http://www.businessweek.com/smallbiz/content/jan2008/sb20080111_262142.htm
Entrepreneurship holds increasing appeal for retirees. But they need to address four unique challenges to improve their chances for success
Ric Cox retired at 55, but he didn’t stop working. Instead, he launched ChicagoCondosOnline.com, a database that sells condo information to realtors and listings services. A first-time entrepreneur, he hoped to channel the same creative energy he brought to his 32-year publishing career into his new venture.
About 20% of the entire over-50 workforce in the U.S. is self-employed, and one-third of those workers made the transition to self-employment after turning 50, according to a 2007 RAND Corp. study commissioned by AARP. Switching to entrepreneurship is one way retirees stay active, says Deborah Russell, the AARP’s director of workforce issues. But she says people must know what they’re getting into: “For those who have not done this before, they may have a false expectation that working for yourself also means less stress and less demand, and it may be in fact the exact opposite.”
While starting a business is a challenge at any age, a first-timer starting a business later in life will encounter different obstacles than younger entrepreneurs, particularly when it comes to funding the business, securing health insurance, managing personal finance, and succession planning. Younger people can spend years trying to make a company profitable and can return to salary jobs if they don’t succeed, but people over 50 may not have the flexibility to deal with such a loss, says Julie Zissimopoulos, an economist at RAND and co-author of the study. Experts say older entrepreneurs need to plan carefully to align their ventures with their life goals.
Cox, who turned to the nonprofit Counselors to America’s Small Business (commonly known as SCORE) for guidance before launching his business, seemed like the ideal retiree-turned-entrepreneur: He was healthy, single, without children, and had a comfortable nest egg. Even with all those factors to his advantage, he says he still underestimated what it would take—in money and time—to launch a business.
“I think there’s kind of a rule of thumb that it’s going to cost you two to three times as much, at least, than you expect it to, so you have to have enough capital or access to it,” says Cox, who put about a quarter of his savings into his business. The time frame to recoup his investment also exceeded his expectations. Now 63 and in the eighth year of his business, Cox anticipates his first profits this year.