Millennials face financial barriers when trying to start a business, including higher student loan debt and lower starting wages than previous generations.
These challenges, cited in a 2016 survey by business services firm EY and policy organization Economic Innovation Group, are making it difficult for young people to become entrepreneurs.
Less than 2% of millennials were self-employed as of 2014, compared with 7.6% for Generation X and 8.3% for baby boomers, according to the U.S. Small Business Administration.
But entrepreneurship is still possible for millennials, defined in this article as adults under 35: Here are three smart business ideas that match up well with the skills, interests and passions of many in this generation — along with the experiences of a few who have used them successfully.
1. Social media coaching or training
Social media is second nature to millennials: 88% of people between the ages of 18 and 29 used Facebook every day in 2016, compared with 62% of those over the age of 65, according to a Pew Research Center study.
Social-media-savvy millennials can turn those skills into a business teaching small businesses and others how to use digital tools to stay relevant in the marketplace.
Success story: Tracy Samantha Schmidt, 32, is a social media educator and digital marketing consultant. She says social media coaching is a low-cost, potentially lucrative business idea because it can lead to other opportunities in digital marketing.
“[Clients] may realize they need an email marketing person, a web designer, a blogger, a copywriter,” says Schmidt, a former journalist.
For social media coaching, a reasonable rate to charge is $50 an hour to start, according to Schmidt. “I know a lot of people who go for that rate,” she says. “Executives are willing to pay up to $200 per hour, but they're going to want someone who's done it for corporations and has credibility.” The amount you get may depend on the market where you live.
2. Nonprofit organization
Starting a nonprofit could be a good match for a socially conscious millennial: 88% of millennials say a job is more fulfilling if they can make a positive impact on social and environmental issues, according to a 2016 study by Cone Communications, a public relations and marketing agency.
While a nonprofit fulfills a social mission, it's also important to operate it as a business and diversify sources of income, says Sarah LaFave, 28, a registered nurse who co-founded Lori's Hands, which connects college student volunteers to people living with chronic illnesses in Newark, Delaware. She named the nonprofit after her mother, who died from breast cancer while LaFave was a high school freshman.
“We spend a lot of time thinking of new and creative ways to bring in funds so we're never depending on a single source,” LaFave says.
Success story: Growing up working for his family's moving company in New Jersey, Adam Lowy, 31, was bothered to learn that so much nonperishable food gets thrown away during a move. After donating to his local food bank, he learned that thousands in his county didn't have enough to eat.
That experience led Lowy to start Move for Hunger, which works with moving companies to donate unwanted nonperishable food. It has delivered over 7 million pounds of consumables to food banks across North America since 2009.
“I feel like I've been able to make a difference in people's lives, and to me that's way more rewarding than any paycheck,” Lowy says.
Identify a problem and come up with a solution the market has yet to find, just like you would try to do with a for-profit business, he says.
3. Subscription-based product or service
Millennials love their subscription services: 70% own a product subscription, such as Birchbox or Dollar Shave Club, while 89% own a service subscription, such as Netflix or Spotify. That's more than any other generation, according to a 2017 study by payments processor Vantiv.
Young entrepreneurs can tap into the demand for subscription services to launch a business.
Success story: Ryan Perlowin, 29, is the founder and CEO of My Happy Plates, which delivers customized weekly meal plans and recipes via email. The subscription-service business model carries benefits for both entrepreneurs and customers, he says.
Many subscription services (My Happy Plates included) offer free trials, so customers can try them out and cancel at any time.
You can validate a business idea much faster and cheaper, and get valuable feedback from customers to incorporate into product changes, he says.
“Get a basic version of your product going without spending much time or money, and see if people adopt it,” he says. “If the problem is there, and you can validate that this is a real problem that you're solving, you have to go for it.”
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