Recently, Earl, a man from Long Island, started a business making a spice mixture reminiscent of what his grandmother made when she was raised in the Middle East. He had a business and engineering background, but the food industry was new to him. He received a positive response from his local area and now wanted to break into the burgeoning food scene in Brooklyn. To help with that process, he approached a nearby entrepreneurship center at a university for help with introductions. They suggested he obtain a partner to focus on the selling. So he recruited his niece to help and soon his business was off and running. There is nothing unusual about that story—except that Earl is 90 years old.
The world has changed for seniors and they, in turn, are changing the world. Today's 50+ year olds who have been given the gift of an additional 20–30 years of longevity and good health and are creating businesses of their own—from micro- to multimillion dollar ventures. They are building everything from glue gun to technology-driven businesses. The senior entrepreneur has years of experience to draw from and that could be corporate experience or managing a family and they are eager to embrace new opportunities.
Recent research in the United States from the MetLife foundation documents that 34 million boomers want to start their own businesses (Isele, 2013). The Kauffman Foundation and the Global Entrepreneurship Monitor (GEM) show that, contrary to the traditional perception that entrepreneurship is a young person’s endeavor, seniors are the most entrepreneurial age group (Amoros & Bosma, 2013; In Search of a Second Act: The Challenges, 2014a, 2014b). According to GEM data, seniors own businesses at a higher rate than any other demographic cohort (Kelley et al., 2013).
Results from various studies have identified different subgroups of senior entrepreneurs largely based on differing motivations. GEM, a long-standing study covering most of the world, has found that fundamentally, entrepreneurs fall into two groups. The first group is composed of those entrepreneurs motivated by necessity. With few other options, necessity-driven entrepreneurs start small businesses with minimal financing (Amoros & Bosma, 2013). The other group, opportunity-driven entrepreneurs are those people who could obtain employment but choose instead to be entrepreneurs. They have greater personal financing, more education, and more extensive business networks than their necessity-driven counterparts. For these reasons, they tend to start larger, better-planned, and ultimately more successful businesses. A disproportionate share of senior entrepreneurs is opportunity-driven entrepreneurs (Kelley et al., 2013).
Another way to categorize senior entrepreneurs is by the differing paths that they followed into entrepreneurship (Giandrea, Cahill, & Quinn, 2008). There are those who wished to continue in traditional employment but lost their jobs. There are those who saw entrepreneurship as a way to do something that they have long wanted to do. There are those who rather accidently came across an idea for a product or business that led them into founding their own businesses.
No one simple and correct way of looking at senior entrepreneurs exists. All these studies have identified key variables that help understand the richness and varied qualities of senior entrepreneurship. In addition to the example offered earlier, consider the variability that characterizes the following two brief examples:
Pearl Malkin, at age 89, launched Happy Canes with a glue gun and $3,500 that her grandson helped her raise through Kickstarter.com. Pearl is what my grandmother used to call a pistol. Bored with her plain black cane, she decided to glue on a few flowers. Neighbors loved them so she started making more and her grandson saw an opportunity for Pearl. They used the Kickstarter money to purchase more canes and flowers, hired neighbors to help with the gluing, and began selling online through Etsy.com.
Robert Gray, self-defined as "involuntarily retired" from the tech industry, started a technology company called @HandApps. His first product, New England At-Hand, is an iPhone/iPad travel app that allows you to easily create and explore New England itineraries. His original content and mined data are retained in a cloud infrastructure. The business is growing and Robert is building a cooperative of other involuntarily retired techies to create additional apps.
Prevalence. How Much Depends on How One Counts
Three different data sources have produced quite different finding regarding the specific rates of senior entrepreneurship. These differences are largely the result of their different methodologies.
U.S. Census Data: The Kauffman Foundation, the Pew Research Center, the U.S. Small Business Administration (U.S. SBA), and AARP have variously reported data that are derived from the U.S. Census (AARP Research, 2013; In Search of a Second Act: The Challenges, 2014a, 2014b; Lichtenstein, 2014; Pew Research, Social & Demographic Trends, 2009).
