In a recent webinar, we took a look at what the data tells us about small business owners. Numbers can paint a picture, and the stats on small businesses are rather telling, in our view. Let’s take a look.
Small Business is Big
There are 31.7 million small businesses in America. They account for nearly half of our GDP and almost 50% of the total labor market. The pandemic was devastating for many small businesses, with 22% of small businesses failing between February and April of 2020. That’s a whopping 6.9 million businesses shutting their doors for good.
Granted, this doesn’t capture the other side of this story, as closures induced other individuals to launch their own companies. But a survey from 2021 shows how many small firms remain on the brink, with 86% of respondents stating that they’d need outside capital should their revenue disappear for 2 months.
Baby Boomers in Control
So, who are these small business owners? With Millennials being the largest demographic in our population, you’d think the data would suggest a nation of twentysomethings in hoodies working on their software startups in Silicon Valley. Not so. Over half of all small business owners are 50 years old or more, while just 16% are 35 years old or less.
But here’s a shocking number:
98% of business owners don’t know what their firm is worth, but 78% of owners plan to fund their retirement from the sale of their business.
Given how many owners are over 50, these numbers are downright puzzling. How can so many owners be flying in the dark? Again, we turn to the data to paint the picture further.
A full 20% of owners works 60 hours a week or more. Over 81% work into the night, and 89% work on weekends. Further, these long hours aren’t necessarily quality hours, as 80% are not taking full advantage of technology and the productivity it may offer.
Now we can draw some conclusions from these numbers, and we offer these key takeaways:
- Small business owners have little/no time to work on their business because they spend all their time working in their business
- All small business owners eventually exit their business, one way or another, but most are not preparing for this event. Why? (See previous bullet point!)
- This presents risk to the business, its owner and his/her family, and our economy … but it also presents an opportunity
- Business owners who avoid becoming a statistic by preparing themselves and their firms for a transition that 1) provides for the next chapter in the business’ life cycle as well as 2) provides the previous owner the financial reward for the next stage in his/her personal life
How do these numbers apply to you and your business? Do you find yourself thinking, “That’s not me!” Or is your little voice saying, “That’s sounds eerily familiar.”
If you’re interested in how to improve yourself as a business owner by evaluating your company or your personal finances, let us know.