They’ve accumulated a wealth of experience and resources compared to Gen Yers — but can boomers afford to take entrepreneurial risks?
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Like anyone else, entrepreneurs have their stereotypes. They’re aggressive. They’re risk takers. They’re young.
But, like most stereotypes, the portrait is misleading. Many people, for instance, would be surprised to learn that there’s currently a boom among older entrepreneurs. In the study "The Coming Entrepreneurship Boom," the Ewing Marion Kauffman Foundation reports that from 1996 to 2007, Americans between the ages 55 and 64 had a significantly higher rate of entrepreneurial activity than those ages 20 to 34.
They may share many attributes with their younger colleagues, but the challenges and opportunities faced by older entrepreneurs are decidedly different, and it’s critical they know what those differences are and how to approach them.
The value of experience
First on the list is risk. Although starting a business at any age carries an element of uncertainty, older entrepreneurs need to be particularly aware of the amount of risk they can comfortably shoulder. If nothing else, should things go south, they have less time to recover than do younger entrepreneurs.
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One way to mitigate risk is to focus on opportunities that complement your experience, says Norman Scarborough, a professor of business at Presbyterian College in Clinton, South Carolina.
“They don’t necessarily have to go into the same types of businesses in which they’ve worked for years, but they should select businesses to which their career and life skills are easily transferable,” he says.
But risk also has a positive slant. Older entrepreneurs set on establishing their own startup have the advantage of leveraging experience — not so much from the perspective of possessing certain skills or knowledge, but from the appeal they can have in attracting necessary financing.
“Risk capital is always looking for experience to lessen the risk. For an investor, angel or venture capitalist, often the turning point of interest can be that this person has or does not have enough experience to pull this off,” says Charles Matthews, executive director of the University of Cincinnati’s Center for Entrepreneurship Education and Research.
“The 50-plus set has the best possible view on risk — they are willing to bet on themselves, and they have the experience to bring to the table to attract outside investment as well.”
Assessing your risk tolerance
That makes it critical for older entrepreneurs to be thorough in examining what sort of risk level they feel they can best manage. For those more wary of risk, buying a franchise can prove a suitable option. To that end, says Scarborough, franchisers are reporting upticks in the number of older franchisees, be they corporate layoff victims or experienced managers looking to use their skills in a different venue.
“These former managers have significant management experience but want the lower risk and management support that sound franchises tend to offer,” he says. “For many former corporate types, franchising offers the ideal blend of entrepreneurship and management support.”
Older entrepreneurs focused on starting their own businesses also need to come to terms with the absence of traditional forms of support. While younger counterparts are accustomed to doing most things on their own right from the start, others who have spent much of their professional life within a large corporate entity need to accept that “gone are the days of the office perks and calling tech support,” says Matthews.
“Cashed-out retirees from large corporations need to remember that they are ‘it,’” he adds. “They don’t have the secretaries, assistants and departments that they could turn to for quick and no-expense answers and solutions to immediate problems.”
That makes building a new support network critical for older entrepreneurs. While contacts from former careers can provide part of that network, it’s important to augment those with new relationships — including associations with other entrepreneurs who can provide guidance and support.
Technology needs in particular can be a double-edged sword. While business software and other products have made starting a business that much easier, older entrepreneurs need to be aware of their limitations. “You need to keep up or get to a position fast enough to hire the technology expertise you will need to stay competitive,” says Matthews.
But the landscape for older entrepreneurs isn’t completely different from that facing their younger colleagues. The basics of success remain intact: identifying market opportunities; devising a thorough plan for building a competitive edge in the marketplace; and compiling a realistic financial and cash-flow forecast. And, although those tasks may be utterly novel to 20-something entrepreneurs, that’s hardly the case for their elder brethren.
“The good news,” says Matthews, “is that this is pretty much what they have been doing all their lives — just for someone else!”