The Boomer Business Bomb

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Baby Boomers account for 40% of small business and franchise ownership in the US. This infographic explores what the consequences are for America as generations shift.

Boomer-Owned Businesses Are Thriving

  • Baby boomers own 2.3 million small businesses
    • 35% have been in operation for 10+ years
    • 3 in 4 are currently profitable
  • Top Industries For Boomer-Owned Businesses
    • Business Services: 13%
    • Retail: 13%
    • Construction/Contractor: 12%
    • Residential/Commercial services: 9%
    • Food and Restaurant: 9%
  • Americans rely on Boomer-owned businesses to succeed
    • Boomer-owned businesses employ 25 million people
      • Up to 1 in 3 Americans rely on income from Boomer-owned businesses
    • Tens of millions more are dependent on their existence and success
      • Venders and suppliers
      • Freelancers and gig workers
      • And more

10,000 Baby Boomers retire each day

What Happens When Boomer Business Owners Retire?

  • Millennials are less likely to take over the family business
    • Wide array of career choices that never existed for their parents
    • Desire for greater flexibility and independence from their jobs
    • Gravitate toward jobs in tech, healthcare, media, and operations
  • 58% of small business owners have no transition or succession plan
    • 75% say they don’t have a plan because they enjoy running their company
  • Many small businesses owners will need to sell to fund their retirement
    • 45% of Boomers have no retirement savings at all
    • Those who have saved, may not have enough
      • Over the last 20 years, healthcare expenses for a retired couple increased 88% — reaching $300,000
      • Since 2004, the costs of long term care options has grown up to 60%
  • Selling a small business may not be as easy as expected
    • Many businesses are too small to be on the radar private equity funds
    • In 2018, private equity firms held $600 billion in uninvested capital — a 34% increase from a decade earlier
    • In 2019, global mergers and acquisitions fell 16% — reaching the lowest quarterly volume since 2016 as uncertainty around COVID-19 grew
    • In 2021, US mergers and acquisitions recovered, growing 55% and reaching a record $2.9 trillion
  • Golden Years, Golden Opportunity
    • Boomer-owned businesses are a good investment
      • Established and profitable business
      • Strong local brands and loyal customers
      • Provide high-demand services
    • Millennials are increasing leaving corporate jobs to become their own bosses
      • Buying an established business may be a better option than starting one
    • Many Boomers don’t want to sell to just anyone — They want a reliable successor who will take good care of their business
      • Has needed skills and experience
      • Will keep existing employees

By 2045, Baby boomers will sell or pass on an estimated $72.6 trillion in wealth — That’s 2X as much as a decade ago and 3X US GDP

The Great Wealth Transfer

  • The Baby Boomers, upon their death, are expected to transfer an estimated $68 trillion to their adult children
    • Charities are expected to receive $11.9 trillion — 14% of the total wealth transfer
    • Divided equally among the population of Gen X and Millennials, that’s and average of $220,000 per person
  • This collective inheritance is expected to transform young consumers into
    • Real estate investors
    • Buyers of big-ticket items
    • Clientele for financial advisors, banks, and more
  • Home ownership and small businesses are Baby Boomer’s greatest sources of wealth
    • How this wealth will impact future generations is yet to be seen

The Economists You Should Know

According to the Influence Ranking Engine at AcademicInfluence.com

  • Paul Krugman
    • American economist and columnist for The New York Times
  • Joseph E. Stiglitz
    • Recipient of the Nobel Memorial Prize in Economic Sciences
  • Thomas Piketty
    • French economist, Co-director of the World Inequality Lab & World Inequality Database
  • Esther Duflo
    • Professor of Poverty Alleviation and Development Economics at MIT, and Co-founder of the Abdul Latif Jameel Poverty Action Lab
  • Abhijit Banerjee
    • Indian-born naturalized American Ford Foundation International Professor of Economics at MIT
  • Thomas Sowell
    • American author, economist, and senior fellow at the Hoover Institution of Stanford University

What will the greatest wealth transfer in history mean for the future of business ownership?

Sources:

https://www.forbes.com/sites/markhall/2022/01/25/unsexy-but-thriving-businesses-the-hidden-opportunity-gifted-to-us-by-baby-boomers/?sh=3d31de3a4620

https://www.guidantfinancial.com/small-business-trends/baby-boomer-business-trends/

https://www.cnbc.com/2019/12/10/as-baby-boomers-retire-main-street-could-face-a-tsunami-of-change.html

https://www.forbes.com/sites/josephcoughlin/2021/11/16/millennials-are-banking-on-the-great-wealth-transfer-4-words-why-you-shouldnt-cash-that-check-yet/?sh=2291334e2dde

https://www.wolterskluwer.com/en/expert-insights/2022-trends-in-us-mergers-and-acquisitions

https://www.finextra.com/blogposting/22117/millennials-buying-businesses-so-that-boomers-can-retire-is-a-growing-trend

https://www.bloomberg.com/news/articles/2022-02-02/what-the-73-trillion-great-wealth-transfer-means-for-america-s-super-rich