IMGCAP(1)]Today’s prototypical small business owner is changing in terms of age, ethnicity, gender and other characteristics.
To get a handle on what’s happening in this arena, BizBuySell, the Internet–based business-for-sale marketplace, surveyed more than 3,000 current owners and prospective buyers. The results show some surprising trends.
“It was a good sample size,” said BizBuySell president Bob House. “We surveyed over 1,700 current small business owners and 1,300 prospective small business buyers. We were trying to understand the demographics and the motivations of buyers and sellers.”
The market is a hotbed of activity, according to House. “In 2014, U.S. business brokers reported a record-setting 7,500 sold businesses to us, followed by more than 7,200 transactions in 2015,” he said. “Despite the slight dip in year over year transactions, the market shows little sign of slowing down—73 percent expect small business transactions to improve further this year.”
“Among other things, we learned that sellers are largely older, college-educated and over 50,” House said. “Seventy-eight percent of sellers are male, compared to 22 percent female, a ratio that strays dramatically from the overall U.S. population, which is more evenly split. It’s largely Caucasian at 75 percent, followed by 10 percent Asian/Pacific Islander, 5 percent Hispanic, 5 percent African American and 1 percent Native American.”
One of the surprising things is that both buyers and sellers often come from a family with a history of small business in their family tree. “More than one-third of sellers—39 percent—have a parent or grandparent who owned a small business,” he said. “Sixteen percent have both a parent and grandparent business owner in their family tree. While 49 percent plan on selling in the next five years, only 29 percent felt like they are currently prepared to sell. And 12 percent were veterans, higher than the 8 percent of the population that is comprised of veterans.”
In contrast, the survey found buyers to be more ethnically diverse, House noted. “The 2014 census showed the overall U.S. population to be 77 percent Caucasian,” he said. “The buyer population is only 70 percent Caucasian, so the buyers are more diverse than both the general population and the sellers in the survey.”
The younger buyers tend to be even more diverse, House indicated. “In the 18 to 29 age group, 49 percent identify themselves as a minority, compared to 19 percent in their 50s and older, so as you get younger buyers, they tend to be more diverse,” he said. “It paints a picture of who buyers of small businesses are, and how the demographics are changing as younger buyers are taking over businesses from older sellers.”
The top motivation for selling is retirement, followed by burnout and the desire to own a bigger business.
“Retirement has its nuances, though, and can mean different things to different people,” House said. “Of the 40 percent who cite retirement as the main reason for exiting their businesses, their post-sale plans vary. Almost half (48 percent) plan to truly retire from working, but 25 percent intend to focus on another venture, and 11 percent hope to pursue volunteer work.”
For buyers, the main motivation is to leave corporate America, House indicated. “Compared to years past, prospective buyers are more likely to view small business ownership as a chance to be their own boss, and tap into income opportunities that traditional employment may not offer,” he said.
“Sixty-three percent of buyers cite ‘being my own boss’ as their top motivation for purchasing a small business, up from 50 percent in 2014, when we last reported on small business buyer and seller demographics. Buyers are also more likely to pursue small business ownership as a side project or source of supplemental income than two years ago,” House said. “In 2014, 22 percent saw a small business as a source of supplemental income, compared to 32 percent who cited it in this year’s survey.”