While the Census is the largest and most commonly used source of data in the field of entrepreneurship research, it employs a confusing and limiting nomenclature that does not reflect the reality of either self-employment or business ownership (United States Census, 2000). Census respondents must choose only one from a list of eight employment options:
Employed by a private for-profit business.
Employed by a private not-for-profit organization.
Employed by a local government.
Employed by a state government.
Employed by the federal government.
Self-employed in an unincorporated entity.
Self-employed in one’s own incorporated business, professional practice, or farm.
Working without pay in a family business or farm.
People who report that they are self-employed in incorporated entities are, by the Census’s definition, employees of the corporation and are thus not self-employed. Someone who is employed in a corporation that he or she owns is within most people’s definition of entrepreneurship. A person with a salaried job could also have a side business during her days off, or she may help a relative with another business. Such individuals would actually qualify under three of the Census categories, although they are limited to choosing only one. Using self-employment by the Census definition as the narrow test of entrepreneurship probably severely understates entrepreneurial activity (United States Census, 2000).
GEM is an international study that is in its 16th year in the United States. The GEM survey interviews over 2,000 individuals each year aged 18–75 about their attitudes, motivations, and activities related to entrepreneurship. Because it relies on respondents to self-define as business owners, it captures a full range of entrepreneurship activity at any point in the business creation and operation phases (Amoros & Bosma, 2013).
The Kauffman Foundation and Legal Zoom publish annual reports (2014) on who started businesses. The sample is businesses that have used Legal Zoom services to form a corporation. Since many people start businesses in forms other than corporations (Subchapter S, partnerships, or no separate legal entity), these data represent a subgroup of entrepreneurs and are perhaps most valuable as a tool for looking at longitudinal data (The Kauffman Foundation and Legal Zoom, 2014).
However One Counts There Is a Lot of Senior Entrepreneurship
One fundamental measure of entrepreneurial activity that the GEM study produces is Total Entrepreneurial Activity (TEA), which covers the range for a desire to start a business to owning an established business. The TEA rate overall for the United States in 2013 was 11.2 percent. While this was 7.7 percent for people between the age of 55 and 64 and 3.4 percent for those over 65, if one adjusts those number to reflect workforce participation rates (not counting those retired or any reason), then the number for 55- to 64-year olds jumps to 11.8 percent and for those 65+ jumps to 18.4 percent (Kelley et al., 2013). Further, the older an entrepreneur is, the more likely he or she is to own a larger and more established business.
The Census and Kauffman/Legal Zoom data show a more dramatic pattern because of the sampling issues mentioned above. This was well summarized by Dr. Greg O’Neill in testimony before the U.S. Senate Committee Hearing, In Search of a Second Act: The Challenges and Advantages of Senior Entrepreneurship:
Self-employment rates increase dramatically with age; for example, only about 4% of workers younger than age 30 are self-employed compared to 15 percent among those ages 50 to 64 and 25 percent among workers 65 or older (Pew Research, Social & Demographic Trends, 2009). Although the media have popularized the image of the “entrepreneur” as a tech-savvy innovator in his or her early twenties, a recent study published by the Kauffman Foundation and Legal Zoom finds that the same percentage of all new businesses—15 percent—were started by entrepreneurs aged 18 to 29 and those 60 and over (The Kauffman Foundation and Legal Zoom, 2014). And, separate research by the Kauffman Foundation has established that the highest rate of business start-up activity over the past decade has been among people in the 55 to 64 age bracket (The Kauffman Foundation, 1996–2012). More than half of the self-employed also retire later than wage and salary workers; small business owners in 2010 reported that they would retire on average at age 72.6, while the expected retirement age among wage and salary workers was 68.4 (Lichtenstein, 2014).
More than half of all U.S. small business owners were age 50 and over in 2012—up from 46 percent in 2007, according to the U.S. SBA (Lichtenstein, 2014).
Importance of Senior Entrepreneurship
While there is still a dearth of research in this arena, given the number of 50+ year olds launching business start-ups, the following assertions are based on standard business and social projections. Most fundamentally, the economic impact of the businesses started and run by senior entrepreneurs is huge, including their own self-reliance and their communities'—indeed the world's—economic vitality. They are creating jobs for themselves and for people of all ages. Prosperity knows no age limits. Moreover, these senior entrepreneurs contribute billions of dollars in state and federal taxes.
