I believe that starting a business in later life is good for you, but what do the experts say?
WHY START A BUSINESS IN LATER LIFE?
Typical reasons:
You’re retiring soon but not quite ready to retire.
You always wanted to start your own business and you now have the time to devote to it.
You spot a great opportunity.
You need or would like to supplement your pension income.
You want control over what you do.
You need but can’t find a job.
You have the financial resources, can secure attractive loan terms, or your new business idea doesn’t need much funding.
You want to find new purpose.
According to recent research from the USA[1], 42% of people born between 1946 and 1964 (baby boomers) started a business in order to pursue their passion, 36% because the opportunity presented itself, 22% because they were dissatisfied with the corporate world and 15% started their business due to redundancy.
Research by Kerr in 2017[2] showed that while career entrepreneurs are motivated by startup rewards, and career success, later-life older entrepreneurs focus significantly more on intrinsic rewards like work–life balance and achieving personal fulfilment. Interestingly, both career and later life entrepreneurs gain equal satisfaction from their businesses.
CAN STARTING A BUSINESS BE GOOD FOR YOUR HEALTH?
In 2012 a new venture incubator was set up for people aged 60 – 75 which offered training to people interested in starting a business and then supported people who did.[3] The project aimed to foster active ageing and extend it further into productive ageing. The research confirmed that “people who have found a sense of meaning in life tend to enjoy better physical health and tend to experience fewer symptoms of depression than individuals who have not been able to derive a sense that their lives have meaning. In addition, people with a stronger sense of meaning also tend to be happier and report higher levels of satisfaction with their lives.[4]’’ Entrepreneurship can not only help to keep you active, it can also create meaning and purpose by helping you achieve goals you weren’t able to pursue when you were younger.
It’s also good to know that having a purpose in life is linked to healthy ageing, and a recent study[5] found that you have a 15% less risk of dying than those who do not.
There is also evidence that switching from organisational employment to entrepreneurship significantly increases an older person’s quality of life[6]. This is because running your own business offers more autonomy and control and more opportunities for self-realisation than working in an organisational setting can, although you are more likely to earn less than before you switched.
A research paper entitled Does Working for Oneself, not Others, Improve Older Adults’ Health? [7] finds that it depends on the type of job and industry. Thus, self-employment in knowledge-based industry sectors (eg consulting, finance, insurance) compared to wage-and-salary jobs results in better health. In labour intensive industry sectors such as durable goods manufacturing, self-employed older adults’ more gradual retirement seems to result in a health advantage over wage-and-salary employees.
ARE OLDER ENTREPRENEURS SUCCESSFUL?
The experts think so.
An article in Quartz magazine written by E Isele [8] asserts that older entrepreneurs’ experience of knowing what works and what doesn’t brings a huge advantage over those who’ve spent little time testing new ideas. Older entrepreneurs are also incredibly resilient, having failed a number of times during their lifetime and learned from it. They have overcome many obstacles, and their understanding of how to weigh outcomes often translates into a higher tolerance for risk.
Figures from Prime[9] show that 70% of businesses started by people in their fifties are likely to survive for a least five years, compared to only 28% of businesses started by those aged under 50.
According to Guidant Financial, baby boomers are often more qualified for financing, have years of professional experience and a wide network of business contacts. When it comes to small business ownership, age is an asset.
WHAT STOPS PEOPLE FROM STARTING UP?
Older people hesitate to consider self-employment because of self-directed ageism, common stereotypes relating to older people’s employability and worry about financial risk[10].
On the other hand, it may not have occurred to some people that self-employment is a possibility worth investigating.
WHAT ARE THE RISKS?
It’s not difficult to gather information about the positive aspects of later-life entrepreneurship, but people do need to understand the risks. Dr Cal Halvorsen wrote one of the few articles I could find on the subject, which is surprising, considering that many small businesses fail. In Why we need to be honest about the risks of entrepreneurship’, Halvorsen exposes the risks for self-employed people aged 50+ in the USA who, until they turn 65, are too young to qualify for Medicare. They are also less likely to receive health insurance and pension benefits (which are linked to salaried employment). Since entrepreneurs earn less, on average, than their counterparts who work for someone else, and with less time to make up for losses, the risks associated with entrepreneurship increase with age.
“In the absence of these protections”, Halvorsen states, “what should potential entrepreneurs do? Know that entrepreneurship can be a high-risk, high-reward game. Do your homework. And if you’re older and approaching retirement, be especially vigilant about assessing these risks. If anything were to happen, it’s essential to have a safety net to fall back on.”
WHAT DO OLDER ENTREPRENEURS NEED?
According to the 2018 Small Business Trends for Baby Boomers Survey (USA) of more than 2,600 small business owners, the biggest challenge for small business owners age 50+ is lack of capital/cash flow; 68% cited this as a problem. About 30% say their biggest challenge is marketing and advertising, while 25% say administrative work is their primary challenge.
If they had additional capital, almost half of entrepreneurs over 50 would spend it on expansion, 45% on marketing and advertising, and 44% on equipment. In addition, 28% would hire staff and 23% would invest in technology[11].
Many older entrepreneurs also need training and support, to enhance their motivation and develop their entrepreneurial skills.[12].
CONCLUSION (FOR NOW)
This is what I have extracted, so far, from lots of reading! I will continue to update my knowledge and share it with you.
I firmly believe that starting a business in later life is good for you. But before you start, you must assess your risks and take all necessary steps to mitigate them, so that your entrepreneurial adventure will reap the rewards you desire.
Best wishes
Viv
[1] The 2018 Small Business Trends for Baby Boomers (US) Survey
[2] Kerr. 2017
[3] Hantman et al. 2014
[4] Bengtson et al. 2009
[5] Hill et al 2014 Purpose in Life as a Predictor of Mortality Across Adulthood
[6] Kautonen et al. 2017
[7] Zhang et al. 2014
[8] CEO of Global Institute for Experienced Entrepreneurship
[9] Prince's Initiative for Mature Enterprise
[10] Hantman et al. 2014
[11]https://www.forbes.com/sites/allbusiness/2018/07/19/baby-boomers-starting-small-businesses/#1cfd2e935679
[12] Hantman et al. 2018