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As Entrepreneurs, Seniors Lead U.S. Start-ups

Once dominated by young, highly-driven, technology-oriented entrepreneurs, startup activity is quickly being taken over by individuals who, while still driven and tech-sawy, happen to be in their 50s, 60s and 70s.

As companies outsource more and more functions, they will wind up hiring senior entrepreneur firms, possibly including people they may not have hired because of their age.

For the last 20 years of entrepreneurism, youth has ruled the roost. Bill Gates, Michael Dell and Napster creator Shawn Fanning all started their ventures before the age of 21.

However, the latest government figures indicate that the tide is turning toward more experienced individuals, many of whom may have lost their jobs during the three-year wave of job cutting, which has yet to let up.

Unpublished government data obtained by Challenger researchers show that the number of Americans 55 and older categorized as self-employed in non-agricultural industries has increased 22 percent from 2,136,000 in May, 2000 to 2,598,000 as of May, 2005.

These senior entrepreneurs now represent nearly 27 percent of all self-employed workers, which is second only to 45- to 54-year-olds who make up more than 27 percent of the self-employed.

Clearly, experience pays when it comes to entrepreneurship.

While self-employment was expanding among those 55 and up, it was falling for almost every other age group. The biggest group of self-employed workers in 2000 was the 35- to 44-year-old cohort, which numbered 2,703,000. Their numbers have fallen 10 percent to 2,422,000. Self-employment has also dropped, by about two percent, among 25- to 34-year-olds.

The only other age groups to see an increase in self-employment between 2000 and 2005 were 20-to 24-year-olds and 45- to 54-year-olds, which increased by 29 percent and more than 6 percent, respectively.

Why the surge in senior start-ups?

One reason behind the surge in senior entrepreneurial ventures is a reaction to stock market gyrations that caused retirement funds to shrink in value. To make matters worse, many aging workers suddenly found themselves out of work due to corporate downsizing. With a weakened safety net, more of these older downsizing victims are opting for self-employment in order to be in control of their own financial destinies.

In addition to retirement losses, the surge in senior start-ups is due to several other factors, including the enduring perception that age discrimination in the workplace remains pervasive. There is also a growing desire among older workers for a high level of workplace flexibility that they feel can only be achieved by acting as their own boss.

Charges of age discrimination continue to climb despite strong anecdotal and statistical evidence that indicate employers are embracing experienced workers now more than ever. Challenger’s quarterly surveys show that it is taking job seekers over 50 years old just slightly longer than their younger counterparts and unemployment among those 55 and older is the lowest of all age groups.

Older workers are highly regarded right now for several reasons. For one, employers see them as valuable assets in the reviving economy because their experience and skills make them better able to do the work of two and sometimes three younger, less seasoned workers.

More importantly, companies are looking ahead, not just to a recovery sometime this year or next, but 10 years down the road when a labor force depleted by retirements will not be able to fill the jobs this economy is projected to create. As a result, it will become more and more important for companies to find ways to keep older workers from retiring.

The fear of being turned away for a job because of age is undoubtedly prompting many workforce veterans to abandon the job market and start their own business or franchise.

Former employers may be the biggest customers.

Ironically, the companies that were perceived to be shunning these older workers may end up being the biggest customers for these senior start-ups.

As companies rely increasingly on contract workers and outsourcing arrangements, they will turn toward individuals and firms that have a clear understanding of the industry. Who better than a former employee or some other project-seeking retiree from another firm in the same sector?

Many companies will be forced to contract work out to these older, independent consultants and freelance workers due to the approaching mass retirement of aging baby boomers, which is expected to leave an enormous void of experienced workers at companies in nearly every industry throughout the United States.

It will be a positive situation for the company and the older contract workers. The company will benefit from the experience that these older free agents bring, paying them a fee versus a monthly salary, which will also save money on benefits.

The older entrepreneur will have an ongoing flow of work and income, which will be critical for many of these individuals since the economic slump and subsequent stock market losses inflicted significant damage to their retirement savings.