The Business of Starting a Business
By Pat Faulhaber
After spending decades in the same job or company, countless adults over 55 want or need to keep working. For some, that means transitioning from employee to employer as a small business owner.
Nearly a quarter of new entrepreneurs across the country are 55-64 years old, according to “Trends in Entrepreneurship Series,” by The Ewing Marion Kauffman Foundation which studies and supports new businesses.
Older adults have attributes that are key to building a successful business: experience, knowledge, education and time.
Holly Bolinger is the center director of the Small Business Development Center at Kent State University’s Tuscarawas branch, one of several located throughout Ohio. She’s worked with entrepreneurs and startups for two decades and is seeing more people who want to start their businesses.
Most older adults exploring encore careers want to use skills they developed from decades in the workforce, she says. Consulting is a common option, returning to a former employer or industry to train or assist the next generation of employees. Some move into the service field, starting restaurants or group homes.
“Others start businesses using skill sets like welding and auto repair,” Bolinger says. “Our Small Business Orientation startup webinars have had over 40 people registered for the past several months. There are attendees just looking for information while others request counseling. Most want to create a business plan and receive ongoing assistance.
“The business climate in Northeast Ohio is amenable to those over 55. Experience allows them to prioritize effectively and to work smarter rather than harder. If the company is labor intensive, they hire others to do the physical labor while they concentrate on management, marketing and sales growth.”
Questions, Rewards
Bolinger says to ask yourself these questions before starting a business: Why do you want to do it? Can you afford it? Can you go without a paycheck or benefits temporarily? Do you have a plan, and is your spouse or partner on board?
One of the biggest challenges to starting any business at any age is money.
“Access to capital continues to be an issue for startup businesses, especially for those in the service sector with little collateral,” Bolinger says. “Banks appear to have tightened credit, plus interest rates are high. Some individuals have turned to home equity loans to fund their businesses.
“Banks are usually not as open for a startup as they are for others seeking funding. The few programs that might be used for startups usually want control of the monies and are term loans rather than revolving lines of credit. While this works well if you need equipment and can submit an invoice to the bank to pay and add to your loan, it does not work for a business that needs ongoing working capital for payroll or other short-term needs.”
Regardless of the challenges, Bolinger says that for those she has counseled, the rewards outweigh the difficulties.
“Often the talents of this (55+) group have been overlooked, and breaking out on their own allows them more control and recognition.”
So You Want to Start a Business?
Steps for Success
- Make sure your spouse or partner is on board. Starting a business takes a toll on personal savings and time.
- Leave retirement funds alone; they aren’t protected from actions such as bankruptcy.
- Attend a start-up seminar at your local Small Business Development Center
(clients.ohio sbdc.ohio.gov). Seminars cover local resources, legal issues, licenses, taxes, business planning, and funding.
- Determine how the company will operate and consider potential liability. A bar has more risk of a lawsuit than an answering service. Business entities include Limited Liability Company (LLC); Sole Proprietorship; Corporation; S Corporation; Partnership; Limited Partnership; Limited Liability Partnership; General Partnership or Nonprofit.
- If there are multiple owners, consider using an attorney to create formal articles of organization to define terms; address how profits are to be shared, including a formula or amount of money if someone dies or gives up ownership. Set this at the start when everyone is friendly.
- Make a comprehensive plan. While there are many templates available, entrepreneurs should research them to make them meaningful. The better the plan, the fewer surprises down the road. Understand and be able to explain business projections for growth and profit, especially if you need financing.
- Projections determine how much capital you need and when you can take a paycheck. Do you have enough money to start a business? Do not use credit cards; their high interest rates affect cash flow and most likely cause the venture to fail.
- Are family members or friends loaning you money? You’ll need a promissory note with the amount, interest rate, and repayment size and timing.
- If necessary, apply for one or more commercial loans. A line of credit is for short-term capital needs 12 months or less. It can be borrowed, paid down, and re-borrowed. It is due on demand. Undercapitalization usually fails. Have an attorney read the documents before signing and negotiating changes. Banks do not need to honor change requests, and if they do, they charge substantial fees.
- Do Not Be Pressured Into Anything. Last-minute changes are often disastrous. Take time to evaluate any new course of action. Once you are up and running, you have to make it work.
Source: Holly Bolinger, center director, Small Business Development Center, Kent State University, Tuscarawas branch. She can be reached at [email protected].
Resources
- Small Business Development Center (SBDC), clients.ohiosbdc.ohio.gov, for planning, analysis, workshops and training programs, one-on-one business counseling, and more.
- JumpStart, jumpstart inc.org, for programs, workshops, funding opportunities, and business assistance.
- Council of Smaller Enterprises (COSE), cose.org, is a small-business group offering networking and educational events, advocacy on legislative and regulatory issues, navigation to the right resources and solutions, and cost-effective group purchasing programs.
- Service Corps of Retired Executives (SCORE), score.org, offers mentors, workshops, community partnerships, and local resources.
- Made in Ohio, ohio.org/home/made-in-ohio, provides links to hundreds of Ohio companies and small businesses; it’s a good place to get business ideas.
Show Me the Money
Grant Options
- Ohio Small Business Grants – usgrants.org/ohio/small-business-grants
- Top Small Business Grants in Ohio – nerdwallet.com/article/small-business/small-business-grants-ohio
- The Ohio Chamber of Commerce – ohiochamber.com/6839-2/
- Ohio.GrantWatch – ohio.grantwatch.com/cat/13/small-business-grants.html
- B2B Network – b2bnn.com/2023/11/small-business-grants-ohio/
Patricia Faulhaber is a Northeast Ohio freelance writer and blogger.
