Retire? Forget About It
A new wave of baby boomer business owners are turning their passion and experience into second-act success.
Which age group do you think has more entrepreneurs--twentysomethings or those over 55? If you guessed the latter (because it seems less likely so it must be true) you guessed correctly.
According to the Ewing Marion Kauffman Foundation, a nonprofit organization dedicated to the research and support of entrepreneurship, in the past decade the highest rate of entrepreneurial activity belongs to those between 55 and 64 years old. According to the study, "The 20 to 34 age bracket.which we usually identify with risk-taking youth (think Facebook and Google), has the lowest rate."
Recently, many factors have encouraged entrepreneurship, including layoffs--which increased steadily for those over 55, and stand currently at 7 percent--according to the Bureau of Labor Statistics. While lower than the national average, this represents a higher unemployment rate for older Americans than at any time since 1948, and those out of work are staying unemployed much longer. Couple that with the fact that many have witnessed the balance in their 401(k)s and IRAs take a tumble, forcing them to postpone retirement.
But the stakes are higher for these people. Risk is not something to take lightly at any age, and David Simon, partner at investment banking firm Capital Strategies, points out that for individuals over 55 looking to fund a startup, "The risk is considered extraordinarily high and typically, suitability standards require that risk be reducing as age is increasing."
Still, successful entrepreneurship can happen at any age. The following are stories of intrepid "boomerpreneurs," business owners who leveraged their assets and life experiences to successfully start and run the company of their dreams.
Consider a Franchise
Mike Accurso was laid off in mid-2008 at the age of 63. After a brief job search, Accurso decided to start his own business. But rather than make a go of it completely alone, he started an Entrepreneur's Source franchise in January 2009--and he hasn't looked back.
Though Accurso was of retirement age when he opened the franchise, he decided to tap his 401(k) fund for startup capital. "This was preferred so I could start my business with no additional debt and not add debt service to my monthly operating costs," he explains.
Using the 401(k) had other benefits. Says Accurso, "The ability to use my fund to invest in my own business and not have the funds treated as a disbursement or loan and therefore not subject to tax, penalties or repayment was a key factor in my decision to go into business for myself."
The other factor facilitating the move was that Accurso didn't need to be a specialist to begin his business. A veteran of more than 30 years in management and sales, he'd developed plenty of skills including team building, communication, leadership, client satisfaction, customer service, organization, time management, and common sense. "They made sure I possessed the basic skills to successfully sell and deliver their brand as a franchisee," he says, adding that once he signed on, he was trained in the specifics required by the company.
"This has been a great decision for me," says Accurso, who now heads up his own practice, coaching others who wish to become business owners.
Necessity Is the Mother of Invention
Elizabeth Nill literally took this chestnut to heart. At 61, Nill launched Shibui Designs because she couldn't find well-made, classic dresses in fine fabrics that fit. "I don't have the body of a model, and the bulges are real. Truly well-made classic clothing that is custom made-to-measure helps camouflage these inevitable imperfections and makes me feel more elegant."
Armed with a Harvard MBA and more than 35 years of senior executive and management experience, Nill cashed in an equity stake in a partnership to provide the liquidity she'd need to pursue her dream to establish and grow a line of clothing designed for older women who face the same frustrations.
Now with a brick-and-mortar store as well as an online presence, Nill says she would not be opposed to tapping her retirement funds to grow her company. However, Sarah Barnhill, managing partner of Atlanta Capital Group, cautions, "If the assets are held in an IRA (or SEP), you'll get hit with taxes and have to pay a 10 percent penalty, so about one-third of the value will go to the IRS instead of to the venture."
Nill admits the idea "terrifies" her but says if analysis suggests it's required, she'd take the plunge, adding, "I have engaged in one startup, one growing startup and several mature organizations. That experience combined with my academic training gave me skills and competencies and a certain amount of humility."
Do What You Love
Very few people would abandon a successful career to pursue a risky endeavor where failure is often the norm. Not Michael Dene. Owner and proprietor of Michael's on Naples, he made his money in the lighting business but never let go of his passion--food.
While working to grow his family's business and other companies in the same industry, he continued to experiment in his own kitchen until selling off his interests enabled him to open his own restaurant in 2007.
Dene admits that his 15 years in the lighting industry taught him many things, most notably how to lead and when to get out of the way. "I found partners [who] had skills I didn't possess, thus admitting my shortfalls and surrounding myself with people [who] were self-motivated and experienced in their selected fields," he says.
And while his restaurant is already a smash hit with diners, he knows the path to continued culinary stardom is not without risk. "The true definition of an entrepreneur is someone who believes strongly enough in his concept to sacrifice whatever it takes to achieve his or her ultimate success," he says.
Even if that means hitting up the retirement fund? "Of course, if there is a way to find funding through partnering with a financial institution or a passive partner, it would be worth giving up some equity," says Dene.
That's a wise choice, says Paul Tran, president of Focal Point Financial. He suggests that entrepreneurs use a home equity line of credit or other easily liquid assets before touching retirement monies. "Retirement funds [are there] mainly to help one live out the rest of their lives in comfort and peace of mind," he notes, adding that leveraging SBA financing, private investments, peer-to-peer lending (like www.prosper.com), government grants, bartering services, and other creative means are all preferred alternatives.
Tap Every Available Resource
In 2005, at age 57, Pat Belanger, a retired F-16 fighter pilot for the Air National Guard, decided to expand his existing business--the 111th Aerial Photography Squadron--to include a web-based resource for stock aerial footage, ProAerialVideo.com.
Belanger knew that he faced potentially big expenses and stiff competition from established providers when starting this new venture. "It takes more than passion to launch an idea and keep it flying," Belanger's wife, Julie, says. "We did not want to take money from our core aerial photography business."
Tapping into their family's talents provided the Belangers' new company with ongoing marketing and public relations services, website designs with video integration and SEO, as well as video production time in return for a partial stake in the success of the venture. Belanger says that videographers who become contributors are eligible to make 50 percent of sales.
Although Belanger never needed funding for the 111th Aerial Photography business, the company doubled its earnings every year for the first 10 years. Julie attributes this to savvy use of Pat's retirement income, continued frugality, and buying the best equipment they could afford.
Tran says good financial management is the key to keeping businesses like the Belangers' humming. "I would advise an entrepreneur have a few buckets set up to manage their finances," he says. "Revenue should always be distributed to maintain the business first, have a certain liquid amount put aside as an emergency (use one-third of the net profit as a guideline, not a rule; each circumstance is different), one-third to put back into your retirement plans (you can look into a solo 401(k) or SEP IRA as accounts designated for entrepreneurs), and one-third to enjoy as the fruits of your labor and put back into the business if you'd like to continue expanding."
Julie says they are still growing. During this recession, Pat added aerial ash scattering to his aviation services. Says Julie, "These days, you have to think outside the box, sometimes literally."
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