher profitability, with 80% reporting a profit which is 4% higher than the national average. Millennials preferred independent ventures as opposed to franchises, with 67% owning independent businesses and 27% having purchased existing independent businesses. In comparison to the 36% of boomers who own and run independent businesses.
The industries millennials are involved in are very broad. Millennial men open business across every industry whilst women focus in more niche areas, with 39% working in health, beauty and fitness businesses.
Last year the top issue for both boomers and millennials was lack of capital (access to capital) and or cash flow. Millennial businesses are 14% more likely to have money issues – which was 36% of millennial businesses compared to 32% of boomers. The other large issues for millennial businesses included: marketing, administrative work, booking keeping and payroll, time management, recruiting and worker retention. Recruitment and retention was one of the stickier issues with 52% of millennials employing 2-10 staff members. 40% of millennial businesses are solely owned and run by their owner versus 31% of boomer businesses.
In the survey when millennial business owners were asked what they would do if they had access to more capital, they mentioned a number of investments they would make. New tools and equipment was the top reported investment accounting for 21% of responses, spending more on marketing and advertising was how 19% would spend extra capital. Whilst 19% also reported they’d use extra cash to expand their business.
Millennial Businesses Financing Trends
A lot of millennial businesses had issues with access to financing. Unfortunately most business lenders require collateral like a home or retirement fund in order to lend money, which many millennial business owners didn’t have access to. These issues may account for why the majority of businesses, 76%, were acquired for under $100,000 and why cash was the main form of financing which accounted for 43% of funding received. Meanwhile 32% of boomers used cash to finance their company and 59% bough their business for under $100,000.
Millennials also relied on help from friends and family, lines of credit (like personal credit cards) and non traditional loans like unsecured loans and peer to peer loans.
A Bright Outlook
Millennial run business are the future backbone of the American economy, that future is more inclusive and diverse but has some way to go. Millennials are optimistic yet also worried about the prospect of a future world as climates change and politics gets weirder. They’re an innovative generation that embrace change and technology and are poised to takeover for retiring boomers.