Mind the (Generation) Gap

Mind the gap sign on a railway platform
Millennial Know Where The Gaps Are in the Marketplace and They Are Filling Them – Amy Friedrich, The Principal

A Survey of 600 Small Business Owners Finds Millennial Entrepreneurs Can Teach the Rest of Us a Lot About Running a Company and Living a Balanced Life

They may be younger than their Gen X and Baby Boomer peers, but Millennial-generation business owners are doing astonishingly well and also crushing it when it comes to work/life balance.

Those are a couple of the many insights stemming from The Principal Financial Well-Being Index, which polled 600 small business owners nationwide, almost one-third of whom are in their mid-30s or younger.

Amy Friedrich, a senior vice president of Des Moines-based Principal Financial Group who helps oversee the Index, recently shared the survey results and her analysis in an exclusive interview with Martin’s Business Milestones.

Walk Away Insights:

• Millennials are succeeding, in part, because they are spotting marketplace gaps and focusing on filling them. Moreover, they’re not shy about asking for help in reaching their goals.

“The best small businesses are the ones that stay true to knowing what gap they’re trying to fill, to knowing what services they’re trying to provide, and then getting the best outside expertise on how to bring capabilities, capital, and knowledge to fill that market gap,” Friedrich notes.

• Millennials are incentivizing their workers with a combination of conventional and unconventional employee benefits, running the gamut from 401(k) plans and disability insurance to laundry service, nap rooms, and even pet insurance.

• Millennial business owners work significantly fewer hours per week on average (38.8 hours) compared to Gen X (47.8 hours) and Baby Boomer (47.1 hours) business owners. Stepping away from the business more often doesn’t seem to have suppressed performance.

“I think when you look at the hours [Millennials] work, they’re working fewer hours, but they’re getting the same or better economic results, that indicates to us they aren’t necessarily saying, ‘I have to be here and be the expert in everything.’ They’re saying, ‘It’s my responsibility to find those places where I can find other people to be experts and to get our work done better.’”


Each year, The Principal Financial Group, a Fortune 500 global financial services company based in Des Moines, surveys small business owners nationwide to take the pulse of American entrepreneurs. Harris Poll conducts the survey online for The Principal.

About one-third of those business owners in the most recent survey were Millennials, 35 years or younger. Those in the 36-to-50-year range were considered Gen Xers, while business owners older than 50 were classified as Baby Boomers. Those questioned by Harris Poll own at least 5% of a company with 10 to 500 employees.

To read more about The Principal Financial Well-Being Index, visit www.principal.com/wellbeing.

What follows is an abridged and edited transcript of our conversation with Amy Friedrich. The red highlights, inserted by Martin’s Business Milestones, are intended to help our readers spot key business insights.

Exclusive Interview:

Amy Friedrich, senior vice president
Amy Friedrich, senior vice president

Martin’s Business Milestones (MBM): You took a little bit of extra time releasing this year’s Index… (The survey was conducted from July 29 to August 25, 2015.)

Amy Friedrich: One of the reasons we did that is because we’re really hearing a lot about Millennials as consumers or employees, but I think we’re hearing a little less about Millennials as employers themselves, people who are responsible for running businesses, people who are making decisions about capital allocation and are making decisions about how they care for the people who work for them. We wanted to make sure we had a really clear profile of how their results look [compared to other generations].

MBM: Walk us through some of the more interesting findings from this year’s Principal Finance Well-Being Index.

Amy Friedrich: What we continue to see for small business owners, no matter what generation, is they continue to be confident about their business, so their optimism in their businesses continues to look very strong.

It is particularly strong, though, for the Millennial generation, and that strength really shows up on statistics like when we ask them, “Have you added staff in the last 12 months?” Again, we ask that because that’s not attitudinal. That’s a financial commitment they’ve made.

When we ask people if they’ve added staff, 83% of the Millennials indicated they had added staff in the last 12 months. That’s compared to 66% of Gen Xers and 49% of Baby Boomers.

So even though a huge proportion of the small business owners are adding staff, they’re doing it disproportionally when they’re owned by a Millennial. That was a pretty interesting finding. Frankly, I wasn’t sure we would see that.

I think there’s also a tendency to think that Millennials as business owners are going to a lot of things, like adding – I would call them – perks. They’re things like laundry service, nap rooms, flexible hours, things like that, and those are things that I would say require cultural support.

I think it’s pretty well established that Millennials do some interesting things with the perks they offer, but what this data also told us is Millennials also have the highest interest of any generation in adding traditional benefits, 401(k) plans, dental insurance, disability, things that would require some level of financial support. I think that’s a difference between how you see Millennials depicted and what they’re saying they’re willing to put their financial backing behind.


MBM: What was interesting in this, Amy, is that it turns out that Millennials are much more likely to turn to financial professionals looking for help on their personal and business finances, retirement planning, all of those things, than any of the other generations. Correct?

