Boomers are Taking the Plunge into Entrepreneurship. But for all the Right Reasons?
In an interview with Rick Anthony of The Entrepreneur Network Radio, “The Entrepreneur’s Yoda” discusses “Boomerpreneurs,” the over 50 crowd moving into entrepreneurship.
The Kaufman Foundation, in their annual poll of entrepreneurs, last year found that the number of new entrepreneurs over 50 were more than twice the number under 25. But, way too often, “Boomerpreneurs” are jumping into entrepreneurship because they either feel that, while they may have retired, either because they chose to, or it was decided for them by their employer, they’re still not “done.” They look at becoming an entrepreneur as kind of another job option (or for some, their only option. And many are finding some big-time reality in that choice.
Rick Anthony: Hello America, welcome to the Entrepreneur's Network Radio, The Nation's crossroads for serial and aspiring entrepreneurs, angel investors, and helpful service providers.
I'm Rick Anthony, an entrepreneur, angel investor, consultant, author, and teacher. Each week we bring you big ideas, fascinating guests, fabulous listening, and valuable lessons learned from Entrepreneurs and business experts from markets coast to coast and border to border.
For some time I've been concerned about the number of people who have retired from the workforce either voluntarily or involuntarily as a result of layoffs.
I've seen too many instances where people in their 50s and 60s deplete their 401k accounts or IRAs, even mortgage their homes, in pursuit of an illusion that they can succeed as entrepreneurs using the same skills they developed when they were payroll employees. Even worse, they take the plunge and in spite of the overwhelming evidence against them, they don't know when to fold their hand and get on with their lives.
My friend and colleague, Lonnie Sciambi, shares my concerns about "Boomer Entrepreneurship," so we decided to do a program on the subject for radio. Hello, Lonnie!
Lonnie Sciambi (LS): Hello, Rick! How are you doing today?
RA: My God, I couldn't be better. Lonnie calls himself "The Entrepreneur's Yoda," that's "Yoda," why Lonnie?
LS: Well, the number one I'm old. Two, I'm short, and three I speak in strange syntax. [Laughter]
LS: Actually, no, it really came about because I was looking for a brand years ago when I decided I was going to write and speak and selectively advise companies after doing my entrepreneur deal and turn-arounds and the like. And came up with that as a brand, and it has served me well for the last eight years. Because when I give people my card that says "The Entrepreneur's Yoda," I don't have to tell them what I do, they get it.
RA: And what is it you do?
LS: I help entrepreneurs and small business owners achieve their dreams. Net net. I help them get through the mine fields. I help guide them through the pitfalls that they could potentially fall through. And I have fund doing it.
RA: I guess this is what it's all about. The number of instances where those dreams turn into nightmares.
LS: Oh yeah. And much of it comes from having expectations that really don't have any basis in reality.
RA: Yeah, do you have any idea how many 50+ folks actually take the plunge into entrepreneurship, start businesses, buy businesses?
LS: It's interesting, the Kaufman Foundation, which does a study every couple of years regarding entrepreneurship and their most recent one found that twice as many entrepreneurs are more than 50 than are under 25.
LS: So for one reason or another, more and more of boomers are taking the plunge. Unforunately for many of them, they're not taking the plunge out of passion for an idea, but taking the plunge because it's the only thing left for them, and that's the wrong reason to start a business.
RA: Or they think that's the only option they have.
LS: Yeah, and I tell entrepreneurs, no matter their age, hey, if you're doing this to get rich, go buy a lottery ticket, your odds are better.
RA: Yeah. I can match your numbers with Gallop. Gallop did a poll with two thousand boomers, baby boomers. And, they asked them a series of questions. These were the findings of that study. 32% of the respondents said that they were pursuing entrepreneurship, buying a business, because they saw it as an opportunity to be independent, not to have a boss. Now Lonnie, you and I both know, if you're a business owner, you got a boss.
LS: Absolutely, the boss could be something as simple as, your significant other.
LS: Who will say, "When are you going to get a job?" [Laughter] To the real boss that you have, that is, your customers. Because they'll really drive the bus as to where your business goes. Later, if you have investors, I tell people, you know, if you're going to bring outside investors in, you don't have control of your company any longer.
LS: Okay, now someone else is telling you how to drive the bus. So, the independence is a two-edged sword.
RA: Yes, and here's the most interesting part: That's really a dream for many of these 50s and overs because they've been in corporate America and what they've had is a boss their whole career and they've been in the womb of a big company.
LS: Yes, a protective womb.
RA: Yes. Gallop also found that 27% of the respondents also said that they were pursuing a passion that they had, which of course is the right reason to even consider entrepreneurship or buying a business.
LS: Absolutely, that is the prime reason. And then, it's kind of 1 and 1A, it's a passion for something, and 1A is solving a problem, filling a need, because if your passion doesn't solve a problem or fill a need, it's just a passion.
RA: It's interesting because only 10% of the Gallop survey said they have an idea for a practice or service that meets an unfulfilled need in the market.
LS: Yeah. They don't get it. And they're not alone, I want to tell you that. They're not alone, most of the time they, I did a blog post a couple of weeks ago, and the best, what we do is we do a little graphic with the blog post, and the marketing guy who does great stuff had a great idea, and the picture said, you need a two inch hole, and I said, "What is this?" because the subject matter was is your product a solution looking for a problem to solve? Mm-hmm. Well, the problem was I need a two-inch hole, not a drill, but a two-inch hole. And that's the whole point, people don't look at it that way. Boomer entrepreneurs are no different than most entrepreneurs.
