news.cuna.org/articles/107720-retiree-entrepreneurs-at-bat

Retiree Entrepreneurs at Bat

How might CUs help members redefine traditional definitions of retirement?

September 28, 2015

Peter Curti, 55, somewhat accidentally found a new career opportunity in his retirement. Bored, Curti thought to explore his interest in baseball by making bats.

Buying an existing bat manufacturing company would cost $1 million—a steep price for someone else’s business, he thought.

But when a friend broke a bat and Curti used equipment in his garage to duplicate it, the baseball team ordered 100 more.

Curti took $55,000 from his savings for equipment, spent $13,000 for an engraver, and invested $7,000 in a website.

Beaver Bat Co. sold 69 bats the first year. Last year, Curti sold 12,000 bats. Gross sales in 2014 were $400,000. He’s now thinking about opening a factory in Florida where he resides during slow months.

Curti is considered a small-business success story, according to Kiplinger.com.

This week, consider the growing trend of retired entrepreneurs. Are they good risks?

‘An entrepreneur is someone who brings a pattern change.’ –Bill Drayton, social entrepreneur

As boomers retire, “many are taking the opportunity to pursue their interests and form their own businesses,” notes LawDepot Blog.  

Good health, shortfalls in retirement funds, longer life expectancy, and the recession all contribute to the trend. And working from home has become easier with improved telecommunications and lower overhead expenses.

Boomers bring life experience, networks, ideas, and problem-solving skills to entrepreneurship. They enjoy the opportunity to realize their dreams and “the benefits of sustained health and freedom” in their business endeavors.

“Would-be retirees can change the world,” notes EY in “The New Entrepreneurs.”  Many of today’s seniors are healthy and well-educated, and they comprise a greater share of the population. Many face lower incomes and greater dependency given “an increasingly narrow base for employment.”

“Policymakers will have to adjust their approach to maximize the potential contributions of senior citizens to productivity and economic growth.” 

The U.S. Small Business Administration offers Encore Entrepreneurs, a program targeted at people over 50. It consists of training, counseling, grants, and other assistance.

“Like all new business owners, older entrepreneurs need access to capital. However, greater financial security and reduced credit risk mean a potentially different risk profile for these borrowers,” the agency notes.

Longer lifespans mean retirement can last as long as careers. 

“To prosper in this environment and drive sustainable and economic growth, policymakers need to rethink what might be long-held judgments about retirees and their value to their country’s economy. A new mindset offers new opportunity,” the EY report notes.

The 2015 Kauffman Index: Startup Activity reports trends on new businesses. Three observations on the age of new entrepreneurs:

1. The age of new entrepreneurs is evenly split, although those age 20 to 34 are down from 34.3% in 1997 to 24.7% in 2015.

2. An aging population, in conjunction with greater rate of older entrepreneurs age 55 to 64, means the older demographic comprises 25.8% of all new entrepreneurs in 2015, up from 14.8% in 1997.

3. Older entrepreneurs continued to have the highest share of opportunity entrepreneurship in the 2015 index despite the increased rate due to unemployment during the recession.

Another Kaufmann analysis, the “State of Entrepreneurship 2015 Address” examines potential contributions and challenges of both millennials and boomers in entrepreneurship endeavors.

Millennials are interested in starting businesses, but are challenged by debt. And fewer young companies hiring younger employees will stifle entrepreneurship for this group.

However, this group is well-educated and tech-savvy. Further, they are “on the cusp of mass entry into the ‘peak age’ bracket for entrepreneurship.”

In comparison, boomers have long been an entrepreneurial cohort, and are poised to remain in the workforce with better health and lengthier work tenure. Aging boomers “will create numerous challenges and entrepreneurial opportunities” and form companies to leverage them. The report also indicates boomers are “the best-positioned people” to start new companies in America. 

Disadvantages for older entrepreneurs include fewer companies started overall, and lesser economic impact with those they create. They may face financial challenges in starting businesses, and have higher labor force participation that “belies large numbers of dropouts and won’t produce growth companies.”

The report suggests “new modes of entrepreneurial financing also may be needed because of the aging of the boomers and the continued moribund housing market.”

Financial innovations must respond to entrepreneurial needs.

‘As a new entrepreneur, you need a stake in the game, but you can’t risk it all.’  --Alexa von Tobel, founder and CEO of LearnVest.com

Let’s explore considerations for those who might contemplate entrepreneurship in retirement.

“Entrepreneurship can be a viable alternative work route for retirees—and it’s getting more commonplace,” notes a post on retirementrevised.com.

Business start-ups do not have to be risky investments. “A micro-enterprise can help retirees generate supplemental income without putting much capital at risk,” the article states.

Another advantage of the micro-enterprise is that it allows potential business owners to test their idea in the marketplace, perhaps while they are still at work. 

“If you get started before you retire or need the money, it can make an enormous difference once you do retire,” notes Judith Rosenberg, founder of a business incubator and resource center for those over 50. 

Part-time entrepreneurs, who put in about 10 hours a week, run most micro-enterprises.

Such businesses can start at less than $5,000. Those that are successful demonstrate a deep understanding of a given topic, an ability to consult on the topic, and an ability to sell services online.

Shared-economy platform businesses--like Uber and Airbnb--also provide an opportunity for older entrepreneurs.

According to a Kiplinger article, older entrepreneurs need to be especially aware of minimizing risk, and should limit start-up expenses, avoid large debt, thoroughly research the marketplace, and opt for “business structure that will protect their retirement savings.”

Would-be entrepreneurs should also volunteer at a business incubator to determine if the endeavor is right for them.

The Detroit Free Press  suggests potential entrepreneurs need to evaluate risk tolerance, analyze their ideas, and create various plans to cover financing, marketing, business operations, and social media.

Older populations can be a driven, dynamic force in business creation and influential in their contributions to the economy. “I’ll do this until I’m dead,” says baseball aficionado Curti.

How can your small business service offerings accommodate the specific needs of this dedicated cohort?

How might you help them succeed in reinventing traditional definitions of “retirement”?

 LORA BRAY is an information research analyst for CUNA’s economics and statistics department. Follow her on Twitter via @Bray_Lora and visit the CUNA blogThe Research Roundup: Economic Perspectives.