One of the most gratifying things I get to do is work with entrepreneurs and business owners to optimize their businesses. In the area where I live, most of the media attention is focused on technology startups usually run by people in their 20s. What I find interesting about the new businesses in our area is that the founders who are willing to rent an office and hire a consultant or take some classes tend to be mid-life entrepreneurs. These older entrepreneurs actually are more prevalent than the younger ones. Dane Spangler, a researcher at the Ewing Marion Kauffman Foundation wrote in a 2009 report, “in every single year from 1996 to 2007, Americans between the ages of 55 and 64 had a higher rate of entrepreneurial activity than those aged 20-34.” Also, according to the 2011 Global Entrepreneurship Monitor U.S. Report — a survey of a representative sample of the U.S. adult-age population — 15.4 percent of Americans aged 55-64 and 12.8 percent of Americans aged 45-54 run their own business, compared with 0.8 percent of Americans aged 18-24 and 4.9 percent of Americans aged 25-34.
Bureau of Labor Statistics data on both incorporated and unincorporated self-employment show an even more extreme pattern. The rate of self-employment is higher among people in their 60s than even those in their 50s, let alone those in their 20s or 30s. In fact, the bureau’s surveys of American workers reveal that people aged 65 to 69 are self-employed heads of corporations at four times the rate of people aged 25 to 34.
The Small Business Administration reports in its recently released publication Small Business Economy that, from 2000 to 2011, self-employment among people under 25 dropped 9 percent. Among those aged 25 to 34, it fell 8 percent, and for those between 35 and 44, it declined 24 percent. By contrast, self-employment among those aged 55 to 64 rose 54 percent, while it increased 36 percent among those over 65.
Scott Shane (A. Malachi Mixon III professor of entrepreneurial studies at Case Western Reserve University) shares an interesting observation that, even in high technology, entrepreneurs are much more likely to be over 50 than under 25. Research by Vivek Wadhwa, Richard Freeman and Ben Rissing shows that these older entrepreneurs, while they fly under the media radar, are very prolific and on the rise.
Shane asks (as you might), “Why are baby boomers more likely than their kids to be entrepreneurs?” He goes on to answer his own question:
Researchers have two hypotheses, the second more plausible than the first. The first explanation is a cohort effect: Today’s young people don’t want to run their own businesses as much as their parents did were when they were young. The more plausible explanation is an age effect.
The reason Shane provides for the cohort effect being a weaker argument is a body of research conducted at UCLA within the Cooperative Institutional Research Program (CIRP). CIRP points to a trend over the past quarter century whereby college freshmen are less likely to want to be a “business executive,” “accountant,” or “actuary.” Instead, a higher percentage want to own a business now than previously.
So, while more freshmen want to be business owners, fewer people in their early twenties are actually starting businesses. This is where the age affect provides an explanation. Those who prefer this argument would say that the experience gained and savings accumulated over a period of fifteen years or more give one more confidence to start a business later in life. While there are certainly more responsibilities for the stereotypical midlife entrepreneur on the home front, this age group appears to have figured out how to address those responsibilities and still be willing to start businesses at a higher rate than the younger counterparts.
What’s holding you back? Start a business as a second career!