Forget Retirement—Many Baby Boomers Are Starting Small Businesses Instead

Energetic senior businessman

The baby boomers aren’t slowing down. Far from looking forward to retirement, baby boomers are energetically making their mark on small business, according to a recent survey from Guidant Financial.

The 2018 Small Business Trends for Baby Boomers survey of more than 2,600 small business owners and entrepreneurs uncovered some surprising information about Americans over 50. (The survey played a little loose with demographics, referring to the over-50 crowd as “baby boomers.” Actually, baby boomers were born between 1946 and 1964, putting their current age at 54-72.)

Specifically, retirement is far from this generation’s minds. Instead of getting ready to slow down, the 50-plus crowd is tapping into their experience in the workplace, their expansive professional networks, and their stable financial positions to become successful business owners.

Here’s a closer look at what Guidant found.

Who are the over-50 entrepreneurs?

Overall, entrepreneurs over age 50 make up more than half of America’s small business owners. One-third of all small business owners are between 50 and 59 years old; 17% are 60 to 69 years old; and 4% are 70 or older. Three-fourths of entrepreneurs over 50 are male, while one-fourth are female.

Business owners over 50 are most likely to live in these states:

  1. California
  2. Florida
  3. Texas
  4. New York
  5. North Carolina

The most popular industry for over-50 business owners is business services, followed closely by food and restaurant businesses. General retail, health/fitness, and automotive round out the top five industries.

Startup motivations

Why are people age 50 and up starting businesses? It’s not (or at least not primarily) because they’re being laid off and can’t find work.

Instead, 42% opened a business in order to pursue their passion, 36% because “the opportunity presented itself,” and 22% because they were dissatisfied with corporate America. Just 15% started their business after their jobs were outsourced or they were laid off.

Growth plans

The majority (44%) of older entrepreneurs in the survey have between two and five employees; 32% are solopreneurs; and 12% have six to 10 employees.

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Despite their businesses’ relatively small size, most of these entrepreneurs have big plans for growth. Nearly two-thirds (64%) of all 50-plus business owners are looking to grow their current businesses; just 6% are considering selling.

Money matters

More than two-thirds (67%) of business owners over 50 say their companies are currently profitable. Maybe that’s why over-50 business owners are so satisfied: A whopping 76% rate their happiness level as 8 or above on a scale of 1 to 10.

Startup stories

Some 86% of business owners over 50 got into business ownership through starting or buying independent businesses; 14% purchased franchises.

Over half of in-business entrepreneurs say they financed their startups with cash, while more than 25% used their 401(k) plans as a source of capital. (This is about twice the national average compared to entrepreneurs of all ages.) Friends and family, a line of credit, and an unsecured loan rounded out the top five financing methods.

Also known as Rollovers for Business Start-Ups (ROBS), 401(k) business funding allows individuals to use money from their retirement accounts, such as IRAs or 401(k) plans, to finance a business startup. Since people over 50 are more likely to have significant savings in their retirement accounts, it makes sense that they are more likely than younger age groups to use this method of financing.

In fact, using ROBS financing gave business owners in the survey greater flexibility to start more capital-intensive businesses. Business owners in the survey who used ROBS financing were more likely to use between $100,000 and $175,000 to launch their businesses. Those that used other types of financing were more likely to spend closer to $50,000 on startup.

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Biggest challenges

Overall, the biggest challenge for small business owners age 50 and up is lack of capital/cash flow; 68% cited this as a problem. About three in 10 say their biggest challenge is marketing and advertising, while 25% say administrative work is their primary challenge.

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Wish list

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.

Starting a business over 50

The survey also included people age 50 and up who want to start businesses, but haven’t yet done so. Finding financing is the biggest challenge for these would-be “encore entrepreneurs” who seek to start businesses after careers in corporate America. Some 61% are struggling to obtain the capital they need to launch their businesses.

The majority of would-be business owners in the survey say they need up to $100,000 to start their businesses. Almost half say they don’t have enough capital to get their business off the ground. However, 46% admit one problem is that they don’t know enough about financing options. About three in 10 say their credit score disqualifies them from certain financing options, while 19% don’t want to take on any debt.

In addition to capital, other issues holding over-50 would-be entrepreneurs back from starting their businesses are:

  • Haven’t identified the right opportunity: 40%
  • Not sure where to get started: 28%
  • Not ready to leave job yet: 14%
  • Lack of support system: 13%

Challenges and opportunities

Clearly, entrepreneurs over 50 are redefining what aging looks like. Sure, baby boomers face some challenges as business owners that are unique to their age group. But the positives, such as more experience, more time and financial resources, can give those of us over 50 an edge on our younger counterparts when it comes to attaining small business success.

RELATED: How to Use Your Retirement Account to Start or Buy a Business: A Guide to ROBS Financing

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