Confession: I’m not that much older than millennials. I like to think of myself as a “young” Gen Xer. After all, we agree on a lot of the same things. We love our technology, but we’re a bit skeptical when it comes to things like online privacy, machine learning, AI, and the latest “it” social app. We spend loads of time researching, breaking things down into bite-sized pieces to better process it all. And we both agree... adulting is hard. The struggle is real. See? We’re not that different!
And as the largest generation in U.S. history reaches their prime working and spending years, their impact on the economy will be huge. Which is why they hold the keys to growing your business.
Also known as Gen Y, or the Lost Generation, millennials are a well-studied (and often stereotyped) group, representing almost one-quarter of the world’s population at 1.8 billion. This demographic (born 1980 – 1994) came of age at the brink of a new millennium, in a world awash in technology. They’ve faced numerous economic struggles on their journey into adulthood. From crushing student loan debt to a poorly timed real estate bubble, challenges have pushed them to delay major life events like purchasing their first home, getting married, and starting families. But without those responsibilities, millennials can afford to take on business ownership earlier, and they’re entering the market like never before.
In fact, millennials are the fastest-growing segment of small business owners. Having started businesses earlier than all other generations at the average (young!) age of 27, they’re continuing to become business owners at strong rates.
They’re also the most diverse. For instance:
- A millennial entrepreneur is 77% more likely to be African American than a baby boomer small business owner.
- A quarter of millennial small business owners are Hispanic, compared to only 11% of Hispanic boomer entrepreneurs.
- Women account for 28% of millennial small business owners, 12% higher than the national average.
As competition for small business loans grows more intense by the day, it’s important to understand how this key demographic is different to ensure you’re not overlooked when they need financial services. Not only are fintech lenders like Rocket and Kabbage knocking on their door, but PayPal, Square, and Amazon are aggressively courting these small businesses with multiple integrated services, including credit.
Tech Junkies
This generation has witnessed astounding levels of technological change. As a result, they’re generally considered more progressive, creative, and far-thinking than earlier generations (ouch!). This may also account for why millennials in business are especially attracted to sleek fintech and neobank disruptors that are seeking to establish digital-only relationships across multiple financial products.
Traditional approaches like relying on higher rates or executing blanket marketing campaigns for acquisition and retention will have limited success with this audience. Millennials have integrated technology into their daily habits. It’s imperative to not only target them with the right messages, at the right time, and in the right channel, but provide the digital experiences they’re accustomed to.
Some millennial behaviors and preferences you should keep in mind:
- Millennials spend an average of 7.2 hours online each day. (eMarketer)
- 71% of millennials regularly shop online via mobile devices. (AdWeek)
- On average, millennials watch online videos for 2.4 hours per day. (Wibbitz)
- Millennials spend an average of two hours and 38 minutes on social media daily. (World Economic Forum)
- 83% of millennials find online content useful when making purchasing decisions. (Sharethrough)
- 40% of millennials refer to online reviews and testimonials before making a purchase from a brand. (Millennial Marketing)
So be sure you’re popping up when they search. Make it easy for them to find what they’re looking for on your website and apply when they’re ready. Invest in social media and online review platforms. Word-of-mouth can generate significant growth with this audience. In fact, more than one quarter of merchants say they act on recommendations from other business owners when choosing suppliers.
Show Me The Data!
While millennials were less than two years old when my generation’s beloved Jerry Maguire film came out, bankers today most likely remember Tom Cruise repeatedly yelling “Show me the money!” to Cuba Gooding Jr. Today, it’s about showing (and using!) the data you have. However, while 65% of community banks and credit unions say data is a key strength, many admit to losing business because they aren’t turning it into insights for SMB customers and members. Data, analytics, and cloud-based tools can enable personalized offers with tailored, targeted, precise acquisition strategies that help widen the pool of would-be borrowers.
From there, a modern vibe and experience is key. Can an instant, digitized qualification be delivered so they’re not looking elsewhere? Can they pick back up where they left off in another channel?
The Trust Factor
Small business owners, in general, are an emotional bunch. Their business is their life, and emotions often overpower rational thinking. This is why millennials in business put a lot of heart in decision-making, and they do the research to gather all the information before they commit. Millennials look for providers they can trust above all else. They must trust you before they commit. They believe in fairness, honesty, and awareness. They are proud, have high integrity, and respond positively to complete transparency.
When it comes to millennials and finance, your communications need to be clear. So skip the jargon. Part of millennials’ disengagement with the financial services industry is that there’s a decrease in general financial understanding. Community-based lenders can help curb uneasy feelings by keeping every interaction as transparent as possible. You’ll need to be completely open about all elements of the loan process and clear about what a millennial business owner is signing up for before they’ll do it. Keep them informed as the loan progresses in a way that’s convenient for them (hint: online).
Small Business Is Big Business
The race for attracting and retaining SMBs is on! As rising interest rates improve margins, borrowing costs will increase. This could impact a business’s purchasing and investment decisions, cooling demand. But with more millennials opening businesses than any previous generation, it makes sense to focus your efforts on attracting this key group of small business borrowers! Millennials in business represent a substantial opportunity for those institutions that can move from traditional processes and appeal to them through digital engagement. Community banks and credit unions must expedite their move to lending technology to not only protect their NIMs, but to also keep up with the speed and ease-of-use standards set by fintechs.
Get it right and the rewards can be significant. Because, as they say, "Small businesses grow up to be big businesses” – and they’re key to growing your business.
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