Will young entrepreneurs follow in baby boomers’ footsteps?
At least 550,000 businesses created in Canada after World War II are at risk of becoming ownerless. CIBC estimates that half of the baby boomers who created businesses in the 1960s will retire within the next 10 years. Will they find new owners or will they be forced to close? The answer lies with young entrepreneurs.
As part of the 2013-14 international report from the Global University Entrepreneurial Spirit Students’ Survey (GUESSS), Alexandra Dawson, associate professor of management, led the team who gathered data for the John Molson School of Business (JMSB).
Concordia was one of 759 universities from which data was collected by GUESSS, the worldwide research project whose main objective is to assess the entrepreneurial intention and activity of students.
Five hundred and nine undergraduate students from JMSB answered the survey. Over 60 per cent of participants indicated their intention to work in a large or medium-sized firm immediately after graduation.
When asked about their five-year plan, 35.4 per cent of respondents said they wanted to start their own business. However, only 7.8 per cent of JMSB students who answered the survey indicated that they would consider taking over an existing or family business five years after graduating.
“One of the main hurdles businesses need to overcome is convincing young entrepreneurs that they will be able to innovate and grow if they take over a family or pre-owned business,” says Dawson.
Research done through the National Bank Initiative in Entrepreneurship and Family Business at Concordia, which is directed by Dawson, dissects the complex problem of succession in order to help businesses prepare for the major transition triggered by the retirement of their founders.
Negotiating intergenerational attitudes toward business development and innovation is no small task.
Planning for the transition ahead of time is the key to success, according to Dawson. “It’s also important to communicate to potential successors that they will be able to find their own way and that there is value in taking over a business,” she says.
Dawson shares five reasons why taking over an established business gives young entrepreneurs more room to focus on innovation and growth:
1. Having an established customer base and knowing customer needs and purchasing habits can guide product/service innovation.
2. If the business is big enough, the next generation can start a side project, which can be innovative without jeopardizing the core business.
3. Startups face the so-called liability of newness, which brings high failure rates. We think of startups as being innovative, but established businesses can be too, while facing lower risks.
4. A young entrepreneur can benefit from the experience accumulated by the incumbent and previous generation(s) who may have already tried out certain products, services and processes, and know what works.
5. Often the new generation has studied more than the incumbent one and through exposure to their studies (e.g., an MBA) or other work experiences, may be able to bring fresh ideas and new blood into what the business is already doing.
Fill out the 2016 Global University Entrepreneurial Spirit Students’ Survey by June 15 for a chance to win an iPad mini.
Find out more about the National Bank Initiative in Entrepreneurship and Family Business.