When most think of startup companies, they envision the founders to be young and aggressive with minds full of new ideas. Typically, we don’t envision Baby Boomers (people born between 1946 and 1964) as aspiring entrepreneurs. In fact, my firm has provided many acquisition loans to business owners who bought companies from Baby Boomers who are retiring.
However, recent data indicates that older Americans are taking risks and starting ventures while they are in their 50s — and sometimes even older. According to a recent study by AARP, A Business Case for Workers Age 50+, the number of people over the age of 50 has grown significantly in the past decade and is expected to increase. In fact, the number of workers over age 65 outnumbers teenage workers for the first time since 1948. People are living longer and retiring later. Many “senior-preneurs” are able to fund their ventures with their own retirement savings.
Why are they ramping up when they are expected to be slowing down? The so-called “Pepsi Generation” has always been about defying age. The AARP study identified motivating factors for continuing to work:
• liking to work and earn money
• wanting to have something interesting to do
• staying physically and mentally active, and
• staying productive.
Another recent study conducted by the Kauffman Foundation found that Americans ages 55-64 are now opening new businesses in greater numbers than ever before, and we are seeing an increasing rate of new entrepreneurs among individuals aged 55-64. In fact, according to the 2015 Kauffman Index of Startup Activity, this age group comprises more than a quarter of all new entrepreneurs.
The economy has been a factor. Companies have given older and more highly paid workers buyout packages — often before these employees were truly ready to stop working. Instead of job hunting in their 50s or 60s — a daunting task, no doubt — many of them are opting to start businesses. With historically low interest rates during the past few years, the environment has been and continues to be ripe for senior entrepreneurship. Because they likely no longer have small children at home, older entrepreneurs can devote significant amounts of time to their new ventures that younger parents may not be willing and able to give.
The advice I give to senior-preneurs differs from what I’d tell the 20-something founders of a fledgling tech firm.
1. Don’t use up all of your retirement savings to start your firm
Business loans are readily available, restrictions have been loosened and interest rates are low. If your money is invested in portfolios that are doing well, it could be more advantageous to borrow at low interest rates to fund a venture that could provide higher returns. Keep 401K and pension money socked away for when you are really ready to retire for good.
2. Become adept at technology
Social media is critical to marketing a business in the 21st century. Be familiar with Facebook and Twitter, as well as Instagram and Snapchat, which are wildly popular among the younger generation. Become knowledgeable in mobile ordering and payment systems, including credit card processing. Use online platforms to secure funding.
3. Look to partner with someone younger
An older person might be the perfect partner for a younger person with a great idea but little experience. Further, someone in his or her 50s likely has more personal money to invest in a business. In turn, the younger colleagues may be more attuned to trends in the marketplace, social media and other technology that can help make a new venture more successful.
4. Maintain your health
Business ownership is stressful. As we age, the body has a lessened ability of dealing with stress. Energy levels naturally decrease as we get older, and long hours take their toll quicker. Visit your doctor for a physical to determine what kind of shape you are in before you take on something big.
5. Plan an exit strategy
Someone starting a business at age 55 or 60 may only want to be involved in it for more than a few years. Every company needs a succession plan. This is especially true when the founder is somewhat older.
Senior-preneurs hold advantages including industry knowledge, expertise, and life experience, as well as the ability to use some of their own capital. The Baby Boom generation is one that has always gleefully battled age, and the growth of companies started by people over the age of 50 is a prime example of that spirit.