Did you know that even three years of additional income improves the odds of a financially secure retirement by an impressive 55%? This fact, courtesy of David Blanchett, head of retirement research at Morningstar, could just be a compelling enough reason to start an entrepreneurial path at age 50 or older.
Baby Boomers starting businesses in their fifties and even sixties…it’s a phenomenon we’re seeing more and more. A recent Gallup study in the US showed that Baby Boomers (those born from 1946 to 1964) are twice as likely to want to start a business as Millennials (those reaching adulthood around the year 2000). Furthermore, people over fifty represent one of the fastest growing groups of entrepreneurs in the US.
Living longer and healthier lives is changing the way we work…and retire. This means that not only will we require more savings, but we will also face many more years in which we can still be productive and stimulated in a working environment, feeling like we are making a contribution. But nowadays, this doesn’t necessarily mean carrying on in the same job. The Gallup study showed that 32% of the Boomers chose to start a business in order to be independent, while 27% wanted the chance to pursue their own interests and passions.
In South Africa, we have observed that while some Boomers are starting up businesses out of financial necessity, many are doing it out of choice. By age fifty, most of us have developed great skill sets and networks that we can capitalise on, and while the trend we see here is more for people to start their own consulting businesses within the industry they know rather than a full-fledged start-up, it’s gaining momentum. These businesses are started with the extra asset of wisdom that comes with age, as older people generally think things through more carefully and are less likely to risk it all for the promising glory of a start-up.
Another positive about the South African business climate is that there are so many opportunities for new ventures, as opposed to the economies of more developed countries like the US and UK. South Africa is hungry for entrepreneurs, age irrespective, and for those who have what it takes, becoming an entrepreneur later on in life can bring on a new and empowering phase, if you can afford the risks involved. And that’s the big ‘if’.
The most important thing any Boomer looking at starting their own venture should be aware of is risk. While you probably have much more that you could invest in a business than when you were in your thirties, you also have much more to lose. It is critical that you shield your personal assets, in order to protect yourself and your family, in the event that the business does not succeed. For example, you don’t want to dip into your provident fund in order to set up a high tech business, or any other start-up for that matter.
If you are considering starting up a business and are fifty or older, we strongly advise that you bounce the idea off a professional in your field and your financial planner, who will be excellent sounding boards and help you in making a well-informed decision.
Here are a few other things you should consider in your decision making process:
- How hard you want to work – By fifty, you probably don’t have any illusions about the work involved in building and maintaining a business, but you should still consider if the business will allow you the free time you’d like to spend with family and friends, travel and generally enjoy life. It’s important to have a clear picture of how much time you want to invest so that you never feel overly bound to work.
- Who would take over the business if something happened to you – Would the business have value without you and would your spouse or children want to take it over? If you have a partner, would he/she want to take over your share? It’s important to have a clear idea about this going in from the start and have all the legal paperwork in place.
- What is your exit strategy – Having one before you start the business will help determine how you run the business. If your intention is ultimately to sell, you need to be prepared for this by always practicing good housekeeping and keeping your financials in order.
The question is: Do you want to spend the next 10 years capitalising on everything you’ve learnt and experienced in your career, or would you rather commit to more leisure time? There’s no right or wrong answer, but irrespective of its possible financial benefits, we have found that it can be a very rewarding and fulfilling thing to do later in life. We believe that in order to make the right decision for you (and your family) long term, you need to thoroughly evaluate all of the risks and factors involved whilst seeking professional help and guidance in the process.