Starting a Business

Studies such as AARP's Self-Employment and the 50+ Population have found that workers age 50 and older are significantly more likely than younger people to be self-employed or run a small business. In 2002, 5.6 million workers age 50+ (16.4 percent of mature workers) listed "self-employed" as their primary job. This compares with 10.2 percent for the workforce as a whole.

Rates of self-employment increase with age, making it a more frequently chosen option for mature workers. Simply stated, workers age 50+ comprised 25 percent of the workforce in 2002 but made up 40 percent of the self-employed. Some of these self-employed mature workers have been in their businesses for many years. Others have chosen it at the time they retired from their primary career.

Research findings about self-employed mature workers are interesting.

  • Self-employed have higher household incomes and financial wealth (exclusive of business wealth).
  • Self-employed are less likely to have health insurance than mature workers in traditional employment
  • Older self-employed workers actually work one hour less per week than their wage- and salary-bound counterparts.
  • Approximately 33 percent of self-employed workers age 51 to 69 made the transition after age 50
  • Men and women in the highest wealth quartile are more than twice as likely to transition to self-employment as people in the lower wealth quartiles
  • Men who have work-limiting health conditions are more than two times as likely to become self-employed as those not reporting health limitations. The experts suggest that individuals can better accommodate their work limitations when self-employed. Thus a number of factors seem to influence the decision to become self-employed--wealth, health, and the general economy.

Self-employment remains a real possibility for retiring boomers, but you shouldn't enter self-employment without significant due diligence. Take the time to complete a business plan. Find a program like the Kauffman Foundation's FasTrak NewVenture program that allows you to add rigor to your market analysis and business plans.

Some Web sites that might be helpful for starting a business include:

Top Ten Reasons Startups Fail & How to Avoid It—

  • Poor Execution: As a founder, you need the discipline to know when to hand over the reigns to a professional manager who can take your business to the next level.
  • No Viable Market: Remember, find the customers first, then look for a solution.
  • Too Much Leverage: It's best to keep most costs variable at first and use equity to finance your startup until your business has been around a while
  • Undercapitalizing the Business: It's often better to change the business model to bring required investment in line with available resources.
  • Lack of Competitive Advantages: If you want your business to thrive, you need something that insulates it from competition.
  • Competing Head-to-Head with Industry Leaders: I strongly advise against making a frontal assault unless you have a world-class team and very deep pockets.
  • Picking a Niche That is too Small: Don't press ahead unless you can convincingly demonstrate to yourself how your competitive advantages will enable you to become the market leader.
  • Breakup of the Founding Team: Because people wear lots of hats in startups, the sudden departure of a key executive can doom a fledgling organization.
  • Poor Pricing Strategy: A pricing strategy and customer value should be considered early in the planning of a new business.
  • Growing too Fast: Never forget that cash is the lifeblood of your business!