By Bruce Freeman The Small Business Professor.
A colleague recently contacted me about an issue that concerns some boomer friends of his: weighing the risks of small business as a second or third career.
Q: I'm over 55 and have an idea for a small business. What are the risks involved?
A: According to one source, the Ewing Marion Kauffman Foundation, in 2012, adults from 55 to 64 accounted for almost 25 percent of all U.S. entrepreneurs compared to 14 percent in 1996. Boomer job experience and skills can be valuable assets.
In fact, a 2013 study by Nesta, a U.K. foundation, reports that 70 percent of startups launched by people age 50+ last more than three years, compared to 28 percent for under-50 launchers. Still, you are wise to weigh the risks carefully. Here are some major ones:
Depleting your nest egg: Many boomers bankroll ventures using their retirement funds. However, as experts point out, when you are in your late 50s or 60s, you may not have the time or financial cushion to absorb a major cash drain or loss.
A far safer approach: the F&F route. Approach family and friends for seed dollars and explore other sources: crowd-funding websites like kickstarter.com; nonprofit micro-lenders like Accion International; or local business incubators, which may provide space, advice, and even a startup budget in return for a small stake in your venture.
Starting with a splash: Many older launchers fall into a common trap: overspending on image and infrastructure. Instead of stretching precious startup dollars, they squander them on nonessentials like flashy websites, costly brochures, and expensive computer equipment and hi-tech gadgets. Avoid these cash drainers and adopt a "lean launch" strategy. Invest your startup funds in product development and finding customers.
Lack of business and marketing skills: A product or service is the tip of the startup iceberg; finding buyers through marketing and running a business cost-effectively are critical to success. Fortunately, there's growing support in these areas for boomer entrepreneurs: The Kauffman Foundation, for instance, runs a 10-week FastTrac course on launching.
Small Business Development Centers advises older entrepreneurs. So do many educational centers: New York's Baruch College's Field Center offers free classes to boomers and the nonprofit Renaissance Entrepreneurship Center helps boomers in the San Francisco Bay area. Also explore encore.org and SeniorEntrepreneurshipWorks.org's "eProvStudio," which helps boomers analyze startup skills.
For more information contact: www.kauffman.org ___ ABOUT THE WRITER Bruce Freeman, a small business consultant, is adjunct professor of entrepreneurship at Seton Hall and Kean universities. He also is co-author of "Birthing the Elephant: The Woman's Go-For-It Guide to Overcoming the Big Challenges of Launching a Business."