Amy Friedrich: That’s exactly right, and I find that to be fascinating.

Millennials respond only 8% of the time that they’re not using anybody to help them with their personal and professional financial planning. Baby Boomers respond nearly 30% of the time that they’re not using anybody. That tells us that there’s something significant going on there.

We feel like the data is pointing us towards [the conclusion that Millennials] are [more] willing to find and ask for help and take responsibility by saying, “Others can do it better for me.”

I think when you look at the hours [Millennials] work, they’re working fewer hours, but they’re getting the same or better economic results, that indicates to us they aren’t necessarily saying, “I have to be here and be the expert in everything.” They’re saying, “It’s my responsibility to find those places where I can find other people to be experts and to get our work done better.” I think that has big implications for the broad economy and growth of small businesses.

I think when you look at the hours [Millennials] work, they’re working fewer hours, but they’re getting the same or better economic results

MBM: Are Millennials, in fact, doing as well financially? Are they doing as well financially as the earlier generations?

Amy Friedrich: I can give you some indirect indicators on that. We don’t force the people who do this survey to bare their financials to us, so what we ask them are questions that bridge that gap between attitudes and trying to get at are they really performing better. We ask them questions about capital usage, how they’re saving, how they’re deploying capital. We ask them questions about hiring, so when you look at are they actually adding staff, you would presume that it would be reasonable to extend that they financially have the ability to make the payroll on these people that they’re adding to their staff. Adding staff is typically a pretty good indicator of the financial health of their business.

MBM: Do you get any sense as to whether the nature of the businesses that Millennials own are much different than the Gen X or Baby Boomer generation? Is the type of business that millennials are going into in some ways reflective, perhaps, of some of the ways that they are working differently?

Amy Friedrich: I think that we have more anecdotal than hard data on that point. The anecdotal data will come from things like as we go to conferences and look at those fastest growing businesses.

When I talk to business owners, what I’m seeing there is a broad array of businesses represented. I think the tendency is to believe they’re all sort of tech companies, they’re all sort of high-flying, happening in maybe one area of the country, and I think what I see is these are people who have seen an idea and who take it to the marketplace. Some of them are offering consulting services. Some of them are doing t-shirt design. Some of them are opening up coffee shops. I don’t know if I can give you hard data that says they’re definitely doing different types of businesses than those that the Baby Boomers own.

What I can tell you is I see businesses that came from an idea of a market gap and who felt comfortable moving in to solve that gap, so rather than, “I inherited this from my parents,” or “I took this from a family legacy,” it feels like more the Millennial business owners are filling in what they perceive as market-competitiveness gaps.


MBM: Talk about technology and what your survey found in terms of how Millennials are using technology?

Amy Friedrich: I think the thing to note is that use of technology is going up for every group. When we look at every group and talk to them of how technology is enabling their businesses, really every group, regardless of the generation, would say that it’s helping them.

What’s interesting is, if you look at the Baby Boomers versus the Millennials, all of them are saying they’re using technology, but the Millennials appear to be able to make that leap to have them actually help them work fewer hours.

Again, maybe you can attribute it has nothing to do with technology use, but Baby Boomers are still clocking in the highest hours that they’re putting into running those small businesses. Millennials are putting in the least hours, and I think that always raises that really interesting discussion about, what does that say about each of the groups?

I think one of the things it says is that Baby Boomers are probably still linking hours at the job with results very clearly. I think Millennials tend to link that a little less. I have had many a Millennial say to me, “I just want the fastest path to get there.” Again, I don’t want to put a judgment on if that’s always the right or the wrong thing, but it does appear to be a running-your-business-strategy difference for the two.


MBM: Why are Millennial business owners different than earlier generations? Is it because Millennials in general are different than earlier generations and they are simply projecting the way they look at the world because they’re Millennials onto their businesses, or is there some other factor that would explain how a generation that is younger has become a force to reckon with, when it comes to competing with Gen Xers and Baby Boomers? What is the secret sauce here?

“It’s not going to be about protecting what I have. It’s going to be about growing what I have.”

Amy Friedrich: I will speculate a little bit on the secret sauce. Again, I’ve got some data, some anecdotes, but I think one of the things that’s interesting is when you talk to Millennial business owners, everyone plays back to me that 2008, 2009, 2010, that those were terrible years.

What [Millennials] would say is, “You know, if that’s as bad as it’s going to get in the next 10, 20, 30 years, things look good. If that really was a terrible experience” … because for them it didn’t feel incredibly terrible.

They remain very optimistic. They haven’t seen two or three or four of these business cycles. They’ve seen one of these business cycles, but I think what that tends to give them is they sort of have a mentality that says, “It’s not going to be about protecting what I have. It’s going to be about growing what I have.”

I think if you talk to different generations, they’ve seen a few more business cycles. They would argue that they want to protect maybe more than grow, and I think in the end you just have to decide what perspective really helps you the most in terms of serving your customers or the markets you’re in. I would argue most customers and markets tend to respond to things that are about growth better than they do just protecting what they have. That’s a little armchair psychology.

