- Millennial small business owners more
willing than older small business owners to take on debt to grow
their business
- Outlook for coming year is brighter
among millennial small business owners
Millennial small business owners are committed to their
businesses for the long term and are more willing to take
calculated financial risks and incur debt in order to grow their
businesses, according to a new Wells Fargo study of millennial
small business owners. The study, conducted by research firm GfK,
identified similarities and differences today between millennial
small business owners and small business owners of earlier
generations and how they are potentially impacting the business
landscape.
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Wells Fargo Millennial Small Business
Owner Study (Graphic: Business Wire)
In a committed relationship with their business
In an online survey of approximately 1,000 U.S. small business
owners, conducted March 24 to April 13, 2016, majorities of both
millennial small business owners and older small business owners
say they started their businesses to control their future and be
their own boss, wanting greater flexibility in where, when and how
they work. Millennial small business owners place more value on
feeling passionate about their work, with 59 percent reporting
passion as a motivation for starting their business, compared with
51 percent of older small business owners. Another reason for
starting a business – wanting a challenge and growth – ranks higher
among older small business owners (55 percent of older small
business owners vs. 43 percent of millennial small business
owners).
Contrary to popular perceptions that millennials are focused on
the short term and more apt to be serial entrepreneurs, the study
found the generation is gearing up for the long term, seeing their
business endeavors as investments in the future, with many already
looking ahead to the next generations. In fact, 80 percent of
millennial small business owners say they hope to grow their
businesses over many years, potentially even passing it down to
their children someday, in spite of most (59 percent) not yet
having children. By comparison, 66 percent of older small business
owners say they hope to pass down the business to their
children.
Although millennials are more likely to have started their
business as a hobby (18 percent vs. 7 percent for older small
business owners), about 70 percent of all small business owners
surveyed now work full time for their business. When it comes to
how quickly they want to grow their businesses, the two groups
differ: 79 percent of older small business owners say they are
happy to stay a small business as long as they can create a
comfortable future for themselves and their families. That
percentage is smaller for millennial small business owners, where
59 percent report they are happy to stay a small business, and 41
percent are looking not only for a comfortable future, but to grow
their business as big as possible.
“We found that millennial small business owners have a much
longer term horizon for their businesses than many may perceive
them to have,” said Lisa Stevens, Wells Fargo’s head of Small
Business. “They recognize an investment in their business is an
investment in their future.”
Taking on debt to invest in their future
While most small business owners surveyed say they are extremely
wary of taking on debt (75 percent of millennial small business
owners and 78 percent of older small business owners), many
millennials believe that business debt and financial risk are
necessary for the future growth of their businesses. About
two-thirds of millennial small business owners say that some amount
of business debt is necessary for growth, or are willing to take
financial risks in order to grow their business. By comparison,
roughly half of older small business owners hold these views.
Additionally, millennial men are more apt to believe that business
debt is needed in order to grow (72 percent among millennial men
vs. 54 percent among millennial women) – and are more willing to
take financial risks to grow (77 percent among millennial men vs.
55 percent among millennial women). They also expect to take on
business debt in the future, with 21 percent of millennial small
business owners saying they plan to take on some form of business
debt in the coming year (similar to 18 percent of older small
business owners).
In addition to business debt, many millennial small business
owners have taken on personal debt to finance their businesses (43
percent of millennial small business owners compared to 33 percent
of older small business owners). This includes carrying a balance
or maxing out personal credit cards or opening a personal line of
credit. Moreover, a sizable three in 10 millennial small business
owners report having student debt, with these individuals owing
roughly $30,000 on average.
“Our research shows millennial small business owners to be
thoughtful about credit, and their attitudes toward taking on debt
have likely been shaped by the Great Recession. At the same time,
it is encouraging to see them investing in their businesses and
looking at entrepreneurship as a way to secure their future,” said
Stevens. “We want to make sure that as they grow their businesses,
they have the financial resources and access to credit that can
help them succeed financially.”
Outlook of millennial small business owners
Millennial small business owners are more optimistic than their
older counterparts about what the next year will bring. Three out
of four millennial small business owners said they expect their
businesses to improve over the next 12 months, compared to half of
older small business owners. Millennial small business owners are
also more apt than older small business owners to believe that they
will increase customers, profitability, sales, and website traffic
in the coming year.
Although millennial small business owners are optimistic that
their businesses will improve in the coming year, they still face
challenges. Less than half of millennial small business owners feel
very knowledgeable about (46 percent) or successful in managing (41
percent) their business’s finances.
Millennial small business owners are, however, on a mission to
seek out knowledge that will help their businesses grow. They are
more apt to look for help outside their business than their older
counterparts, citing friends and family, peers and competitors,
social media and other online information sites as resources for
their business’s financial success.
About the research
The Wells Fargo Millennial Small Business Owner Study was
conducted by research firm GfK from March 24 to April 13, 2016. In
the poll, 1,005 U.S. Small Business Owners (SBOs) were surveyed.
Approximately 500 interviews each were completed among Millennial
(ages 19 to 35) and older (36 and above) small business owners. In
order to qualify, respondents had to be in business for at least
six months (but could be working on the business full- or
part-time), be the business’s primary or shared financial decision
maker, and own at least 50 percent of businesses that earn under $5
million in annual revenue. The poll is part of Wells Fargo’s
efforts to understand and serve this important group of individuals
helping to drive the U.S. economy. All results reported are from
the Wells Fargo Millennial Small Business Owner Study.
About GfK
GfK is one of the world’s largest research companies, with more
than 13,000 experts working to discover new insights into the way
people live, think, and shop, in more than 100 markets, every day.
GfK is constantly innovating and using the latest technologies and
the smartest methodologies to give its clients the clearest
understanding of the most important people in the world — their
customers. GfK Public Affairs & Corporate Communications is a
division of GfK. The group specializes in customized public affairs
and public opinion polling, corporate communications and thought
leadership research, and reputation measurement in the U.S. and
globally. To find out more, visit www.gfk.com.
About Wells Fargo
Wells Fargo & Company (NYSE: WFC) is a diversified,
community-based financial services company with $1.8 trillion
in assets. Founded in 1852 and headquartered in San Francisco,
Wells Fargo provides banking, insurance, investments, mortgage, and
consumer and commercial finance through 8,800 locations, 13,000
ATMs, the internet (wellsfargo.com) and mobile banking, and has
offices in 36 countries to support customers who conduct business
in the global economy. With approximately 269,000 team members,
Wells Fargo serves one in three households in the United States.
Wells Fargo & Company was ranked No. 30 on Fortune’s 2015
rankings of America’s largest corporations. Wells Fargo’s vision is
to satisfy our customers’ financial needs and help them succeed
financially. Wells Fargo perspectives are also available at
Wells Fargo Blogs and Wells Fargo Stories.
Wells Fargo serves approximately 3 million small business owners
across the United States and loans more money to America’s small
businesses than any other bank (2002-2014 CRA government data). To
help more small businesses achieve financial success, in 2014 Wells
Fargo introduced Wells Fargo Works for Small Business® – a broad
initiative to deliver resources, guidance and services for business
owners – and a goal to extend $100 billion in new lending to small
businesses by 2018. For more information about Wells Fargo Works
for Small Business, visit: WellsFargoWorks.com. Follow us on
Twitter @WellsFargoWorks.
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version on businesswire.com: http://www.businesswire.com/news/home/20160629005119/en/
Wells Fargo & CompanyAlice Hartnett,
704-715-9115@AHartnettWFalice.hartnett@wellsfargo.com
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