The extensive knowledge and experience that baby boomers have accumulated throughout their working lives could make them the ideal entrepreneurs. Increasingly, older workers who are unable to find new jobs or are looking for increased workplace flexibility go to work for themselves. Almost a quarter of workers who change jobs after age 51 become self-employed, according to an AARP and Urban Institute analysis. Here are some tips for becoming an entrepreneur in retirement:
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Emphasize your experience. Decades of work experience can be a huge advantage in coming up with ideas for a start-up and making a business work. "You want to start with something you already know how to do—a skill that you know you are already good at," says Jeff Williams, chief executive of Bizstarters.com. "The key to having a successful business is to find a problem that you can solve better than other people."
After retiring for two years, Lex Alexander, 57, launched 3 CUPS in 2008, named after the three fermented drinks it sells: wine, coffee, and tea. Alexander already had extensive experience in the retail food business: He started Wellspring Grocery in 1981, which merged with Whole Foods in 1991, and he remained with the company for 10 years. "Going back to work, you have to have this calling to somehow do something that contributes in a positive way," says Alexander. "For me, it is about preserving the places where these agricultural products come from and being a selling agent for these really great farmers and wine makers." The shop sells a vetted collection of high-end products, and each bottle of wine comes with a write-up explaining where the wine came from, how it was made, and why it was selected for the store. When he's not managing the Chapel Hill, N.C., store's 12 employees, Alexander also works part-time as a consultant for Whole Foods.
Find funding. You may have savings you can tap to launch a start-up, but it's risky to invest a large portion of your life savings so close to retirement. "You want to be very careful about using your retirement funds, because if your entrepreneurial venture doesn't work out, then you won't have many years to recover," cautions Dan Olszewski, director of the Weinert Center for Entrepreneurship at the Wisconsin School of Business. "You need to be able to feel confident that the worst-case scenario is something that you can live with." The majority of small business owners (70 percent) use their own savings as the main source of funding for their first business, according to a 2009 Kauffman Foundation survey 549 company founders in high-growth industries including computing, electronics, and health care. Less common sources of funding for first startups include bank loans (16 percent), friends and family (13 percent), venture capital (11 percent), and angel financing (9 percent).
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Tap your network. Most people approaching retirement age have a large network of friends, associates, and colleagues, which can help you find suppliers, customers, and other support for your business. "A very large amount of people age 50 and older are very networked and you can save money and get sales leads through your network," says Williams. Reach out to your social network when you need ideas and assistance.
Prepare for more responsibility and flexibility. As a business owner, you'll have the flexibility to set your own hours and work at your own pace. But you are also ultimately responsible for hiring, firing, and meeting your budget. "The decisions you make you are very accountable for," says Bob Vomaske, 58, who left Hewlett-Packard and bought into IT engineering firm Vista Solutions Corporation in Fort Collins, Colo., in 2003. When business dropped off in 2009, Vomaske had to put some of his retirement savings into the business and reduce his staff from 20 to 13 people. "We've been profitable since April due to a combination of the business coming back and cutting ourselves to success," says Vomaske. "My object when I got into this was to make jobs for people. I want to get those people back."