Considering that under the UN’s standard assumption that a working life ends at 65, and with no increases in productivity, “retired” aging populations could cut growth rates in parts of the world by one third and then one half over the coming years (The Economist, 2014). Moreover, research by Nesta.org found that older entrepreneurs are also more successful: 70 percent of their start-ups last more than 3 years compared with 28 per cent for younger entrepreneurs (Khan, 2013).
Senior entrepreneurship has two other significant economic impacts. First, there is evidence that older people who remain engaged in life stay healthier (Geriatric Mental Health Foundation, 2014), making fewer demands on social service/entitlement programs—in fact, as they work, they continue to contribute to Social Security and Medicare through their taxes.
Perhaps most importantly, because new businesses create jobs, rather than taking jobs away from the younger generation, senior entrepreneurs are creating jobs for themselves and others—simultaneously boosting their local and our national economy.
What Do Senior Entrepreneurs Need?
Building Awareness of the Entrepreneurial Option
Although senior entrepreneurship is widespread, there is a significant group of people for whom the option of becoming an entrepreneur is not seen as an option. For this group, an effort at building awareness is a necessary strategy. One can hope that eventually, the awareness of the option of entrepreneurship will be as widespread as it likely is among younger groups, but until then efforts are needed to build this awareness.
Without a large budget to utilize media that would reach this older populations along with those who join this demographic on a constant basis, awareness programs need to build off existing organizations and programs that have broad outreach to seniors. These include outplacement organizations dealing with older workers who are lost their traditional employment, social service agencies, government agencies such as the Social Security Administration that touch every older American, local business development agencies that have significant presence in their areas, and unemployment/workforce development agencies. The media can also play a large role in publicizing examples of seniors who have followed this path. Educational institutions that reach active and involved seniors through their continuing education programs should consider adding “entrepreneurship for seniors” programs to their curriculum.
Technical Support
As discussed above, senior entrepreneurs have unique needs. For example, in general, they have lower technical skills than their younger counterparts, a reduced tolerance for financial risk, and a shorter time horizon for their business ventures. One common solution to the problems raised by these needs is for senior entrepreneurs to work in teams (Bion, 2000; Hackman, 2005). Entrepreneurship is widely recognized as a team—and often family or intergenerational—endeavor. While family members are usually right at hand, building teams with others may require networks that are not available to most. For example, finding young, tech-savvy, prospective entrepreneurs who would benefit from teaming up with older, more experienced and better-financed partners is a difficult task. One approach to filling this need to work is through entrepreneurship service organizations, especially those based at schools, which can identify potential partners and help to forge teams.
Another need of senior entrepreneurs is for social support. Being unmoored late in one’s career is reason enough for severe stress but tackling the task of becoming an entrepreneur when one is feeling insecure and enduring a period of low self-esteem is a huge task. There is a great deal of evidence that these problems can be mitigated by social support such as groups, counseling, being made aware of successful coping strategies used by others, and being a member of a social network made of others in similar situations. Again such programs could be housed at the wide array of entrepreneurship support organizations and could significantly increase the number of potential senior entrepreneurs who would persevere through this personally rough period.
Changes to Government Policy
It is not just many perspective senior entrepreneurs who lack awareness of the prevalence and importance of senior entrepreneurship it is also legislators and regulators. Currently, a senior who loses his or her job can maintain unemployment benefits while searching for new employment. As pointed out above, for seniors, this process is long at best and unlikely to be successful at worst. Becoming an entrepreneur is not only more likely to be successful it does more the build the economy by creating new businesses and new jobs.
Currently, there are no programs in the United States that specifically target senior entrepreneurs and provide the most relevant services that address their unique needs. Just as there are programs that provide targeted services to women, minority, and immigrant entrepreneurs, senior entrepreneurs should be recognized as a group that merits such special attention.
