Starting a Business in Midlife

The modern image of an entrepreneur is a young tech wizard launching an Internet empire from a dorm room. We might need to age that image by a few decades. 

These days, the age range when people are most likely to start new businesses actually is 55 to 64, according to a report by the nonprofit Kauffman Foundation. Why then? Some older entrepreneurs strike out on their own because they hope to profit from their extensive knowledge, set their own schedules and be their own bosses. Others are pushed into late-career entrepreneurship by ­latent ageism—it can be difficult to land a new job if you’re unemployed after age 50. Employing oneself can solve that problem. Of course, starting a business after age 50 can carry substantial risk, too. If the business loses money, there are not many working years left to recover from the financial setback.

The good news for these risk-takers is that when workplace veterans launch businesses, they tend to succeed more often than younger people—a start-up with a 50-year-old founder is almost twice as likely as one with a 30-year-old founder to achieve financial success, according to a study by researchers at MIT and Northwestern University. 

Four smart things to keep in mind for those who are considering launching a business in middle age or later…

Choose a business that turns your age into an advantage. It can be tempting to view the launch of a new business as a fresh start, a time to take your career in an entirely new direction—but that’s usually not the wisest strategy for people over age 50. The best way to leverage your decades of experience and many contacts is to continue to do work related to what you always have done for a living. Example: Serve as a consultant or trainer for companies in your longtime sector. 

Another way to take advantage of your age is to start a business that targets the fastest-growing market in the US—the retiree market. Young entrepreneurs often struggle to figure out what older customers want and may have trouble forming connections with them and earning their trust. You should have an easier time because you are much closer to their age. Among the many potential ways to serve this market: Become a health-care patient advocate…a senior fitness trainer…a de-accumulation ­specialist for people moving into smaller homes…or a retirement coach. 

To generate additional business ideas that target retirement-age customers, visit friends and relatives residing in retirement communities, assisted-­living facilities and/or nursing homes to explore which of their needs are not well-served. Examples: A retiree who enjoyed working with his hands started a business repairing broken gurneys and wheelchairs for medical facilities and nursing homes. A woman nearing ­retirement age earned her cosmetology license, then started a mobile hairdresser business cutting women’s hair in ­local assisted-living facilities.

Be cautious about turning your ­favorite hobby into a business. That’s a common dream, but it can go badly—there might be aspects of the business that are not apparent to hobbyists…and some things that are enjoyable as occasional diversions turn out to be tedious when done more often. Example: An attorney who loved gardening took an early retirement package from her law firm to launch a landscaping business. She discovered that while she enjoyed spending time in her garden each day as an escape from a hectic life, she was lonely and bored when she spent long hours gardening for others. 

Before jumping in with both feet, speak with others in the field about what it’s actually like or, better yet, volunteer to apprentice in the field to get a firsthand look at the career. 

Preserve your retirement savings. Although it may be tempting to use your retirement nest egg for start-up funds, don’t risk it. Instead, keep a lid on expenses. 

Many businesses can be launched for less than $5,000 or even less than $1,000. How? Don’t rent office space or a storefront if a home office and/or an online presence are sufficient. Be especially cautious about business ideas that require a large up-front investment in equipment or inventory. Don’t hire employees if you can run the business yourself, perhaps with the assistance of experts who work on a freelance or consulting basis, such as a social-media consultant/web designer and a bookkeeper.

Try to fund your business by cutting back on your living expenses rather than dipping into your savings at all. This may require making some small or large shifts in your life. Example: If your kids are grown and out of the house, consider downsizing. Skip vacations and restaurant meals. Continue driving your old car. Success story: When Tim Sheerer left his lucrative Wall Street job to launch an Italian restaurant, he did so by relocating from New York City to a suburb of Pittsburgh. Not only was the restaurant competition less daunting there, the cost of living was far lower. 

Consider your health—and your health insurance. Your own health is especially important when planning to start a business. Building a business can be time-consuming and stressful, and if your body breaks down under the grind, your finances will suffer—there are no paid sick days when you work for yourself. Besides, clients prefer working with people who convey a sense of energy and vibrancy. Include exercise among your daily responsibilities. ­Example: Molly MacDonald, founder of the breast cancer nonprofit The Pink Fund, swims three to five miles most weeks. The exercise keeps her fit, and she claims that she does some of her best thinking in the pool.

Mental fitness is important, too, so find time for meditation or yoga or something else that calms and quiets your mind.

Another health-related issue— launching a business likely means losing access to employer-­provided health insurance. That can be costly for an entrepreneur who isn’t yet eligible for Medicare. Among the potential coverage options…

You can obtain coverage through your spouse’s group health insurance plan, if he/she is employed.

You might be able to remain on your former employer’s plan for a period of time through the Consolidated ­Omnibus Reconciliation Act (COBRA). Federal law requires employers with at least 20 employees to make COBRA available for 18 months when you leave a job or 36 months in the case of qualifying events. This can be pricey, since you probably would have to pay the entire cost of the coverage, with no subsidy from the employer. Ask your employer’s benefits department for details, ideally before leaving the company.

Government subsidies could help you pay the premiums of an Affordable Care Act policy purchased through HealthCare.gov. Subsidies are available to people earning 400% or less of the federal poverty level—in 2019, that’s as much as $48,560 if you’re single…or as much as $65,840 if you’re married. If you launch a new business, you might qualify for subsidies even if you historically have earned well above these income levels—few businesses produce big profits (if any profits) in their first year.