I noticed a decades-old retail business that’s closing soon. There’s no “For Sale” sign in the window. The newspaper article about the upcoming closure says nothing about the owner’s desire or attempts to sell it. It appears they’re simply closing. I suspect their staff are looking for a new job. Later that day, I was listening to a podcast discussing data showing that 60000 U.S. boomers retire every day and that boomers own 57% of the 28.7 U.S. businesses. The impact of closing rather than selling a “boomer business” will not go unnoticed by local economies.
This boomer business data comes from the U.S. Census, Social Security Administration, the SBA, the BLS, and the financial industry. Per a JP Morgan Chase analysis of U.S. Census data, 48% of the people U.S. employees work at a small business. 18% of them work at a small business with fewer than 20 employees.
Boomer business closures
If you combine the 60000 per day figure with the 57% figure, what you get is a picture of a massive group of businesses that will change hands over the next decade or so. The troubling thing is that the sale of the business isn’t the only option.
Many business owners choose to close up shop and walk away. Perhaps they don’t have children who wish to take over the business. Maybe they don’t feel their “boomer business” is worth anything to anyone else, even though it’s probably producing an income. They may not be interested in dealing with the hassle of finding a buyer who can pay the price, much less the effort required to train the new owner.
At first, I thought this apparent hesitance to sell and train was because a long-term business required very specific, and perhaps disappearing, skills. Some fit this profile, but the JP Morgan analysis shows that 51% of small businesses are less than 10 years old, so many likely aren’t limited by that problem.
Over 99 percent of America’s 28.7 million firms are small businesses. The vast majority (88 percent) of employer firms have fewer than 20 employees, and nearly 40 percent of all enterprises have under $100k in revenue.JP Morgan Chase analysis of U.S. Census data
Why this matters
There’s somewhere around 155 and 160 million Americans employed. I know, the numbers are weirdly calculated, politicized (as always), and may count people with multiple part time jobs as more than one person.
There are probably other problems with the numbers, but for the sake of discussion, let’s assume they’re inflated by 20% – a wide margin of error. That means roughly 128 million individuals have at least one job. Interestingly, a little research after the first draft of this found a Statistica report showing that same 128 million figure for full time employment in the U.S.
If 99% of the employers of these people are small businesses, and 57% (percentage owned by boomers) of them have owners nearing retirement in some form, there are a lot of jobs at some sort of risk.
You can’t simply take 57% of 99% of 128 million, of course. What we can do is accept that it’s reasonable that a very large number of people work for businesses that will either close or change hands over perhaps the next 10 years.
With the average number of employees across all businesses being fewer than 20 (16 is one of the averages I saw from BLS.gov data), every time a business sells or changes hands, 15 jobs are at some level of risk (on average, assuming one owner is an employee).
That’s a significant impact on employment, even if these calculations are off by 50%.
SBA/SUSB data shows about 115,000 businesses in Montana – a number growing by ~3400 per year. About 51% remain open after five years.
If half of them close/sell over the next decade, that affects about 118,000 employees. While these numbers are rough, it’s reasonable that resulting life upheaval will ripple through local economies.
Owners: Consider a creatively-structured sale. No matter how it pencils out, you gain little by closing the doors.
Employees: Tell the owner you’re willing to keep going. Look into how the business can be kept running. Someone who already owns a business is a good candidate.
Locally-owned banks: Is it OK for these businesses to disappear? No bank understands and can serve these folks like you can.
All three groups: Look for the win-win, rather than the fantasy outcome. Everyone can be rewarded by a successful transition – including the community’s economy.