Gen Z Entrepreneurs Are Transforming the Future of Small Business

How Gen Z is redefining career paths and navigating the entrepreneurial world on their own terms.

The data in this article comes from an internal study, the “Small Business State of Mind” report, commissioned by Microsoft Corporation in April 2022 and conducted by Wakefield Research.

In 2021 alone, Americans submitted over 5.4 million applications to start new businesses. With the U.S. experiencing a small business boom, Gen Z, the generation known for defying traditional paths, is shaping its future. They’re showcasing their unique views on work and success and transforming the world as we know it with their social media skills, value for self-expression, and strong social awareness. With 62% of Gen Zers indicating they have started—or plan to start—their own business, Gen Z is set to become the most entrepreneurial generation yet.

So, what does the state of small business look like today and how is Gen Z shaping this evolution? Microsoft Store’s “Small Business State of Mind” report—a survey of 1,000 small business owners with 0-24 employees—explores the mindsets of today’s entrepreneurs to understand their work motives, lifestyles, and vision for the future as they lead, navigate, and plan for the opportunities and challenges ahead.

Key Findings

Five small business trends shaping entrepreneurship today:

1. 9-to-never. Gen Z small business owners are redefining the workday.

2. The do-good effect. Small business owners investing in social good are seeing benefits.

3. Risky business. Small businesses are neglecting data breach prevention.

4. Road to retirement. Gen Z aims for early retirement through small business ownership.

5. TikTok over textbooks. Gen Z small business owners are using TikTok for business advice while questioning the need for a college degree.

The workplace hustle experienced by Millennials—typically consisting of long workweeks and endless hours at a desk—has taken on a new form with Gen Z. The Gen Z grind may look similar to the Millennial hustle, but it has some key differences.

Survey results show that 91% of Gen Z small business owners work unconventional hours outside of 9 a.m. to 5 p.m., and 81% work while on vacation, compared to 62% of small business owners overall. They juggle multiple roles: nearly half of Gen Z (48%) and non-Hispanic Black small business owners (49%) have multiple side hustles, compared to 34% of small business owners overall. Additionally, a majority of Gen Z (64%) and BIPOC small business owners (58%) operate at least half of their business on their phone, compared to 48% of small business owners overall.

Not only does Gen Z hustle, but they’re driven by purpose. Half of Gen Z small business owners (50%) rank social good as one of their top three business priorities compared to 39% of small business owners overall—more on this in the next section.

“At Microsoft Store, we know technology is crucial for supporting a flexible and mobile work lifestyle,” says Travis Walter, vice president of Microsoft Store. “It allows small business owners to manage their business anytime from anywhere, reach customers where they are, and focus on what really matters to them and their business.”

As the world continues to navigate a prolonged global pandemic and a period of vast societal change, Microsoft Store found Gen Z small business owners adopting non-traditional priorities—social good. The data illustrates a “do-good effect”—positive impacts were reported as a result of these social good investments.

The survey reported that half of Gen Z small business owners (50%) rank social good as one of their top three business priorities, out of a list of options including financial stability, business growth and expansion, brand image/reputation, environmental sustainability, and achieving fame. In fact, while 88% of small business owners overall put financial stability in their top three priorities, and 77% put business growth, those figures fall to 73% and 65%, respectively, among Gen Z small business owners.

The focus on social good doesn’t stop with Gen Z—nearly two in five small business owners (39%) placed it in their top three business priorities. And it has made an impact in more ways than one. The data shows a “do-good effect,” with 88% of small business owners who prioritize social good in their business saying it helps their business grow and 44% saying it has positively impacted their mental health.

Interestingly, 82% of Gen Z small business owners say prioritizing social good has helped their business grow, and 52% say it positively impacted their mental health; and 86% of BIPOC small business owners who prioritize social good in their businesses say it helped their business grow, and 56% say it positively impacted their mental health.

The pandemic drove many small business owners to adjust their operations or invest in technology to maintain business and reach their customers. With every pivot comes risk. The survey found that nearly half (47%) of small business owners haven’t invested much in data security and are taking a gamble hoping to avoid a data breach.

“This highlights the importance of investing in the right technology and taking proper precautions,” says Walter. “Technology can open doors for small business owners—allowing them to efficiently run their business, more easily reach their customers, improve productivity and increase output—but preventive security measures are a must. A recent study from Microsoft found there are now 921 password attacks per second, that’s 79.5 million attacks per day—a data point that has nearly doubled in the last year. It’s crucial to implement proper data security measures, safeguard devices, and educate employees to prevent data theft.”

Small business owners can access cybersecurity training and resources for free at Microsoft Store’s Small Business Resource Center.

There are many reasons to choose small business life, and Gen Z has one more: the potential for early retirement. Sixty-one percent of Gen Z small business owners believe pursuing entrepreneurship will lead them to retire sooner than if they had gone corporate, compared to 40% of all small business owners. Early retirement offers the chance to pursue personal passions while age is still on their side. One thing is for certain, Gen Z is not afraid to write their own playbook.

Gen Z is entering the workforce at a crucial moment in the evolution of work, following recent years of pandemic-fueled online schooling. Historically, graduating from college was seen as a rite of passage, an achievement previous generations expected and longed for. Gen Z, however, believes other paths can lead to their goals. Seventy-eight percent of Gen Z small business owners say obtaining a college education is not very necessary for running their own business. What are they turning to instead? TikTok, of course.

TikTok has emerged as a career resource for the next generation of entrepreneurs, ushering in a new wave of mentorship as the social platform teaches them new entrepreneurial skills they may not have had the chance to learn in a classroom setting. Microsoft Store found that while a third (33%) of small business owners overall use TikTok as a resource to learn about business, that percentage nearly doubles for Gen Z small business owners (65%).

In fact, small business owners who use TikTok as a resource (48%) are more likely to have multiple side hustles than those who do not (27%), further evidence of today’s workplace hustle.

What’s Next for Small Businesses?

“It’s your local coffee shop, florist, and barbershop you’ve been visiting for the past 10 years—it’s these small businesses that are driving our economy forward,” says Walter. “Small businesses with fewer than 20 employees make up 89% of all businesses in the U.S. Supporting these businesses is crucial, especially as they face no shortage of obstacles today.”

Half (51%) of small business owners ranked inflation as the biggest threat to their businesses right now, followed by COVID concerns (21%) and supply chain shortages (18%).

Despite this, a majority of small business owners (59%) surveyed are optimistic, expecting business growth in the next 12 months, including Gen Z (55%) and BIPOC (67%) small business owners. And they aren’t looking to trade in their “boss” title for a badge: 86% of small business owners stated they are more likely to keep their small business than quit and take a corporate 9-to-5 job.

The state of small business will continue to evolve as our world changes, but we can expect Gen Z and its entrepreneurial and non-traditional mindset to shape its future. This is only the beginning.

We invite small business owners to visit Microsoft Store’s Small Business Resource Center for free access to training, tools, products, and business solutions to connect with teams, reach new customers, protect their businesses from data security threats, and grow their businesses.

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