RA: I’m not sure I agree with that, we'll touch on that in a moment. As I was preparing for this visit with you, I was, as you know, we have the Entrepreneur's Network which is a series of meetings where we tee up for early-stage companies five times per year at these meetings. And I was thinking about the number of 50+ and in a couple of case considerably over 50+, who have been tenacious, fanatical, irrational, been blind to the realities that they're dealing with and they just keep pushing on. And in a couple of instances, two I can think of specifically because they are quite recent, they have literally burned through all of their retirement savings, all of their cash, and they are now hanging onto their homes, and they have no source of income because they've given up the jobs they've had. In one case, he was an executive search executive. In the other case, he was a consultant. And they gave all of that up because they felt they had to spend 132% of their time on their venture. It's sad.
LS: Well, I mean, they were right in that it can't be a part-time endeavor. If you're really going to do it, you've got to be 100% committed to it. But be 100% committed to the right thing. Make sure, verify, that the problem you think you're solving or the need you think you're filling, is really worth it. What you can't have is a $10,000 solution for a $2,000 problem.
RA: Yeah, but in both cases that I'm citing, there was a need, there simply was no market.
LS: Yeah, logic doesn't pay the bills. It's very logical because I know one of the folks you're alluding too because you and I both dealt with him. And the fact is he was logically correct with his product. Yes, it made a great deal of sense. Unfortunately, the problem wasn't big enough for enough people to have connected the dots. It was being solved in other ways, also, so that you know it was a great idea, kinda sexy to see and your first reaction was, "Wow that's very cool," and then you start to think about how much it's going to cost and how you're going to distribute it, and there aren't enough buyers out there to make it a business.
RA: But the other problem he had was he wasn't asking the right questions to the people to whom he was going to for validation.
LS: Worse, he wasn't accepting the right answers. [Laughter]
RA: Yes, that's right.
LS: He wasn't listening. And a lot of that is, as we get older we, unfortunately, I'm not speaking for either you or I, we get more stubborn.
RA: no [sarcastically]
LS: And, not speaking for you or I.
RA: No [sarcastically]
LS: And he had reached that point I think where no one was going to tell him he knew.
RA: But again, understand the psychology of it, he had to do that so he could get up the next day and start all over again.
LS: Absolutely. And that's the trap they fall into.
RA: It's understandable, but as you and I have talked the first thing we should be doing, and I'm sure you do it when we're consulting/counseling an older person who's considering buying a business, putting at risk their financial resources, is to really understand are you ready for this? Have you thought about life as an entrepreneur? Because it's so different from everything else they've experienced.
LS: Yeah, it's not like the closet down the hall that has the office supplies won't get filled unless you fill it. [Laughter] And the tickets to fly to Minneapolis aren't going to get booked unless you book them.
RA: Yes, mm-hmm.
LS: And that's a different kind of thing then coming out of the corporate world where the travel group did this, and the admin did that.
RA: Lonnie, when I came out of corporate, big corporate, international consulting firm, and started my own business, I missed then, and I still miss, having a limousine on the curb to take me over to New York to the finest restaurants and not worry about the cost because it was all expense covered. And the fact that I had a big name company behind me that blew open doors. It wasn't so much my business card, it was the card that said "XYZ company."
LS: Here's a perfect example. Years ago, in fact, the company is still in business I spoke to the CEO today because I am, he's one of my best friends, and I'm one of his, I'm his largest outside shareholder, so I poke him periodically. But, when he started the business I spent almost six months trying to talk him out of it. [Laughter] And then, when I couldn't talk him out of it, because he was leaving IBM in the very earliest, early out. He took a pile of money and I said, "Alright, I'll invest alongside you and how are you going to do this?" Well, he had some very definite ideas of what he was going to do. Well, here's what he did. He spent 2/3rds of his capital, 2/3rds of his capital, and he already committed it before I put mine in, 2/3rds of his capital on capital equipment, and space. Leasehold improvements etc. He had enough space to carry him through three years.
RA: Yes [laughter].
LS: And, so he was rattling around in the space, and I said to him about 60 days in, and I said, "Well, um, when are we going to start eating the furniture?" [Laughter] Because we're going to have to just to get through lunch. [Laughter] You see, this is something from a big company's perspective you never worry about. For a little company, what I preach is the gospel of cash flow. And it starts with not raising capital but generating it, and collecting it. It's the first sale.
RA: You're absolutely right. Lonnie, in the time we have left, give me the three tips that you give to an aspiring 50+ entrepreneur.
LS: The first one is the one I give to all entrepreneurs. Whatever your idea is, whatever your concept is, the concentration of your earliest efforts ought to be on one thing and one thing only: go get customers. Get as many of them as you can as early as you can and love them so much they never leave you.
Number two, cash flow is the name of the game. You have to protect every ounce of cash.
And lastly, and lastly, you know, we're not in Kansas anymore. And what that means is this isn't a company where you're going to walk down the hall and hand a job off to somebody. No, you'll hand it off to the guy in the mirror.
LS: And it's the guy in the mirror that's going to be responsible for everything early, and it's the single hardest thing boomers who have been through corporate America have to get through. So that one is probably the first one they've got to really address, is can they do it alone?
RA: I agree it does get awfully lonely, or it can be until you're able to create your own network and live in your own universe as an entrepreneur.
RA: Well, I think we're going to probably continue this conversation over time.
LS: I hope so. So much more that we can talk about.
RA: Absolutely, but for the time being, my guest today has been Lonnie Sciambi, The Entrepreneur's Yoda, author, mentor, speaker, Lonnie, how can people learn more about who you are what you do?
LS: They can come to my website which is thesmallbusinessforce.com and they can get a wealth of information from my blog posts, I have a free e-course that will help any entrepreneur understand what the requirements are to be successful.
RA: Terrific. Thanks, Lonnie.
LS: Thank you, Rick, it was my pleasure.
RA: Until next time, this was The Entrepreneur's Network.