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Start-ups for Grownups

7.4 million boomers are self-employed. Only 44 percent of new businesses last four years. Is launching a start-up late in life risky?

By Carole Fleck

February 2007
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Move over, Google boys! Older Americans are the new entrepreneurs. Nearly half the country’s self-employed workers—7.4 million—are boomers, reports the U.S. Department of Labor. And that figure is expected to climb as people retire from one career to start another, lose their jobs or simply want the independence and flexibility of working for themselves.

“I am willing to bet that over the next 10 years, entrepreneurship is going to increase for people 50 and older, and especially for those 65 and older,” says Robert Litan, vice president for research and policy at the Kauffman Foundation in Kansas City, Mo., which advances entrepreneurship in America.

“Some will become entrepreneurs out of necessity,” Litan says. “They can’t find a job but still need income, so they’ll end up starting their own businesses. The baby boom generation wants to continue working.”

But is it wise to launch a start-up or buy a business at midlife? Experts say it’s risky at any age, but for older adults, particularly those who finance their venture with savings and retirement funds, the stakes can be painfully high: If a venture goes belly-up, there’s less time to work and restore retirement savings. The statistics are sobering. According to the Small Business Administration, 66 percent of new companies survive at least two years but only 44 percent last for four years.

John Challenger, CEO of the consulting firm Challenger, Gray & Christmas and an expert in older-worker issues, says prospective business owners should ask themselves, “How much of your savings are you willing to put at risk to try and leverage greater income in your later years?”

They also should be prepared to spend most of their waking hours at their new business. “The amount of time, energy and stamina that a new business takes—those are the biggest pitfalls” to success, he says.

Despite the odds, recruiter John McDorman, who has counseled many older workers, says he often advises those clients to consider buying or starting a business if they can’t find a job that pays what they think they’re worth.

“If you’re 55 and looking for a job, you’re looking at a long job search,” says McDorman, a managing partner at Transition Consulting in Dallas. “You’re burning your life savings, and it may take you nine or 12 months to finally land a job. Three or four years later, odds are you’re out of a job again because the average length of stay is three to four-and-a-half years. So which is more risky—the job or the venture you controlled?”

To minimize the risk, McDorman suggests buying a “fairly low-end” business with a record of success rather than financing a start-up. Examine the company’s financials thoroughly and make sure it has a positive cash flow and potential for growth. [See “Questions for the Self-Starter.”]

McDorman says new owners often run a business better than their predecessors because they’re more adept at controlling costs, expanding market share and diversifying the product line and channels of distribution. They’re motivated and fresh, he says, compared with previous owners who may be burned out.

Tom and Sue Ann McGoldrick followed McDorman’s advice when they bought Paws in Heaven, a pet crematory in Texas. They increased advertising and distributed brochures to veterinary clinics in neighboring counties while keeping operating costs in line—earning handsome revenues in the first year. “What I’m doing,” says Tom, “it’s a real labor of love.”

Read below for five inspiring profiles of 50+ entrepreneurs

Bob Axisa, 52

Business
CertaPro Painters, Staten Island, N.Y.; residential and commercial painters; started 2005

Previous jobs
Information technology for 21 years at J.P. Morgan Chase & Co.

Investment
$90,000, including cost of franchise

Motivation
At age 50, he figured it would be difficult to get another job without taking a pay cut.

Worst moment
His first dissatisfied customer.

Best moment
His first really satisfied customer. “When you go into people’s homes, you have to make sure everything is done right.”

Silas Lumpkins, 73

Business
Lumpkins Courier Service, Cleveland; started 2004

Previous jobs
Medical records and supplies courier for a medical clinic

Investment
$6,000 to buy and insure two vans

Financing
Savings

Hours worked
18 a week (two days)

Employees
1 full-time, 2 part-time

Years to turn profit
Immediate

Biggest challenge
Hiring reliable employees

Motivation
The clinic decided to outsource its work to contractors and he wasn’t ready to retire. “I loved what I was doing and I was familiar with it.”

Worst moment
None.

Best moment
When he was awarded a contract for the courier service, which renews each year.

Bottom line
“It gives me independence, to work for myself, and I can render services. My drivers are happy and I’m happy. I have peace of mind.”

Judy Finch, 58

Business
Echo Valley Campground, Tremont Township, Pa.; started 1998

Previous jobs
Human resources management; engineer

Investment
$500,000 acquisition

Financing
Owner financing for 2 years, then bank loan

Hours worked
60 a week

Employees
3 part-time

Years to turn profit
Three

Biggest challenge
In the spring and fall, there are RVers and other campers, “but in the winter it quiets down. It’s really tough to get the bills paid.”

Motivation
She disliked her job and thought it would be a “neat lifestyle” to own a campground (even though she’d never been camping).

Worst moment
“The bank didn’t want to give me a loan because I’m a single woman in a high-risk business.”

Best moment
“Having really nice people enjoying the campground and telling me how beautiful it is.”

Bottom line
“I just needed to do something different. It’s been a struggle, but I’m still here. It was a huge risk, but I have really adapted to the area.”

David White, 53

Business
Heaven’s Best Carpet and Upholstery Cleaning, Bristol, Tenn.; started 2001

Previous jobs
30 years at Eastman Chemical Co.

Investment
$12,500 franchise acquisition

Financing
Paid cash; still has retirement funds and savings

Hours worked
50-60 a week

Employees
2-3

Years to turn a profit
Three

Biggest challenge
Learning (with corporate support) how to clean carpets and match solvents with stains; and dealing with employees-two had drug or alcohol problems.

Motivation
Took early retirement at 48. “I always wanted to be my own boss for as long as I can remember.”

Worst moment
Cleaning stained church pews-they looked worse when he finished, he said.

Best moment
When he figured out how to clean the pews. “I went back three times.”

Bottom line
“I had never cleaned carpets before. I chose the business for the exercise. And I liked to travel around the ar

Dave,

You probably don’t know how good it feels for others here on the board (more specifically, me) to hear you say that. I enjoyed getting to know you and your son at the Vegas convention. It was my pleasure, and I look forward to seeing you again. Thanks for your wonderful comments. I too will say thanks to Cody, as well as to Dennis (Dirtbag) and Janice (Mrs. Dirtbag).