The Coming Wave Of Pentagenarian Entrepreneurs
Posted on April 09, 2011 by Terry Murray, One of Thousands of Business Coaches on Noomii.
Author, entrepreneur coach, and business strategist Terry Murray foresees an explosion in new business startups by Americans age 50 and older.
For better or for worse, the Baby Boomer generation has left its indelible stamp on the American cultural landscape. It looks like this 77 million member strong generation (of which I must disclose, I am a member) is about to leave another mark on the U.S. economy in its wake. A number of factors are conspiring to bring about a renaissance of entrepreneurial activity amongst older Americans. In fact, the most recent Kaufmann Index of Entrepreneurial Activity1 reported that entrepreneurship rates are rising amongst older Americans. People between the ages of 55 to 64 represented 14.5% of new business starts in 1996. In 2010 this same group represented 22.9% of business births. Older Americans are now the second fastest growing demographic for entrepreneurial activity. Another recent report by the Associated Press indicates more than 14 million Baby Boomers plan to start a business in retirement.
It is an interesting phenomena that has major implications for our nation’s cultural and economic future. About half of my entrepreneurial coaching practice consists of Baby Boomers. While my younger clients are launching businesses in a variety of industries, all of my Boomers are in the process of launching new endeavors meant to be of service to the community. Together, we’re exploring innovative approaches to leverage the for profit business model in support of traditionally nonprofit concerns. It’s exciting to be a part of these initiatives. To paraphrase Mahatma Gandhi, I cannot help but wonder if these counter-cultural children of the sixties are about to be the change they wish to see through their entrepreneurial activities. Perhaps the generation that embraced free love, is about to embrace free markets?
While I’ve been fortunate to be a part of positive, planned transitions into starting businesses, the coming wave of older entrepreneurship will likely have darker undertones. I see a confluence of five distinct factors that will contribute to the coming surge in startups by Baby Boomers:
1.) The number of displaced, older workers is at record levels. Historically, older workers had greater job security than younger workers. Now, however, older workers are more likely than younger workers to lose their employment.2 The Great Recession left 15 million people unemployed…2.1 million of them were 55 years of age or older.
2.) The barriers to re-entry into the job market are higher for workers over fifty. The Bureau of Labor Statics reports that when older workers lose their jobs they will experience greater losses in earning and endure a significantly longer search than younger workers. Dislocated workers with two decades of experience secure jobs that pay, on average, between 20% and 40% less than their previous wage.
Older workers face impediments in the attitudes and perceptions of employers, too. The Government Accounting Office recently held a forum for employers to explore issues surrounding older workers. From this meeting, the GAO reported employers were hesitant to hire older workers because they felt they were more expensive. Their compensation, the rising cost of health insurance, and perceptions that older workers cost more to train discourage hiring. The attending employers also expressed concerns that older workers were less productive, produced lower quality work, and were more resistant to change than younger workers. These attitudes are deeply rooted and subtle. The Center for Retirement Research at Boston College reports that workers under 50 years old are 42% more likely to be called for an interview than those over 50 years in age.3
Not surprisingly, workers over 55 have the lowest reemployment rate of any demographic group.4 In fact, the University of Michigan Retirement Research Center found that only half of older job seekers are successful at attaining employment.
3.) The levels of employee disengagement, dissatisfaction, and work-related stress are at record levels. The Gallup Company published research in the Harvard Business Review5 that indicates only 29% of employees show up with enthusiasm and passion for their work. Seven out of ten of workers are either disengaged (54%), meaning they’re sleepwalking through portions of their day, or actively disengaged (17%), meaning they’re working at cross-purpose with their employer.
According to research published by the American Psychological Association in 2009, 69% of employees report that work is a significant source of stress. Fifty-one percent of employees report that they are less productive at work as a result of stress.