Programs Around the World to Encourage and Support Senior Entrepreneurship
Some efforts, mainly in Europe, have begun to encourage and support senior entrepreneurship. The European Union was one of the first government organizations to create policy initiatives aimed at stimulating entrepreneurship among older people. SeniorEnterprise.ie in Ireland is an EU-supported initiative through INTERREG IVB NWE, specifically designed to encourage a greater involvement with enterprise by those aged over 50. This may be through starting a business, alone or with others, acquiring or investing in a business, advising an entrepreneur or supporting innovation within a business owned by another.
In this way, Senior Enterprise addresses the concerns of the European Union with regard to the challenges posed by an ageing population and the need to increase productivity, competitiveness, and entrepreneurial activity across the EU. It is intended that as a result of Senior Enterprise that more businesses will have been started, more investment will have been made and that more senior citizens will be active as advisors in new and developing businesses. In June 2014, Elizabeth Isele gave a 2-hr presentation on the state of senior entrepreneurship in the United States to Joanna Drake, Director General of the EU Entrepreneurship Commission and her colleagues, to help them determine best practices for the EU's 2020 strategic plan.
The Office of Economic Cooperation and Development (OECD) also understands and is optimizing this opportunity. Turning unemployment into self-employment has become an increasingly important part of active labor market policies in many OECD countries. Grounded in the success highlighted "From unemployment to self-employment: Facilitating transition in the recovery," at the International Conference organized by the Federal Ministry of Labour and Social Affairs (BMAS) in co-operation with the OECD (ELSA and LEED) Berlin, October 7–8, 2010 and in this Abstract from IZO (Institute for the Study of Labor [IZA] in Bonn), "Start-Up Subsidies for the Unemployed: Long-Term Evidence and Effect Heterogeneity," the OECD is assessing senior focused initiatives in this area (Caliendo & Kunn, 2010). In June 2014, it hosted an Experts Forum in Oxford, United Kingdom, on the Challenges and Opportunities in the Silver Economy and Elizabeth delivered a presentation to help the OECD better understand the value of, best practices for, and additional research needs for senior entrepreneurship.
The United States held its first Senate Hearing on Senior Entrepreneurship in February 2012. Elizabeth was a key witness, and Senators, such as Susan Collins of Maine, are already creating new legislation related to seniors being able to utilize their unemployment benefits to support business start-ups. Currently, seniors cannot receive their unemployment benefits unless they can document they are looking for work (United States Senate, 2014). Since it is common knowledge that long-term unemployed seniors are the least likely to ever get a job again, the government is wasting millions of dollars on what constitutes a senior welfare program, when they could be investing those benefits in senior entrepreneurship education and seed capital for senior business start-ups from which the government would receive a significant economic return on that investment.
Elizabeth also recommended that seniors be included, as are all other special populations in programs and policies developed by the SBA (United States Senate, 2014). As a result, seniors were included for the first time ever in this major speech by SBA Administrator, Maria Contreras-Sweet, "Entrepreneurial Equality: New Tools for a More Inclusive SBA" before the Center for American Progress, in Washington, District of Columbia.
What Should Be Done About It
An aging economy will be a slower and more unequal one—unless policy starts changing now (The Economist, 2014). In addition to our suggestions such as using unemployment benefits for business creation activities, we recommend targeted programs supporting aspiring senior entrepreneurs, team building programs for creating cross-generational businesses, and education programs about succession planning to prevent senior-owned businesses from closing when the owner retires.
Specifically, now that we are beginning to understand the "golden dividends"—economic, social, and environmental—created by encore entrepreneurship, it is imperative for Congress to create an innovative, interagency framework to marshal resources, catalyze strategic thinking, prioritize new policy, and create actionable research to advance this movement.
Just as the European Union has created a model infrastructure of public/private investment, education and training programs, policy and research to support senior enterprise, which it has identified in its 2020 strategic plan as key to economic recovery in Europe, Elizabeth recommended the U.S. Congress appoint a special committee to spearhead and coordinate an interagency, bipartisan support infrastructure, including but not limited to actions related to business regulation and financial industry regulation:
Small Business and Entrepreneurship
- Create entrepreneurship education programs, customized to meet the needs of the 34 million self-identified senior entrepreneurs and those looking to explore entrepreneurship, including those with disabilities.
