Lower middle-market business owners in America are ignoring the fact that there’s a tsunami approaching. It will leave few businesses unscathed while decimating many others from the face of the planet.
Am I exaggerating? No, not in the least. Listen to this piece written by management guru Peter Drucker in The Futurist magazine (“The Future that has Already Happened”):
“The future has already happened. In human affairs, political, social, economic and business, it is pointless to try to predict the future, let alone attempt to look ahead 75 years. But it’s possible and fruitful to identify major events that have already happened, irrevocably, and that, therefore, will have predictable effects in the next decade or two.
“It is possible, in other words, to identify and prepare for a future that has already happened.
“The dominant factor for business in the next two decades — absent war, pestilence or collision with a comet — is not going to be economics or technology. It will be demographics. The key factor for business will not be the overpopulation of the world, of which we have been warned these last 40 years. It will be the increasing under-population of the developed countries — Japan and those in Europe and in North America.”
In this series of columns, I’ll share my two cents worth on why business owners in the $5 million to $50 million sales range must be vigilant and prepare today for the pending tsunami.
Describing this storm as a tsunami isn’t an exaggeration either. The path, timing and velocity are all on schedule. As the storm rapidly approaches, it will grow larger and larger. The devastation will be widespread, but I’m going to focus on the issues for small and medium-sized business owners.
According to the Small Business Administration, there are approximately 28 million small-to-mid-size businesses in America. Seventeen million of them are home-based or Internet-based with zero to one employee. Of the 9 million left, 3.5 million are owned by folks younger than 54 or older than 74.
That leaves us with 5.5 million businesses solely owned by members of the baby boomer generation. Put another way, 60 percent of all the small-to-mid-size companies in the United States are owned by baby boomers. Although these individuals make up a mere 25 percent of the U.S. population, baby boomers own more than 60 percent of the small and mid-market businesses. Think about it for a moment.
Most of us are familiar with the baby-boomer generation. My guess is that many of you reading this column are part of that group. Through this series, we’ll take a look at boomers from an economic viewpoint and determine how their sheer numbers helped create the onset of a generation, while significantly impacting those generations that followed.
Population Growth and
World War II
It’s important to recognize that the actual baby boom was an American phenomenon. The United States was a relatively late entrant into World War II and, as a result, had far fewer causalities as a percentage of its young male population. Further, the U.S. territory was never a combat zone in the war, so our returning servicemen came home to an intact infrastructure and a healthy economy supported by an industrial base primed and ready for maximum production.
In 1945, the population of the United States was 140 million, with an annual birthrate of around 2.8 million. The birthrate had been between 2.5 and 2.9 million since the early 1900s, with one noticeable drop during the Great Depression.
In 1946, the birthrate exploded by 24 percent to 3.47 million, in just one year! By 1947, new births cracked the 3.5 million mark, soared to 4 million in 1954 and peaked in 1957 at 4.3 million. It stayed above the 3.5 million mark until 1971. So, it took another 18 years (1989) for the birthrate to reach 4 million again.
From 1945 to 1964, the United States added 78 million new, natural-born citizens. By 1965, the U.S. population had surged to about 195 million. Picture that: Roughly two out of every five individuals in America was under 20 years old.
The WWII baby boom was a unique American phenomenon that shaped our culture and sparked wondrous changes. “The Greatest Generation” is thought by many to have changed the world, or at least watched it change. Now, as this generation prepares to leave the workplace, it will evoke one last titanic shift that will forever change lower middle market businesses in America.
If you’re a baby boomer business owner or know a boomer business owner, I urge you to share these informative articles with them. I guarantee that at the conclusion of this series, you’ll be better prepared for a future that has already occurred.