MBM: We like armchair psychologists. Continuing in that role, do you think that when Millennials get to their 40s and 50s they will continue to look at the world and operate differently? Or are they likely to more closely resemble today’s Gen Xers and Baby Boomers?

Amy Friedrich: I think that is an incredibly important question for us to ask. Now why, though, it’s really important to understand is because the numbers at this point in the cycle are favoring the Millennials. They’ve got more workers with that attitude. They’ve got more business owners that are moving into the population, and they’ve simply got more, frankly, wealth. Some of that’s going to come from their parents, some of that’s going to come from their own enterprises, but seeing how that wealth then translates into ‘do you continue to feel like you can grow, or do you start to try to protect,’ probably has some very real economic implications for the U.S. economy.


MBM: What’s the takeaway from your survey for other small business owners who are not in the Millennial generation?

Amy Friedrich: I think it’s always healthy to do a little self-reflection. If you’ve got a generation coming up saying, “I use financial professionals more. I have people helping me with my financial planning. I have people helping me personally and professionally,” I think it’s very fair to ask yourself, ‘could I gain more by handing more off to other people who could help me? Could I learn something if I am part of a business community?’

I’m sitting here today in Des Moines, Iowa. If I’m part of a small business community, I can tell you that there are some people who employ 10 people and other people who employ 150 that can learn something from one another. There are people who work for companies that employ 15,000 people that can learn something from someone who employs 15 people.

I really believe down to my core that any business of any size is better off when we just simply talk to each other. When we talk to each other about what’s going on, what we’re seeing, and then we do so in a way that we can learn from one another. I think when you start to build those artificial boundaries of what we can learn from one another, you’re going to ultimately not do the best for your customers.


MBM: The 600 business owners who you surveyed have obviously survived. But the vast majority of small businesses don’t make it to their five-year milestone anniversary. Do you have a feel for the companies that don’t make it and what’s to blame?

The best small businesses are the ones who stay true to knowing what gap they’re trying to fill, to knowing what services they’re trying to provide, and then getting the best outside expertise on how to bring capabilities, capital, knowledge to fill that market gap.

Amy Friedrich: I think that there is this general thought that a lot of people don’t want to work with small businesses – a lot of larger, more established companies – because they’re just always going in and out of business.

You know what? Fundamentally, that’s not really true.

Certainly if you employ over 10 people, you’ve hit a point where you have quite a bit of stability in those businesses. I think those that go out of business probably emerge slightly differently and perhaps slightly better even two years, three years, and four years down the road.

Those that go out of business, what I see is they probably still had some sort of an interesting concept or interesting idea of a gap in the marketplace but they just didn’t go to market quite right, with the right partners, with all the right funding. What I find is those business owners tend to reinvent themselves two, three, and four years later, maybe with different capital, maybe with different partners, and they do it in a way that’s still trying to get at that same market need.

My advice would be, I think, the best small businesses are the ones who stay true to knowing what gap they’re trying to fill, to knowing what services they’re trying to provide, and then getting the best outside expertise on how to bring capabilities, capital, knowledge to fill that market gap.

MBM: Thank you.

7 Characteristics of Martin’s Business Milestones Companies

There are good reasons why some small and mid-size businesses survive and thrive for decades while most enterprises never even make it to their first significant business milestone – the five-year anniversary.

Dr. Charles W. Martin and his colleagues at Martin’s Milestone Advisors specialize in helping CEOs and leadership teams blow past business milestone after milestone, allowing the owners to build a lasting legacy of profits, personal satisfaction, and service to employees, clients/customers, and community.

Dr. Martin, whose own professional practice began in January 1979, is a serial entrepreneur, owner, business author, and C-Suite mentor.

Having advised dozens of companies and studied thousands of other ventures, Dr. Martin can readily diagnosis the traits and regiments of companies and professionals that have what it takes to endure while also identifying the symptoms of companies that are destined to fail.

There are seven key characteristics of Martin’s Business Milestone Companies. The traits that distinguish those companies on track to celebrate major milestones for years to come – include:

  • CEOs/Owners who are constant learners, perpetually expanding their expertise and knowledge base
  • Companies that develop a deliberate, well-crafted organizational design and regularly refine their operating approach
  • Companies that cultivate a distinct culture that includes fostering enjoyment and job satisfaction companywide
  • Companies that genuinely care about being the best at what they do and consistently strive to exceed the expectations of their customers/clients
  • Companies that recognize their inherent limitations and look to external sources – including mentors, coaches, and outside directors – to supplement their internal expertise
  • Companies that are not deterred by setbacks, adversity, or even outright failure. Rather, they view disappointments as learning opportunities and forge new strategies in response to defeats
  • Companies that give back to their communities by investing both time and money to contribute to the public good