Small business in the United States has evolved tremendously over the last decade. Baby boomers are retiring and a new generation of entrepreneurs is replacing them. Women, minorities, and veterans own more small companies than ever before.
Greater workforce diversity presents new challenges in management, performance expectations and work-life balance.
Nationwide, more than half of Americans either own or work for a small company. Each year, small businesses create roughly two out of every three new jobs.
- Contribute to local economies through growth and innovation
- Provide employment opportunities and thus help stimulate economic growth
- Attract talent that develops new products or solutions
- Often support larger businesses through outsourcing services.
Businesses of all sizes are adapting to a workforce that's mobile, connected and data-driven. Today's employers face a slew of challenges to meet employees' demands and keep pace with marketplaces undergoing high-speed evolution. Small companies provide the greatest opportunities for, and are most affected by the dramatic shifts occurring in the U.S. economy.
Let's explore the driving factors—generational changes, entry of more women and minorities, veterans becoming entrepreneurs—and what they mean for the future of business.
The Future of Small Business by the Numbers
Baby boomers (born 1946-1964) are retiring and selling their businesses to a new generation:
- The number of small businesses listed for sale is at a six-year high.
- Boomers sold 65 percent of small companies listed in the first quarter of 2014.
- 67 percent of boomer business owners expect to retire within the next 10 years.
- 66 percent of current small-business owners believe that millennials (born early 1980s to 2000) will lead small-business entrepreneurship into the future.
Millennials are shaking up conventional ways of doing business:
- 70 percent say they'd reject traditional business to work independently.
- One in five says they want to quit their current jobs to start their own project.
- 47 percent of millennial-owned businesses exceeded revenue goals last year, compared with 21 percent of boomer-led enterprises.
This new generation will certainly put its stamp on American commerce as its members further establish themselves.
Women-owned businesses on the rise
In the world of work, women are increasingly taking charge in small companies:
- Women own 30 percent of small businesses in the United States.
- The number of small businesses owned by women has increased 50 percent faster than the overall number of small firms.
- Over the last three years, the daily average number of companies started by women has doubled.
The female touch may influence the country's future economic direction in unexpected ways.
More minority-owned businesses
Diversity is the watchword in many small firms:
- The number of Latino-owned companies increased from 11 percent in 2001 to 23 percent in 2011.
- Of boomer-sold businesses, 19 percent of interested buyers between ages 18-29 were of Asian-Pacific Island descent. In that same age group, 15 percent were Hispanic and 12 percent African-American.
Diversity in business and other sectors of American society will increase as America trends toward what the U.S. Census Bureau calls a "plurality nation."
Veterans flexing their business muscle
Entering the business world with varied experiences in the military, veterans increasingly seek to start and run businesses of their own:
- In fiscal year 2015, loans to veterans rose 101 percent in total dollar amount and 45 percent in the number of loans from the previous year.
- As of late 2013, veterans owned more than 2.4 million businesses, about 9 percent of all U.S. companies. They employed 5.8 million people and paid $210 billion in annual payroll.
- Slightly more than 75 percent of veteran business-owners are age 55 or older, possibly reflecting a change of career after lengthy military tenures.
- The Small Business Administration (SBA) offers many resources to help veterans start and expand their own companies.
Paychex, which helps companies of all sizes grow and succeed, invites you to learn more about the Changing Face of Business.
Sources: BizBuySell.com, Small Business Buyer & Seller Demographic Study, 2014. CEB, Segment Profile: Women-owned Businesses, Arlington, VA, 2014. Florida Tech, Small Business Loans to Veterans Rise Sharply, 2016. Manta, Millennials: The Next Big Thing in Small Business, 2015.