This is the last of a four-part excerpt from my new book, The Hard Times Guide to Retirement Security (Bloomberg Press/John Wiley & Sons, June, 2010).
Meet the new boss: you.
Many baby boomers intend to keep working past traditional retirement age. Surveys show that about 58 million boomers plan to stay in the workforce well into their sixties. Employers won't accommodate all of them, considering the state of the economy and attitudes toward older workers. And many will want to leave the corporate world anyway because of burnout or an impulse to run their own show.
All those factors will drive a major trend toward boomer entrepreneurship in the years ahead. For some, that will mean launching full-scale businesses with partners, investors and employees, office space, and all of the accompanying headaches. But far more will start very small ventures that allow their owners to mix work, play, and other pursuits.
Solo businesses are by far the country's most common form of entrepreneurship. At the end of 2004, almost 20 million Americans operated businesses with no employees, and companies without a payroll made up more than 70 percent of all businesses in the country. Americans ages 55 to 65 are forming businesses at the highest rate of any age group-28 percent higher than the average for all adults. The business formation rate for people ages 45 to 54 also is higher than average.
The trend isn't surprising. Boomers have been through the grind of managing companies-and being managed by others. They're more than ready to walk away from the politics and pressure of large organizations and budgets, as well as answering to boards of directors and shareholders. And some just want to diversify their sources of income beyond a single employer.
Small-scale business owners don't always leave the industry they've worked in; many launch businesses serving the companies they once worked for full-time. "They're looking for a 'no muss, no fuss' kind of business," says Jeff Williams, principal of Bizstarters, a company that provides coaching and training to boomer entrepreneurs. In most cases, these entrepreneurs want to work from home; many are empty nesters, so they have extra bedrooms that can be used for the business.
Small-scale businesses can be started without much start-up capital-a big plus in a credit-starved economy. Many small enterprises are bootstrapped into existence for less than $10,000, especially if they can be run from a home office. The Internet and other digital technology make it possible to operate a solo business with little or no support staff. A web of relationships supports these entrepreneurs, with other solo operators and freelancers providing services such as bookkeeping or marketing.
Although these businesses may not consume a great deal of capital themselves, they also may not generate revenue immediately. That means entrepreneurs need to maintain an adequate cash cushion to pay living expenses while starting up-about six months, on average.
The entrepreneurial route is a good fit for people with some broad experience managing a business, including some understanding of sales, marketing, and finance. You also need to be willing to work harder than ever and at all hours of the day and night. Finally-and most risky-you must be able to identify and bring to life a business where there is actual market demand. You also need to be comfortable with the risk of the unknown and the absence of a steady paycheck.
On the other hand, ask yourself this: How steady is that paycheck, anyway? We're living through a time when the pillars of corporate America are toppling like dominoes. Do you really want to put all your employment "eggs" in one basket? Or is it better to diversify your risk among a variety of employers-who become your customers?
If at all possible, get started on your new enterprise before leaving the world of full-time employment. "If you have the luxury of preparing for your start-up while you're still employed, do it by all means," says Jeff Williams. The steady paycheck, he points out, can help pay for equipment and furniture you'll need. When you have a job, it's also easier to obtain a home-equity line of credit that you may need to draw on later to fund your start-up, he notes.
The other benefit of starting while you're still working is that you can test out your idea by doing some transactions while you still have a job. "You can do a lot to get ready before you strike out on your own, while you're still getting a paycheck," says Terri Mauer, an interior designer and industry consultant based in Ohio. "Do your business planning and market research when you have a job. Is the business you want to go into something that will be viable?"
Reprinted with permission of John Wiley & Sons, Inc.