Small businesses play a crucial role in the United States economy, accounting for approximately 99.9 percent of all businesses in the country. These enterprises also serve as major employers, hiring a significant portion of the labor force. Defined as businesses with less than 500 employees, small businesses are predominantly owned by baby boomers, who are approaching retirement age and considering their options for the future.
According to NerdWallet, there are currently around 33.3 million small businesses in the United States. The number of new small businesses started has been steadily increasing in recent years. In 2021 alone, there were 16 million new small businesses established, and in 2023, a record-breaking 5.4 million new businesses were launched.
However, the success rate of business startups is notoriously low. Many new businesses struggle to survive beyond the initial stages. Statistics show that up to 20 percent of startups do not make it past the first year, and 30 percent fail by the end of the second year. Only half of small businesses manage to survive beyond five years, and a mere 10 percent reach the 10-year mark.
This presents a unique opportunity for aspiring entrepreneurs. As many small businesses are owned by baby boomers, who are looking to retire, there is a potential market for those interested in buying an existing business rather than starting from scratch. When boomers retire, they may choose to close their businesses altogether, pass them on to family members, or sell them to interested parties.
Interestingly, ForbesAdvisor reports that a significant number of small businesses in the United States are one-person operations. In fact, eight out of 10 small businesses have no employees, meaning that a single individual handles all aspects of the business. This highlights the potential for individuals to take over such solo enterprises and build upon their existing foundation.
The ownership landscape of small businesses is largely dominated by baby boomers and Generation X, with millennials owning a smaller share. Baby boomers currently own 40 percent of all small businesses, while Gen X owns approximately 47 percent. In contrast, millennials only own 13 percent of small businesses. As boomers approach retirement, there is a growing opportunity for younger generations to acquire these businesses.
Starting your own business from scratch can be a daunting and time-consuming endeavor. It involves extensive research, finding the right business idea, and securing the necessary funding. However, an alternative path exists for those looking for a more straightforward route to business ownership. Buying an established business from a retiring boomer comes with several advantages. The previous owner has already done the hard work of setting up the business and establishing a customer base. By taking over, aspiring entrepreneurs can focus on maintaining and improving the business without having to start from square one.
When considering buying a small business, it is essential to thoroughly evaluate all aspects of the enterprise. This includes examining the financials to ensure profitability, understanding the operational processes, identifying sources for materials, and evaluating market demand for the products or services offered. Additionally, it is crucial to consider factors such as equipment maintenance, customer acquisition strategies, and long-term viability.
While many may associate startups with cutting-edge technology and innovative apps, it is worth noting that most boomer-owned small businesses fall into traditional industries such as gas stations, restaurants, roofing companies, and pizza shops. Although these industries may not be considered cutting-edge, they have proven to be stable and sustainable over time.
One of the advantages of buying an existing business is the potential access to funding. As the business already has a track record of success, securing financing may be easier compared to starting a new venture. It is important to demonstrate business acumen and have relevant experience in the industry when seeking funding for an acquisition.
Furthermore, when purchasing an established business, one can tap into the knowledge and expertise of the current owner. Retiring boomers are often willing to share their insights, helping younger entrepreneurs avoid common pitfalls and save money.
In conclusion, the small business landscape in the United States offers a range of opportunities for aspiring entrepreneurs. While starting a business from scratch is a challenging endeavor, buying an existing business from retiring baby boomers presents a viable alternative. By acquiring a business that already has a customer base and established operations, individuals can focus on growth and improvement, leveraging the wisdom of the previous owner. With careful evaluation and consideration, buying a small business can be a pathway to entrepreneurial success.
