Even before the Great Recession, older entrepreneurs led the way in new business formations. The trend has continued during the past three years and spans even high-tech businesses once thought the sole turf of twenty somethings holed up in their parents' garages. What's even more noteworthy is that start-ups with older owners are more successful, at least measured by their survival rates.
"The United States might be on the cusp of an entrepreneurship boom -- not in spite of an aging population but because of it," the Ewing Marion Kauffman Foundation said in a report last year. Kauffman backs major entrepreneurship research, including annual reports on new business formations and an on-going look at the experiences of 5,000 businesses begun in 2004.
"Contrary to popularly held assumptions, it turns out that over the past decade or so, the highest rate of entrepreneurship activity belongs to the 55-64 age group," the report said. "In every single year from 1996 to 2007, Americans between the ages of 55 and 64 had a higher rate of entrepreneurial activity than those aged 20-34." Further, Kauffman said, increasing life expectancy leads it to expect a blossoming in even older entrepreneurs. Today's "entrepreneurial 60-year-olds could be 2020's entrepreneurial 70-year-olds."
Kauffman's 2010 update to its study of how start-ups have fared over time found that "firms surviving through 2008 were much more likely than firms that exited over the period to have primary owners older than age 45." Of the 5,000 start-ups included when the study began in 2004, 48 percent were started by persons 45 or older, but 64 percent of the surviving companies were headed by entrepreneurs in that age group. That's more than would be expected, even adjusting for the fact that all 2004 business owners were older in 2008. "Previous industry experience and start-up experience had less impact on firm survival prospects than owner age did."
The recession has created across-the-board challenges to newer businesses, and they don't vary much from those faced by all companies. Sales weakness is a particular challenge to start-ups, many of which don't have financial cushions to see them through hard times. Access to capital is also cited as a pressing concern to ongoing start-ups. Internally provided financing helps get many ventures off the ground but continued growth often requires third-party financing. Older entrepreneurs with solid personal credit histories have an edge here.
Dennis Ceru is an adjunct professor at Babson College, just west of Route 128 near Boston, where he teaches entrepreneurship and consults with many family businesses, entrepreneurs, and angel investors who finance start-ups. "People are living longer, they're living healthier, and they're living more energetic" lives, he says. It's hardly surprising that so many want to begin new businesses.
The most successful path for entrepreneurs of any age, he notes, is to pursue ventures that build upon their prior experiences and skills. "Usually, we say that entrepreneurs who stay close to their experience base often show greater success in their ventures." But for older entrepreneurs, he emphasizes, the definition of success can be very broad.
"There are what we call 'necessity' entrepreneurs," Ceru says. These are older people who pursue new businesses mostly because they have unmet financial needs. "But there also are a significant number of what we call 'opportunity' entrepreneurs," he explains. "These are people who feel compelled, who feel the desire to make something happen." Money may not be inconsequential to them, but it's not their prime motivator.
Making a difference and enabling other people to succeed -- what Ceru calls generativity -- are extremely important components of success, as is the notion that the person is continuing to make productive contributions through his or her efforts. "Think of it as preserving and passing on a legacy," he says, "and enabling others to use the tools and find better tools."
Ceru is also not surprised that older persons are active entrepreneurs. They have the experience, he notes, and also tend to have more financial resources than younger entrepreneurs. There are many tales of younger business successes who didn't have the experience to know where the barriers to success would be located, and overcame obstacles they didn't know existed when they began. Older entrepreneurs, by contrast, often have extensive business connections that help them anticipate and bypass such barriers rather than frontally assaulting them. The result in both cases is success but the route to achieving it is quite different.