Self Made: NASE's Blog

Entrepreneurship as a second act

Whether it is the desire to be your own boss or just an entrepreneurial itch, a greater number of older adults are starting businesses. According to a recent study, the average age of an entrepreneur requesting a small business loan is 36.4 years old.

The saying goes that with age comes wisdom, but with entrepreneurship, there’s still a learning curve to overcome. And as you near traditional retirement age, you should take several factors into consideration before striking out on your own. Here’s what you need to know:

5 age-related “barriers” to starting a business — and why they’re actually your secret weapon.

1. Obstacle: You may not be up to date on the newest technology.
   Whether you want to build a website with ecommerce functions, set up electronic payment on a mobile app or promote your business on social media, getting up to speed on technology may be intimidating for older entrepreneurs. It’s not uncommon to be hesitant to start for fear that younger business owners will have a leg up on you when it comes to being technologically savvy.

   Your advantage: You have an established network to ask for help.
   If you are worried that technology is a barrier for you, enlist help from your network. As a more established professional, you likely have a wider range of contacts than your younger competitors. Find someone who can help or teach you, or who can point you toward an even better resource.

2. Obstacle: More people may rely on you for financial support.
   Depending on their stage of life, older entrepreneurs might have families to support — or, if you’re an empty-nester, maybe you have grandkids or aging parents who need your help. It might feel like younger entrepreneurs have fewer obligations tying them down, allowing them to take on greater risks.

   Your advantage: You may have a longer, better credit history.
   On average, older adults tend to have higher credit scores than younger Americans. Since a major part of your credit score is the average age of accounts and your payment history, your track record of on-time payments may help to show you’re a reliable borrower. This could make you a more attractive candidate to get lower interest rates on small business loans or business credit cards.

3. Obstacle: Retirement is approaching, so you don’t want to be too risky with your nest egg.
   If you’re nearing retirement age, it might be tempting to consider using your 401k as a funding source. Taking an early distribution from your 401k or other pre-tax retirement accounts usually forces you to pay a 10% penalty. While taking a loan from your 401k may be a lower-cost option if you stay at your nine-to-five while getting started, it still forces you to take your money out of the market and lose out on the magic of compounding interest in the years just before retirement.

   Your advantage: You may have more assets.
   Startup funds are hard to come by for most businesses. But with time on your side, you may have more capital, whether a higher savings balance or equity you’ve built up in your home that you can tap into. And don’t forget there are grants for small businesses that can provide money that (unlike loans) you don’t have to pay back.

4. Obstacle: You may have hidden costs like additional insurance policies.
   If you’re starting a new business, you might need to consider taking out additional insurance policies, which could add other expenses. If customers come to your home for business, for example, you may need additional liability or property insurance in addition to your existing homeowners insurance. Or, if you drive your vehicle to visit clients, you may need to take out commercial auto insurance. These so-called hidden startup costs could be surprising and eat into your profits.

   Your advantage: There might be tax deductions and savings you can claim.
   While additional insurance premiums for a new business will increase your business expenses, the upside is that there are benefits in the tax code you may be able to take advantage of as a business owner. If you use part of your home as a home office, you may be able to claim a deduction on your taxes. You might also be able to claim home repairs, car costs or even mileage as deductions, so long as they are for legitimate business purposes.

5. Obstacle: You may not have the time to dive into a new business venture.
   Let’s face it: When you’re over 40, the days of burning the midnight oil might be behind you. And even if you wanted to throw yourself all into launching your new business, your regular living expenses, like a monthly mortgage payment or student loan payments may not make it possible to quit your job and the consistent income it provides.

   Your advantage: You can maintain better balance because experience is your biggest selling point.
   While it may seem like younger entrepreneurs have the leg up in being able to afford the risk and unpredictability of starting a new business, remember that you bring more years of experience to the table. So even if you can’t quit your job and commit entirely to a new business, your experience in the field is your biggest weapon. Your time in the industry is going to give you a level of gravitas and credibility with your customers or clients that your younger colleagues simply won’t have.