Wise-up Wednesday from Zane Benefits: Will retirement of baby boomers shrink the dental industry?
Recent studies indicate that a lot of shifting is going on as baby boomers retire and millennials grow in numbers in the workforce. These changes will have a profound impact on the dental industry as we know it today.
Do baby boomers stand apart as America’s entrepreneurial generation? As they begin to retire, is there cause for concern that the number of dental practices in America will shrink?
A 2015 study released by the Ewing Marion Kauffman Foundation says, not necessarily.
Many economists are concerned about the future of small businesses as baby boomers move out of the workforce. The baby boomer generation is defined by those born between 1946 and 1964, and is known to have catalyzed the information technology revolution. Their cohort comprises an extremely large workforce, and disproportionately represents the total number of small business owners in the US.
The fear is that millennials (those born between 1981 and 1997) will not be able to mirror the small business growth of their predecessors, and the number of startups, including new dental practices, will decrease, along with their likelihood of success in the coming decades.
Outlook for dental practices
Financially, the first three quarters of 2014 saw more venture capital investment than any single year since 2001. New companies are being valued at higher amounts than ever before. These are both positive indicators for future business development in the dental industry.
However, survival rates of new small businesses have been falling since the early 1990s. A Kauffman study reports that while “new business creation peaked in 2006, [it] plummeted 31% to its nadir in 2010; as of 2012 it was still 27% below that recent peak.”
The right age to start a small business
In aggregate, age is correlated with likelihood to start a business. This means that one indicator for future small business growth is generational cohort size and age. The Kauffman Foundation found that first-time entrepreneurs are likely to be around 40 years old, and serial entrepreneurs likely to be in their 50s.
The millennial generation is a product of the IT revolution, and has experienced near-ubiquitous exposure to entrepreneurship. Millennials are more educated than any other generation, and those ages 20 to 24 are now the largest cohort size in the United States, displacing baby boomers for the first time. Given the average age of first-time business owners, and the current age of the millennial cohort, experts expect to see a decline in the number of new dental practices opened. The rate of business creation should pick back up as the next generation ages and becomes statistically more likely to start their own small business.
Millennials, however, are saddled with unprecedented amounts college debt, which is worsened by their entrance into the workforce during the Great Recession. Prohibitive quantities of debt raise concerns about their willingness to assume the risk of starting a small business.
Conclusion
There are conflicting small business growth indicators, which some see as the mark of the end of an era and others see as the beginning of a renaissance. However, it is clear that the aging baby boomers and the emerging millennials will be the largest demographic forces shaping the number of new dental practices to enter the market.
To learn more about small businesses, download the free guide “The 8 Small Business Health Benefit Trends All Owners Need to Know for 2015.” Wise-up Wednesday is presented bi-monthly from the experts at Zane Benefits. One Wednesday a month features Human Resource issues, and the other Wednesday discusses health benefits.
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