Why do Baby Boomers start their own business later in life?
As you get closer to retirement how about starting a business of your own? After working a lifetime in your 9 to 5 job why not start up a business where you can be the boss.
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In a State of Small Business survey of more than 2,600 men and women small business owners and entrepreneurs, Guidant Financial uncovered facts about Baby Boomers who don’t want to stop working as they reach retirement age.
David Nilssen, Co-founder and CEO of Guidant Financial offered these tips for those Boomers looking for a second chance as they enter their golden years.
Boomer: What seems to be drawing Baby Boomers to start up their own business?
Nilssen: Compared to previous years, more boomers cited positive reasons for pursuing business ownership in 2018: ready to be their own boss, pursuing a passion and even taking advantage of opportunities that presented themselves. This signals that with the strong economy, fewer individuals are starting businesses out of necessity (as it had been in year’s past), but rather because they want to enjoy the benefits of working for themselves and remain active in their older years. What’s more, most boomers are happy with their encore careers as business owners: 76% of business owners rated their happiness as an 8 or above on a scale of 1-10, according to our survey.
Boomer: What are some of the challenges facing Boomers with startups later in life and how are they being funded?
Nilssen: Access to capital is a major challenge for small business owners across the board, and boomers are no exception. According to our survey results, 68% of boomers reported their No. 1 challenge was lack of capital/cash flow with marketing/advertising coming in second, followed by administrative work third.
As for funding, the majority of boomer business owners chose to fund their businesses without taking on debt. Cash was the most popular funding method, followed by 401(k) business financing (through an arrangement called Rollovers for Business Start-ups) and then friends & family. Of note, 28% more baby boomers used Rollovers for Business Start-ups compared to other business owners. This method allows individuals to use their retirement funds to start or buy a business without incurring tax penalties or early withdrawal fees. This inclination toward debt-free funding is a testament to the lack of credit access that exists in today’s market — even for boomers, who are usually the most qualified candidates for business loans with strong credit histories and solid experience. According to April 2018’s Small Business Lending Index, only 26% of business loans were approved by big banks, which leaves another 74% who were declined. But with boomers straying away from loans, they’re instead investing in an asset they can control and impact the value of, rather than relying on approval from banks.
Boomer: Statistically, who, what and where are these small business owners?
Nilssen: Individuals over the age of 50 accounted for 54% of all current business owners, according to our State of Small Business survey. The majority of our boomer clients held mid-senior level management roles in corporate America, with 74% identifying as male and 24% identifying as female. Most hold at least a two-year college degree, but surprisingly, about 30% of boomers reported having just a high school degree or GED, signaling that education is not a prerequisite for business success.
The top industries for baby boomers were business services (12%), food/restaurant (10%), general retail (7%), health/beauty/fitness (6%) and automotive (5%). Sixty-seven percent of boomer business owners said their business was currently profitable, and another 64% said they were looking to grow their current business. What’s more, boomer business owners are also adding jobs to the U.S. economy: 44% of boomer businesses employed teams of 2-5 employees.
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