Seniors as Entrepreneurs: Their Time Has Comeby
Wally Blume worked in the dairy business for two decades, first for grocery chain Kroger (KR) and later as sales and marketing director for a large dairy in Michigan, where he helped market new ice cream flavors. But soon after another company purchased the dairy, Blume decided that the once-innovative company was falling short, prompting him and a couple of colleagues to quit to develop and market their own flavors. In 1995 the partners had a national hit with Moose Tracks (a combo of vanilla, peanut-butter cup, and fudge), and within a few years Blume decided he'd be better off running his own company.
In 2000, Blume mortgaged his house and every other asset he could, plunking down what he says was "seven figures" to buy out his partners and start anew. That same year, he launched Denali Flavors, a marketing and licensing company that creates new ice cream and dessert concepts for independent regional dairies, allowing them to compete with the big national dairy brands. Looking back, Blume says: "I knew I could run it better than my partners. In my opinion there was just no downside to the risk."
While Blume's path from corporate suit to entrepreneur may sound familiar, his story has a twist: Blume was 61 when he went into business for himself.
Stock SlumpIn recent years, the number of individuals starting their own businesses during what is usually considered the "retirement years" has been rising, according to economists and small-business observers. And so has the age at which they are starting their own ventures: According to the nonprofit AARP Public Policy Institute, in 2008, 21% of the self-employed were between 55 and 64, while 10% were 65 and older. Of course, not every self-employed senior is an entrepreneur, but experts believe the stock market's recent brutalization of retirement accounts will prod additional older Americans to start their own businesses.
A combination of economic volatility as well as the growing number of baby boomers with time, energy, and money on their hands has redefined the starting age for new startups and has led to a surge in senior citizen entrepreneurs. This is a category that is only recently being studied. Five years ago, Boston's Putnam Research reported that some 7 million previously retired Americans had returned to work. Similarly, a 2005 study by the Center on Aging & Work/Workplace Flexibility at Boston College found that workers 50 and older are more likely than younger folks to own their own businesses.
While Blume concedes that betting the farm on launching a business in his 60s was a dicey proposition, he says his age and experience gave him an unparalleled advantage. "I always wanted to go into business for myself when I was younger," he says. "But I didn't have the money. At 61 if I was trying to get into a business that I didn't understand and spent that kind of money, someone should have put me in a home. But I understood this business, and I saw its potential." Moreover, he says his time in the trenches also left him with a strong sense of what not to do. "I paid off my loans in 25 months," he notes. And today, Denali Flavors earns about $80 million annually and has licensing agreements with a number of manufacturers. Denali's 40 different flavors can be found in all 50 states as well as Canada. Now 70, Blume is just getting started, having launched two additional ventures: a sauna business and a boat pontoon outfit.
While many have elected to become first-time entrepreneurs after 60, a number of economic factors and a job market perceived to be biased against older workers have pushed a number of people into starting their own businesses. With many retirees finding their pensions and 401(k) plans dented—and a rising U.S. unemployment rate, now at 9.4%—the trend toward aged entrepreneurs is poised to grow.
Hard to Get HiredSara Rix, a strategic policy adviser at AARP, says that in a recent AARP survey people were asked what they expected to do when they retire, and 15% responded that they were going to go into business for themselves. "Unemployment rates are lower for the older population," she says. "But they are increasing for those 55 and up. And it's been dramatic since this recession began." Rix notes that when older people are laid off, they remain unemployed longer than their younger counterparts. They also are subjected to a number of barriers such as the perception that they lack marketable skills. "In that case," says Rix, "starting a business may seem the only feasible alternative in a down economy even though they might not have an easy go of starting a new business."
This potential new wave of later-in-life business owner will have ample company.
Nine years ago, C. Kumar N. Patel, the inventor of the carbon dioxide laser, the holder of 38 patents, and the former head of the physics and engineering departments at Bell Labs—where he worked for 32 years—started his own business. Then 62, Patel sunk $150,000 of his savings into launching his company Pranalytica. "I guess I was trying to relive my youth," he says. "I was doing something that I had not done before."
However, Patel quickly realized that despite his vast experience he still had a lot to learn about starting his own firm. Initially, Patel's Santa Monica (Calif.) startup developed sensors that could analyze human breath for disease. He shifted direction after realizing physicians preferred to lease rather than purchase such instruments and funding evaporated following the dot-com bust. He then began making ammonia-detection sensors for federal and state environmental protection agencies. That led to a $13 million military contract to create a device that could detect nerve gas. Awarded an additional contract from the Defense Advanced Research Projects Agency (DARPA), the company now makes small lasers to destroy shoulder-carried antiaircraft missiles.
25 Hours a DayToday, Pranalytica has 18 employees, and Patel says that last year revenues hit $1 million. He expects that to reach $8 million this year. Patel, who will turn 71 in July, says "starting a company late in life is hard, because it takes 25 hours a day to make it successful, and there are only 24 hours. It takes intensive work to start a company. and to do so at 62 is maybe not the smartest thing, but I don't regret it," he says. "It turned out well."
In 2006, Civic Ventures, a San Francisco organization that actively engages baby boomers as a change agent launched the Purpose Prize. Designed to tap into the knowledge bank of those over age 60, the prize awards $100,000 to social innovators who have developed enterprises that create new opportunities and lasting social change.
That first year, Marc Freedman, the organization's founder and CEO, says Civic Ventures worried there wouldn't be enough quality applicants to award five winners. In fact, they were deluged with 1,500 nominations. "We had to give out an additional 10 prizes and 50 fellows in order to honor the top 5%," he says. Each subsequent year of the prize, Civic Ventures has received more than 1,000 businesses (both for profit and nonprofit). One of the 2007 winners was H. Eugene Jones, a former World War II bomber pilot who launched his first business in 1999, when he was 84. Jones devised Opening Minds through the Arts, a program that integrates art education into the core curriculum for at-risk kindergarten through eighth grade children. Initially operating in three Tucson schools, the program has since expanded to three dozen and works with 17,000 students.
"This is only one corner of the market," says Freedman. "And there are thousands of people working in it. They have the knowhow, and they want to work longer. Their priorities have changed, and they expect to be healthy for a significant period of time. They know they are not going to live forever, and they are thinking about what kind of legacy they want to leave."
Jones told Marc Freedman after he won the Purpose Prize: "You sit on a shelf waiting for the billions of years that this earth has been in existence, and you have your turn on stage for a nanosecond. To waste it by doing nothing is unthinkable."