There are many interesting data points, and again, the data supports the Alderman Holdings’ thesis that there is an emerging supply of healthy small businesses entering the market. If this is true, then competent and local buyers can provide a meaningful option for Sellers who are wary of dealing with large, traditional private equity companies.
Some interesting observations to note:
- Ownership changes are, in fact, coming. Numbers tell the story:
- 97% of owners 65 and older indicated that they plan on selling in the next 5 years. When asked for an expected timeline, 57 percent of respondents over 65 expected to exit their business within 6 months and 81% intend to sell within a year.
- Demographics of owners will shift from a majority of male/Caucasian to a more diverse and younger set of owners:
- The study found that young buyers tend to be much more racially diverse than older buyers. Among buyers 65 and older, 87 percent identified as Caucasian—a number that declined significantly as the age of buyers decreased. Caucasians represented 78 percent of the 50-64 year olds, 66 percent of 30-49 year olds and just 48 percent of 18-29 year olds interested in buying a business.
While it remains to be seen how the transition of ownership will actually unfold, it is likely that the population of business owners in the next 10 years will look very, very different. They will likely be much younger and have tolerance for more risk, more growth. The potential for risk taking among these younger owners will be higher given a longer time horizon.
Usually, with risk comes reward. Perhaps the shift from an older demographic of business owners to a younger, more diverse set bodes well for the economy. While we have no crystal ball, it’s exciting to think that on the horizon of the small business scene lie more opportunities for innovation, job creation, and even GDP growth. Only time will tell.