The Horizon

The Millennial Business Model

Jordan Williams, Managing Editor

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Starting Small Businesses

If you are a millennial – an American born between 1980 and 2000- then business matters to you and you matter to business, according to research.

A study published in 2017 by America’s SBDC, the association of the country’s small business development centers, emphasizes the relationship between younger generations of Americans and small, local businesses. The research indicated that millennials, more so than previous generations, have a distinct inclination to both support small businesses and start ventures of a similar nature of their own.

While millennials have had less time, research suggests that they are more likely to have started small businesses more so than both Baby Boomers and Gen-Xers. This implies that young adults in their 20s and 30s are significantly more apt to run their own small, locally operated business than the more established generations that pre-date them.

So, millennials are good at starting their own businesses, this is apparent according to recent findings as mentioned above. But why? Why is this particular generation more likely to pursue their own business ventures than generations before them?

Ann Neel is a former marketing manager for a Louisville-based firm who also did freelance advising for local businesses from 2011 until her retirement in 2017. Neel states that the answer to the aforementioned question has something to do with the lack of innovation that millennials have seen before their time.

She isn’t interested in the fiscal or socio economic critique that may support reasoning as to why the generation is as inclined as it is. Instead, her curiosities surround the millennial mindset when it comes to the initial consideration of starting one’s own business.

“Millennials were brought up to be consumers thanks to the variety of chain restaurants and big box stores,” Neel said. “For the majority of their upbringing, they were customers of stores that lacked both characterization and innovations. At some point, millennials thought they could do things better.”

Neel explained that the lack of change and ultimately drive to be something different for chain organizations became unrelatable for millennials, both in terms of quality and how they ran internally. At a certain point throughout the course of their maturity, millennials decided that working for themselves in a customized setting was immediately preferable to the alternative, which Neel believes plays a major role in the millennial pursuit for small business.

“Over half of millennials want to start a business of their own and I believe this says something about the way in which businesses have been run in past years,” she said. “Millennials are interested in small businesses of their own because they don’t care for the lack of innovation and close-mindedness in the industry.”

While millennials are more inclined to seek out innovative business ventures, they are also less inclined to be as informed as they could be when pursuing ideas of their own, according to Neel.

“Millennials are passionate, probably because of how they were raised in comparison to their parents and the generation before them,” she said. “Their passion is good, but it is also a bad thing as they can find themselves knee-deep in a venture they are not fully prepared for.” 

Supporting Small Businesses
Millennials don’t only have a heightened desire to start small businesses, but they also have a drive to support small businesses.

According to data gathered by AT&T in conjunction with National Small Business week, it was discovered that over half of millennials are willing to pay more in order to support small businesses. The survey provided results detailing that as customers, millennials are very offering when it comes to local eateries and stores. The millennial mindset appears to revolve around paying more to help your neighbor rather than paying less to help a corporation.

In an interview with Small Business Computing, LaKendra D. Davis, vice president of Small Business Solutions at AT&T, explained that small business support by millennials was in fact on the upswing.

“The survey results underscore a renewed interest in small business support, particularly among millennials. Our research shows that approximately half of millennials, ages 16 to 34, are willing to pay more to support a small business,” Davis said. “Millennials have tremendous purchasing power and small businesses have the opportunity to tap into these younger generations.”

Davis goes on to explain that when it comes to the largely millennial clientbase, a fundamental decision that must be made by small businesses comes down to technology and in-shop convenience surrounding it.

Tapping into the millennial customer base may be relatively simple for small businesses as the demographic is already inclined to represent such locations, but sustaining millennials as customers revolves around the tech side of things in a major way. Catering to technology is exactly how small businesses can get ahead in comparison to their larger, more corporate opponents.

“Small businesses have something to gain by embracing technology as it plays a critical role in reaching millennials – from in-store Wi-Fi and digital advertising to social media marketing and mobile payment options,” she said.

The numbers are in and it is apparent that millennials are in favor of local businesses, and Danielle Decker, a sophomore at IU Southeast, shares this sentiment.

Decker is 24 and fits perfectly into the millennial mold that has been defined for her. She is a full-time student and works as a waitress on the weekends, so her income is limited for the time being; however, this doesn’t sway her from keeping her shopping and eating small business oriented.

“[I shop local] because I like seeing where my dollar is being spent and I like to see who is doing the spending,” Decker said. “I feel like I am helping an actual person out by paying a little more, instead of paying a little less and helping some corporation without a face.”

While her reason for spending a little more is centered on customer interaction and the potential knowledge that comforts her with the way in which her money is being spent, Decker acknowledges that other millennials may have their own reasons for shopping and eating locally.

She knows that there is variation when it comes to reasoning behind the support of small businesses, but explains that as long as the support is there, the reasoning doesn’t matter.

“Some people may shop locally because they feel like it’s the right thing to do, but quality also plays a part,” she said. “When it comes to going out to eat, the majority of my friends avoid chain restaurants and instead eat at these small businesses. They aren’t doing it because they think it’s the right thing to do, they’re doing it because the quality of food at these local places is just better. Quality matters.”  

[I shop local] because I like seeing where my dollar is being spent, and I like to see who is doing the spending. I feel like I am helping an actual person out by paying a little more, instead of paying a little less and helping some corporation without a face.”

— Danielle Decker, sophomore, business administration major at IU Southeast

Decker mentions the quality of food at casual dining establishments as problematic for some of her friends and this may be a reality that CEOs aren’t finely tuned with. With that being said, chief executives are becoming aware of millennials as a dwindling clientbase.

“Casual-dining restaurants face a uniquely challenging market today,” wrote Buffalo Wild Wings CEO Sally Smith in a 2017 letter to shareholders.

Smith’s letter covers the basics in terms of what the root of the problem for diminishing profits could be, but she emphasizes millennials as the true cause of the issue. Millennials simply aren’t frequenting big chain restaurants like they used to, and from a big chain restaurants perspective, this is obviously problematic.

“Millennial consumers are more attracted than their elders to cooking at home, ordering delivery from restaurants, and eating quickly, in fast-casual or quick-serve restaurants,” Smith wrote.

However, smaller organizations managed not by CEOs, but instead small-time owners don’t see the millennial influence as problematic, they see it as beneficial to their overall business model.

Matt McMahon is the owner of both Big Four Burgers and District 22 Pizzeria and his businesses have each benefited from the millennials clientbase that frequents his establishments.

McMahon explained that millennials are great customers to cater to and have because they tend to frequent places they enjoy more so than other age demographics. He has had nothing but positive experiences when it comes to the millennial customer base.

“Millennials customers have been pretty great for business,” he said. “[Millennials] like to eat and drink local, and this is perfect for independent business owners. As a whole they are really great customers to have.”

According to McMahon, millennials also offer a client perspective that most other generations do not, and this comes down to the type of spending that they do when dining out.

“The millennial generation is the only current generation to have mostly dual-income households with no children,which means they are more inclined to spend more and come back. They have more disposable income and more time, which makes them terrific customers,” McMahon said.

Millennials as customers appear to be ideal for independent business owners. They care about what they eat and drink, and they care about where they eat and drink; this allows for them to be loyal and loyal customers are ideal from a business standpoint.
There are questions surrounding their legitimacy as a generation, likely due to the less than traditional means of making a living, but there is no denying that when it comes to supporting local businesses, millennials are the perfect fit.  

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