There’s been no shortage of gloomy headlines about the struggles of workers age 50 and over. But there’s one area in which this age group continues to shine: entrepreneurship.
“The older you are, the more likely you are to be an entrepreneur,” said Edward Rogoff, professor of entrepreneurship at Baruch College’s Zicklin School of Business, and co-author of “The Second Chance Revolution: Becoming Your Own Boss After 50.”
“It’s a very prevalent form of economic activity for older Americans,” he said.
Of the roughly 8.2 million Americans aged 65 and older who are still counted as workers, about 42% are running a well-established small business, about 9% own a business that’s less than 3 1/2 years old, and 11% own a fledgling new business, according to data from the Bureau of Labor Statistics and the 2012 U.S. Report of the Global Entrepreneurship Monitor (GEM), an annual assessment of entrepreneurial activity world-wide. (Rogoff is a co-author of the entrepreneurship report.)
Keep in mind that these percentages apply to people who are in the workforce and don’t count retirees or those not looking for work. Only about 19% of people age 65 and older are counted as workers, compared with about 65% of 55- to 64-year-olds and about 80% of people aged 25 to 54. (Also, there could be some overlap, with one entrepreneur owning more than one business.)
Among workers aged 55 to 64, more than 19% have an established business, 4% have a young business and about 11% have a nascent business. Read More retirees want to start their own businesses, and see the data in Chapter 5 of the GEM report.
It’s not as though the oldest workers are bereft of dreams, either: Fully 26% of workers age 65 and older said they plan to start a business. The only age group with a higher portion of workers with a similar rate of “entrepreneurial intention” is the 18- to 24-year old workers.
While older entrepreneurs might face some unique risks—a big one is not having as much time as younger workers to bounce back financially if a business fails—they also enjoy advantages that their younger competitors don’t.
“There are particular skills and resources that older Americans have that give them advantages,” Rogoff said. “Older entrepreneurs tend to have more money, more social-capital resources—a network of people, and they tend to have industry knowledge,” he said. Plus, “They tend to be highly motivated.”
According to the GEM report, among all of the age groups surveyed, those aged 55 and older were least likely to say they were afraid of failure.
Challenges and solutions
William Zinke is on a mission to ramp up entrepreneurial activity among older Americans. The 86-year-old, a former human-resources professional, is now president of the Center for Productive Longevity, a nonprofit advocacy group that recently hosted a conference in Washington, D.C., titled “The Entrepreneurship Imperative for Engaging People 50 and Older.”
Zinke sees older Americans as one solution to the U.S.’s current economic malaise. These workers “represent a large and growing talent pool,” he said.
“These are people with experience, expertise, seasoned judgment and proven performance. Millions of these people want to continue working, but no jobs are available. [Becoming an entrepreneur] may be the only viable option for these people who want to continue working,” Zinke said.
He said he’d like to see easier access to financing for older people who seek to start new businesses, plus a simplification of the rules governing small-business ownership.Some observers would like to see older Americans embrace the idea of social entrepreneurship—that is, founding companies that serve the greater good in some way.
That doesn’t necessarily mean coming up with a unique business idea, said Ian MacMillan, a professor of innovation and entrepreneurship at the Wharton School of the University of Pennsylvania and director of Wharton’s Sol C. Snider Entrepreneurial Research Center.
As an example, MacMillan described a young entrepreneur in Zambia who started a chicken-feed plant and encouraged farmers to start raising chickens. Now, “There’s that much more meat in a place that was rife with malnutrition and starvation. Why can’t this be replicated in the Democratic Republic of Congo, Malawi, Namibia?” MacMillan said.
Older entrepreneurs are well-suited to help replicate such ventures and to work with local business owners to get their ideas off the ground. “They can bring with them a wealth of experience, training, cash-flow analysis, logistics,” said MacMillan, who is author of a forthcoming book, “The Social Entrepreneur’s Playbook.”
“They don’t have to invent the enterprise themselves. They can orchestrate the creation of such an enterprise,” he said. Older entrepreneurs “could go out there and make a huge difference and at the same time feel pretty good about helping.”
Despite their relative success, older entrepreneurs do face unique challenges, and the biggest one is the financial risk. If a business fails, “We don’t have 30 or 40 years to recoup any losses,” said Donna Kelley, associate professor of entrepreneurship at Babson College and director of the Global Entrepreneurship Monitor.
First, be very clear about your business plan. Older entrepreneurs “can’t just pursue some sort of vague dream,” Rogoff said. “They can’t take that kind of risk. They need to plan it, prove it’s feasible and work out the details before they take the plunge.”
Second, assess your financing options carefully. There are numerous ways to fund your business, and the path you choose may play a part in your long-term success.
One approach, said Rogoff: “Use other people’s money—you try to raise money or you try to recruit partners to work with you. Another is you strategically start smaller and focus on becoming cash-flow positive as soon as possible—that drastically reduces how much you need to invest.”
Also, he said, if you don’t have a specific passion around which your business is focused, then focus on getting into a business that’s less capital-intensive, or one where you can finance the required startup costs, so your personal exposure is reduced.
“Ray Kroc started McDonalds when he was 52. The way he unlocked its value and was able to grow it was by financing the land that all the stores sat on. It’s a good strategy. Banks always love to lend money against land,” Rogoff said.
Third, tap resources. “There are small-business development centers—a couple thousand throughout the U.S.—and entrepreneurship centers at colleges and universities,” Rogoff said. Plus, “There are many local economic development agencies that offer all kinds of help, all free.”
One example, Kelley said, is the incubator at Babson College’s entrepreneurship center, which is now open to alumni. “We have entrepreneurs that are over 50 that are getting started.”
Fourth, consider your succession plan. “If you’re 70 years old, you might not want to do this for 30 years,” Rogoff said. “Do you have a succession plan in mind? Are you going to hand off to a family member, sell to employees, or is it a business you just operate while you can do it and then close it?”
Andrea Coombes is a personal-finance writer and editor in San Francisco. She’s on Twitter @andreacoombes.