Research conducted by the Families and Work Institute6 found that one third of U.S. employees are chronically overworked. Thirty-nine percent of overworked employees feel very angry toward their employers. That’s a lot of unhappy people on the job. As a result, 54% of currently employed adults plan to look for a new job once the economy improves.7
4.) Economics. According to research conducted by the Heldrich Center for Workforce Development, 82% of older workers have less savings than when the recession began. In addition, 62% report they have a lot less and 35% report seeing their savings diminish by half in the past year alone.8 Add to this the record drop in property values over the past several years and you can see how the overall asset base for older workers has eroded significantly. In addition, many older workers simply wont have enough time to recoup their losses.
5.) The Brain and Experience Drain. While the first four factors point to the constraints being imparted upon older workers by recent events and current hiring practices, the last factor has to do with the emerging demand for their talent, experience, and expertise. This is the year that the Baby Boomers begin to turn 65. In fact, beginning in 2011, more than 10,000 Baby Boomers will retire per day. This rate of retirement will continue for 19 years! Demographically, there simply aren’t enough trained, experienced, and tenured workers to backfill this rate of retirement. Generally speaking, companies are poorly prepared to address this accelerating issue and, at some point, will find themselves in the market for these resources.
Let’s face it, for a lot of Americans it isn’t very much fun working in Corporate America today. Unfortunately, for older workers, the only thing that is perhaps less enjoyable than working for Corporate America is not working at all. Simply put, many of these new entrepreneurs will be embarking on this journey because they have few other viable alternatives. This is reflected in the Kauffman Index finding that while entrepreneurial activity is up, the employer establishment (companies that plan to hire employees) birth rate is down. Many of the new entrepreneurs are sole practitioners. While operating as a sole practitioner is less expensive, it brings along its own set of challenges for the uninitiated.
While older entrepreneurs are often technical experts, their ability to rapidly and efficiently commercialize their technical expertise will be critical to their survival. Anticipating and thoroughly understanding the challenges of launching a startup through the use of a comprehensive strategic planning process is the place to start. This will help the nascent entrepreneur hone their vision on their target market, identify the resources they will need along the way, and create a step-by-step plan to secure traction and grow their business.
While many of the emerging, older entrepreneurs may not have planned to be where they are today, they can take hold of their lives, careers, and earnings by planning on where they want to be tomorrow.
© 2011, Terry Murray.
1 “Kauffman Index of Entrepreneurial Activity, 1996-2010”, Fairlie, Robert W., The Kauffman Foundation, March, 2011.
2 Munnell, A. H., Sass, S., Soto, M., & Zhivan, N. (2008). Do older workers face greater risk of displacement? (Issue Brief No. 53). Chestnut Hill, MA: Center for Retirement Research at Boston College. Retrieved from http://crr.bc.edu/images/stories/Briefs/ib_53.pdf.
3 “Do Older Workers Face Discrimination?”, Lahey, J. N. (2005). Do older workers face discrimination? (Issue Brief No. 33). Chestnut Hill, MA: Center for Retirement Research at Boston College.
Retrieved from http://crr.bc.edu/images/stories/Briefs/ib_33.pdf?phpMyAdmin=43ac483c4de9t51d9eb41.
4 “Work Trends Data”, John J. Heldrich Center For Workforce Development, Rutgers University, 2010.
5 “Manage Your Human Sigma”, Fleming, John H., Coffman, C., Harter, James K., Harvard Business Review, July, 2005. Retrieved from http://hbr.org/product/manage-your-human-sigma/an/R0507J-PDF-ENG.
6 “Overwork in America: When the Way We Work Becomes Too Nuch”, Galinsky, E., Bond, J. T., Kim, S. S., Backon, L., Brownfield, E., & Sakai, K. (2005). Families and Work Institute. Retrieved from http://familiesandwork.org/site/research/summary/overwork2005summ.pdf.
7 “Hoping for Stabilization…Better Plan for Resignations”, 2009, Adecco.
8 “Older Workers, the Great Recession, and the Impact of Long-Term Unemployment”, Van Horn, Corre, and Heidkamp, John J. Heldrich Center For Workforce Development, Rutgers University, February, 2011.