Small businesses are popping up everywhere, but who owns them? Do age and gender play a role in how well a business does?
JPMorgan Chase Institute conducted a study that followed the demographics of small businesses today. In that study, they found that women-owned businesses make up 36% of small businesses today as do ‘younger business owners’ ages 35 – 54.
The JPMorgan study focused on the demographics of business owners and how it affected the longevity of their business, their business decisions, and even how many employees they hired.
Do age and gender make a difference in how a small business is run? How do age and gender affect a business’s revenue? While the demographics are all over the place, there are some distinct areas of focus that provide the answers you seek.
Older Business Owners are Wiser
Business longevity isn’t something that is abundant in our economy today. Businesses start and close faster than we can blink sometimes. Today, most businesses started by people ages 55 and older last the longest – at least three years.
Younger business owners, those ages 35 and under tend to start 33% of the new businesses, but they also close much faster than businesses owned by older people. Older business owners tend to make slower decisions and even have a slower growth rate, but they last longer. The JPMorgan study theorizes that older business owners are financially prepared for the ups and downs businesses endure, which is why they are able to stay in business longer.
The Difference in Young and Female Owned Businesses
The study found that women tend to start smaller businesses than men and bring in smaller revenue $50,000 versus $75,000 per year. Women-owned firms tend to grow at a slightly slower rate too. Women-owned firms grew 13.3 percent from the first to the second year, whereas men-owned businesses grew 15.4 percent in that first year.
As far as age goes, firms owned by younger people start smaller (less cash flow), but grew much faster. Young business owners grew their business 24.7 percent in the first year, whereas older business owners grew it only 6.7 percent.
Additionally, women-owned businesses start with much less revenue than men. Women start with as much as 34% less revenue and have slower revenue growth. The slower revenue growth doesn’t ruin a women-owned business’s ability to stay afloat, though.
Location Matters Too
As suspected, location also plays a role in a business’s success. The study found that there was a vast difference in a business’s success rate in San Antonio and Austin where women opened businesses that were less than half the size of businesses opened by men. In Miami, however, women-owned businesses made revenues that were only 17 percent lower than that of men-owned businesses.
This could have a lot to do with how each municipality helps business owners of varying demographics. Whether the laws are stricter, the financial assistance is less, or it’s just harder to start a small business, the difference is vast.
The bottom line is that gender and age do play a role in a small business’s ability to succeed. While each demographic has a different effect in different areas, the bottom line remains the same. Female business owners are making a name for themselves and taking over, but they still have a long way to go to catch up to male-owned businesses or those owned by the ‘older and wiser’ generation that also has a higher ash flow.