A shrinking proportion of young entrepreneurs
According to a recent research from the Australian Small Business and Family Enterprise Ombudsman, the proportion of young small-business owners in the country is shrinking. The median age of small-business owners in Australia is at 50 years old, with 22 per cent aged 60 and older. This trend is consistent with the global statistics, as a study by Score, a non-profit organization affiliated with the US Small Business Administration, found that 51 per cent of US small businesses are owned by people older than 55, even though they represent only 21 per cent of the population.
The ageing demographic of small-business owners reflects the challenges and barriers that younger generations face when starting or running their own businesses. Some of these challenges include:
- Lack of access to capital and credit. Young entrepreneurs often have less personal savings, lower credit scores, and fewer assets to secure loans than older business owners.
- Lack of experience and mentorship. Young entrepreneurs may lack the necessary skills, knowledge, and networks to successfully operate and grow their businesses. They may also have difficulty finding mentors who can guide them through the complexities and uncertainties of entrepreneurship.
- Lack of support and recognition. Young entrepreneurs may face negative stereotypes and biases from customers, suppliers, investors, and even their own families and friends. They may also struggle to balance their personal and professional lives, especially if they have young children or other dependents.
A looming succession crisis
The ageing demographic of small-business owners also poses a significant challenge for the future of the small-business sector. As older owners retire or exit their businesses, millions of small businesses will change hands in the next decade. However, many of these businesses may not have a clear succession plan or a suitable successor to take over. This could result in the loss of jobs, assets, customers, and innovation for the economy.
According to a survey by KPMG Australia, only 25 per cent of family-owned businesses have a formal succession plan in place. Moreover, only 35 per cent of family-owned businesses intend to pass on their business to the next generation, while 40 per cent plan to sell their business to a third party. The main reasons for not passing on the business include:
- Lack of interest or capability from the next generation. Many younger family members may not want to take over the family business due to different career aspirations, personal preferences, or lack of skills and confidence.
- Lack of preparation or communication from the current generation. Many older business owners may not have prepared their successors adequately or communicated their expectations and intentions clearly. They may also have emotional attachments or conflicts that prevent them from letting go of their business.
A window of opportunity for innovation and growth
Despite the challenges and risks associated with the ageing demographic of small-business owners, there are also opportunities for innovation and growth for both older and younger entrepreneurs. Some of these opportunities include:
- Leveraging technology and digital platforms. Technology can help small businesses improve their efficiency, productivity, customer service, and competitiveness. It can also enable them to access new markets, customers, and partners globally. Older business owners can benefit from adopting new technologies and digital platforms that can enhance their business performance and value. Younger business owners can benefit from creating or using new technologies and digital platforms that can solve problems or meet needs for their customers.
- Embracing diversity and collaboration. Diversity can foster creativity, innovation, and resilience in small businesses. It can also help them attract and retain talent, customers, and investors. Older business owners can benefit from embracing diversity in their workforce, customer base, and supply chain. They can also benefit from collaborating with younger entrepreneurs who can bring fresh ideas, perspectives, and skills to their businesses. Younger business owners can benefit from embracing diversity in their team, network, and mentors. They can also benefit from collaborating with older entrepreneurs who can offer experience, wisdom, and resources to their businesses.
- Seeking support and guidance. Support and guidance can help small businesses overcome challenges, seize opportunities, and achieve success. There are various sources of support and guidance available for small businesses, such as government agencies, industry associations, professional services firms, incubators, accelerators, mentors, coaches, peers, and online communities.
- Older business owners can benefit from seeking support and guidance from experts who can help them with succession planning, exit strategies, valuation, taxation, legal issues, and other aspects of transferring or selling their businesses. Younger business owners can benefit from seeking support and guidance from mentors who can help them with business planning, financing, marketing, operations, management, and other aspects of starting or running their businesses.