- Expand education about and access to microloans and crowdfunding capital to support the swelling numbers of seniors' self-employed and small and microbusiness in the United States who are driving a new round of job creation and prosperity.
- Reduce loan interest rates for seniors, as in existing business financing programs for veterans, women, and minority owned businesses.
- Develop coinvestment and fund matching initiatives to increase the supply of funds for senior business start-ups.
- Provide grants for business start-ups where loans are not feasible.
- Highlight the possibility of acquisition, rather than start-up of a business, as a means into entrepreneurship for an older person, as it may be quicker and less risky.
Banking, Finance, and Treasury
- Improve understanding of this issue by banks. Even though seniors’ assets are by far the largest proportion of banking revenues, most banks fail to understand the needs of those seniors and certainly not their entrepreneurship or business start-up needs.
- Increase engagement of mainstream private as well as Federal Reserve and U.S. Treasury’s Community Development Financial Institutions fund economic development support to capitalize senior business start-ups.
- Design actions to eliminate special obstacles senior entrepreneurs face, such as age bias, from lending institutions. This could include creating new criteria for credit worthiness and risk assessment such as acknowledging the seniors' life and work experience: such as long-term, gainful employment; knowledge of how to operate in a business environment; has held payroll or balance sheet responsibility; understands human resources, benefit and pension programs, etc.
- Develop loan guarantees and mutual guarantees, similar to mortgage guarantees to stimulate private-sector funding for senior business start-ups.
- Develop more microcredit initiatives with competitive delivery mechanisms to target special populations such as seniors with greatest chances of success.
- Develop tax incentives for seniors starting businesses including earned income tax credit.
- Ensure that tax and social security systems do not contain disincentives to entrepreneurship for older people, including investment in other businesses.
- Develop tax incentives to encourage private investors to finance senior start-ups. National initiatives directed toward senior entrepreneurs, based on these three exemplary Maine models, would boost the number and sustainability of senior entrepreneurs' business development:
- Expand BTOP (Broadband Technology Opportunity Programs) grants to provide broadband access necessary for seniors launching businesses in rural areas.
- Expand policy and programs such as the Self-Employment Assistance Programs in the United States or British Enterprise Allowance Scheme or French Chomeur Createur to permit long-term unemployed seniors with minimal opportunities of being rehired to capitalize a business start-up with their unemployment benefits without penalty.
- Provide entrepreneurship education and training in workforce development and unemployment programs.
Despite its important implications for older adults’ retirement well-being and national economic growth, entrepreneurship at older ages is a relatively understudied area. There is a great need to collect and analyze data to best understand who is a senior entrepreneur and the unique aspects of the entrepreneurial arc regarding ideation, opportunity identification, sustainability, growth, and exit strategy/business transition for the 50+ year old entrepreneur.
Expanded research such as this recent study from Israel (Hantman & Gimmon, 2014) would help policymakers and business advocacy agencies to better understand this large and rapidly growing cohort and provide evidence to assess program and policy effectiveness and to guide intervention development. In this regard, the Empowering Encore Entrepreneurs Act of 20131 (S.1454) call for a report that reviews potential “barriers and obstacles” (e.g., access to finance) is an important first step toward building a policy framework that encourages and supports those who take the entrepreneurial path in later life (Empowering Encore Entrepreneurs Act of 2013, 2013).
Conclusion
The world is beginning to understand how senior entrepreneurs with their wealth of work and life experience, deep networks, and eagerness to remain productive are a huge untapped resource. Indeed, it is time we stop thinking about this demographic as a liability and instead recognize them as assets and work across sectors to help break down barriers to unleashing their potential. As Elizabeth testified in the February Senate hearing, "We need to stop the gloom and doom we are generating by referring to this huge and rapidly expanding demographic as an impending crisis or ‘Silver Tsunami’. We, as a society, need to recognize seniors are one of our greatest natural resources. They are not a ‘silver tsunami’, they are a silver lining, yielding golden dividends.”
In this regard, given what we know and data have demonstrated about the experience, capability, and size of this demographic, the time is NOW for governments to make senior entrepreneurship a top priority, creating supportive policy reforms to expedite the creation of and sustainability of senior business start-ups.