They go by various names - encore entrepreneurs, senior entrepreneurs, and elder entrepreneurs. But no matter the label, at least one thing seems certain: Self-employment among seniors is rising.
In fact, the percentage of individuals age 62 and over who were self-employed increased from 4.2% in 1988 to 5.4% in 2015, according to a recent report from the Small Business Administration (SBA). Read The Ascent of the Senior Entrepreneur.
So, what might you need to know if you’ve got designs on joining the ranks of the self-employed? Donald Smith, director of the SBA’s Office of Entrepreneurship Education shed some light on the subject in a recent interview with USA TODAY.
1. Is encore entrepreneurship for you? Not everyone is cut out to be an encore entrepreneur. There are, however, resources that can help you assess whether you have what it takes to be an encore entrepreneur. Some of those resources: SCORE, which provides free or low-cost training for business owners, SBA’s Small Business Development Centers, the SBA’s Office of Women's Business Ownership, and AARP.
2. Know your product/service. High on the to-do list, encore entrepreneurs should have a “great understanding” of the product or service they want to deliver into the marketplace. Plus, encore entrepreneurs should focus less on developing a business plan and more on pursuing something called a lean startup. Yes, encore entrepreneurs need to have a sense of their expenses and revenue potential; they need to do a break-even analysis; and they need to know how to make their business operational.
But mostly, says Smith, they need to have “a minimally viable product or service” that will give them the entryway into the market. “For many encore entrepreneurs, they need to just give it a try,” he says.
Encore entrepreneurs should also try to “find a perfect alignment between their skill set and the market opportunity.”
3. Understand the risks. Getting a sense of the risks you’ll face in becoming an encore entrepreneur is also critical. “That’s the biggest thing we have to explain,” says Smith. “Most entrepreneurs are sole proprietors so their money is their business’ money. They have to understand that they are taking on a risky proposition to begin a new business.”
They also have to consider what happens if their business fails. “There are financial risks and risks to their quality of life, especially since many small businesses owners are sole proprietors,” says Smith.
4. Find a mentor. There may not be much of a learning curve if you become an encore entrepreneur in a field where you have years of experience, knowledge and skills. But if you purse a passion, something you’ve always wanted to do, there’s likely to be a steep learning curve. If that’s the case, consider using a resource such as SCORE, which can provide one-to-one mentorship. And that mentoring could mean the difference between success and failure for an encore entrepreneur. “More often than not, the best indicator of success is not only the idea and its viability, but whether the entrepreneur has ongoing mentoring,” says Smith. “Entrepreneurs who have mentors are more successful than those who don’t.”
5. Financing is local and global. Smith recommends taking advantage of every financing tool – be it equity investments, loans, or crowdfunding – available. Start by seeking small business financing from the bank or banks that you currently use. Consider too financial help from family and friends and the SBA. Also, use – if it makes sense – a crowdfunding service such as Kickstarter to fund a proof of concept for your business.