Kids today: they just aren’t starting businesses like they used to. At least, not yet. According to the Kauffman Foundation, millennials ages 20 to 34 made up only 23% of new entrepreneurs in 2013, compared to 35% in 1996. Today’s young workers are graduating with greater student debt and are taking longer to build household wealth than previous generations.
Under these conditions, it’s easy to understand why starting a new business may feel like too much of a risk. Better to take a steady paycheck, at least until you get established.
In some ways, however, the millennial generation is better-suited to entrepreneurship than any previous cohort we’ve seen. They’re more educated than previous generations and more likely to have taken a specific class in entrepreneurship. And they are interested in becoming entrepreneurs. According to a survey commissioned by Bentley University, 66% of millennials would like to start a business.
While the average age for the owner of a small or medium-sized business today is almost 60, according to Barlow Research, the percentage of young business owners is higher among the smallest businesses. Among companies with sales of $100,000 to $500,000, 13% of owners are under 45. There are some young people starting businesses, despite tough economic conditions. And some older business owners, particularly those whose businesses are larger and more stable, are considering transitioning ownership of their firms in the next five years.
As aging entrepreneurs train their replacements, and millennials become financially stable enough to strike out on their own, the face of entrepreneurship will get younger. Will your bank be ready for this change?
Millennials do everything online. The Internet has always been a part of their lives, and mobile phones nearly as familiar. A majority–54%–of business owners under 45 use mobile banking, compared to 26% of all small business owners. More than one third of small businesses already say that they would switch banks to get a better online banking system, according to Barlow Research. Those who would be willing to switch are interested in a wide range of online services, including electronic payments, mobile payments, and video conferencing.
Today, despite the fact that the average business owner is almost 60 years old, one in five business owners would prefer to apply online for a loan or line of credit, according to Barlow Research. That represents almost 2 million small businesses – as more millennials become entrepreneurs, that number will only grow.
Where will these young, digital-native entrepreneurs go for loans and other banking services? New, all-online loan providers like OnDeck and Kabbage might seem to have the advantage. But regulators are stepping up their scrutiny of these new players, with the potential for inter-agency conflict. Plus new online marketplaces lack experience with the market’s historic ups and downs. Traditional banks who transition quickly to online services are actually much better-positioned to capture this growing business segment than untested online marketplaces.
Will your bank catch the rising tide of young, digital-native entrepreneurs? Or will you fall behind?