Entre-Boomers

We seem to be a little late at everything. Many Baby Boomers took a long time to grow up. Many were late to start families. Now US News & World Report reports that many of my generation are discovering the world of entrepreneurship just as they are about to enter their retirement years.
There are echoes of the 1960s in some of the profiles in this story.

“I just decided if it was my last day on Earth, is this really what I wanted to be doing?” [Franny Martin] recalls. “I mean, I lived it, and being in corporate was great, but that’s not how I would want to be spending my last day on Earth. A really good friend of mine had taken ill–she has passed away now–and I just realized that life is really too short to be doing something that I didn’t want to be doing anymore.”

Some Boomers are looking to entrepreneurship to satisfy their inner self. Some are trying to build additional wealth that they need to live out their twilight years in the manner they’ve grown accustomed to. Others just need the income. Whatever is driving their move into free enterprise, they are doing it in large numbers. Several studies suggest that Boomers are one of the fastest growing group of entrepreneurs. (Interestingly, their children–today’s college aged kids and young adults–are another of the fastest growing groups of entrepreneurs).
Many Boomers are choosing a self-employment, consulting route to entrepreneurship. They gained significant expertise within some specific area, and they become a “free agent” selling their service to a variety of clients. While this can create an income flow, it is not a business model that generally creates a path to wealth.
There is often nothing to “sell” when the boomer entrepreneur really wants or needs to retire. A consulting business is tied to the activity of the owner and has no residual value that someone will be able to buy. A business has value to a buyer if it creates on-going cash flow into the future. If the boomer entrepreneur/consultant retires, the cash flow from his/her consulting activities ends.
Speaking of selling, that is a skill that Entre-Boomers seem to lack. Years of corporate life have taken the hustle out of their skill set, which John Challenger, CEO of outplacement firm Challenger, Gray & Christmas, reminds us is key to entrepreneurial success.
My experience with working with late-in-life entrepreneurs is an alarming over-confidence. They seem to think, “How hard can it really be to run my own small business?”
Trust me, it is a lot harder than most of them realize. And their corporate experience provides little knowledge and experience that helps with the day-to-day challenges of running a small business.
There seems to be a myth that entrepreneurship and self-employment are secret paths to wealth. If these Entre-Boomers didn’t prepare in their working years, they believe that they can start a business when they reach retirement age and it will magically create wealth. It just doesn’t work that way.
Wealth takes time, effort and careful planning to build, whether it be through a job or through your own business. Creating wealth from an entrepreneurial venture is something that has to be engineered into the business model. That is why many experts recommend having your exit plan in mind from the very beginning of the business.
You need be able to build a business that will generate cash flow into the future long after you leave the scene. That is what has value to a buyer more than anything else. They don’t care about assets or reputation unless these things can continue to generate income after they buy your business.
The story in US News cites a study by Merrill Lynch that seems to get to the heart of this entrepreneurial stampede among Boomers.

A 2005 Merrill Lynch survey found that the unpredictable cost of illness and healthcare is by far boomers’ biggest fear. They are about three times as worried about a major illness (48 percent), their ability to pay for healthcare (53 percent), or winding up in a nursing home (48 percent) as about dying (17 percent).

That’s right, we are more afraid of living than dying. We Boomers sure are a curious group…..