Helping Clients Launch Post-Retirement Businesses

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A significant portion of my clients are retirees or are approaching retirement, but with a depleted nest egg. Many supplement their cash flow by starting a business, so here are some tips to guide them.

Indeed, one of the most striking things I noticed following the financial crisis was the number of folks who retired from one career only to launch a new business.

I shouldn’t be surprised. According to a recent survey of small business owners conducted by Guidant Financial, an overwhelming percentage of new and ongoing businesses are owned by people in their 50s, 60s, and 70s. In fact, more than half of small business owners in the U.S. are 50+. Seventeen percent are 60–69, and 4% are 70+.

You might think that these “graying entrepreneurs” were forced into startup mode because of job losses in the Great Recession or some similar reason. But to the contrary, a mere 15% of older business owners reported starting their businesses because of being laid off. Instead, the majority of older and retired entrepreneurs are starting and running their own businesses because they love it. In fact, 76% report that on a “happiness scale” of 1–10 (with 10 as the best rating), they rate themselves at 8 or above.

Perhaps not surprisingly for a generation that, by and large, spent their careers in a corporate setting, over 70% of older business owners said their businesses employ five or fewer people; nearly a third are “solopreneurs.” The vast majority (86%) launched or purchased independent businesses (in other words, only 14% went the franchise route).

How can advisers prepare for the rising tide of startups by post-retirement clients? What specific guidance do they need about financing, business plans, marketing, and all the other elements essential to building a solid foundation for their new enterprises? Finally, what are the implications of all this for the portfolios that they’ve asked us to manage?