Why your bank should be targeting ‘encore entrepreneurs’

Retirees Ruben and Wendy Conde are preparing to buy a family gas station and convenience store in Sentinel, Ariz., with the help of Ray Face (right), a senior lender at Foothills Bank.

Young startup founders may grab headlines, but their elders are increasingly putting off retirement in favor of becoming business owners. How might community banks reach this potential population of later-in-life entrepreneurs?

By Judith Sears

We hear a lot these days about the emerging demographic dominance of the millennial generation, but something surprising is happening among older age groups: Seniors who remain in the workforce represent a rising share of new entrepreneurs.

In 2015, the Kauffman Foundation published data showing that baby boomers were twice as likely as millennials to be planning to start a new business. The Kauffman Foundation’s 2016 Index of Startup Activity showed that individuals ages 55 to 64 make up 24.3 percent of all new entrepreneurs, up from 14.8 percent in 1996. Likewise, the SBA’s Office of Advocacy reported in 2016 that self-employment among those ages 62 and up had increased from 4.2 percent in 1988 to 5.4 percent in 2015.

What constitutes “older” among researchers is sometimes restricted to baby boomers, but others include those 50 and up, which dips into Generation X. The SBA has dubbed this older population the “encore entrepreneurs,” or those who start a business after lengthy careers.

There are a variety of reasons for the uptick in these startups. Guidant Financial partnered with the Lending Club to survey more than 2,600 of their customers about their plans for starting businesses. They found that 43 percent of respondents said they were motivated to be their own boss, and 42 percent said they wanted to pursue a passion.

“They want to have more control versus working toward someone else’s dream,” says David Nilssen, cofounder and CEO of Guidant Financial. “They want to own a business in a space where they can make some money, but it also feeds their lifestyle.”

Mary Lynn D. Lenz

“Expansion into entrepreneurship brings them fulfillment. … It allows them to turn their passion into a business.”
—Mary Lynn D. Lenz, Foothills Bank

That fits with what community bankers are seeing in their older customers. “Expansion into entrepreneurship brings them fulfillment,” says Mary Lynn D. Lenz, president and CEO of $450 million-asset Foothills Bank in Yuma, Ariz. “They take those years of experience and it allows them to turn their passion into a business.”

Pedal to the metal

In the case of Ruben and Wendy Conde, two retired government workers who are considering going into business for themselves after age 50, the motivation is to continue a family legacy. With the help of Ray Face, a Foothills Bank senior commercial lender, they are preparing a business plan that would enable them to buy the combined convenience store and gas station in Sentinel, about an hour outside Yuma, that Ruben’s 80-year-old parents own.

“My folks would like to pass on something to their children—my family—and we’d like to see that come to fruition,” says Ruben. “Ray gave us a list of what we needed to do, what information the bank would need and how to write out my business plan.”

Older entrepreneurs may find personal satisfaction in starting their own business, but data shows they’re also more likely to find success. Research recently summarized in the Harvard Business Review showed that the average age of the people founding the highest-growth startups is 45. The probability of extreme startup success rises with age, at least until the late 50s, the study found.

Older entrepreneurs have several advantages, primarily their greater maturity and life experience. “We’ve faced a lot of ups and downs in our lives, both personal and business,” says Jeff Williams, CEO and chief coach for Bizstarters.com, a company that specializes in coaching entrepreneurs over 50. “As a result, we don’t panic in the ups and downs of the business cycle. We’ve been there and seen it.”

Klaus Fink

“Once you have operated a billion-dollar business for 10 years, you have a set of skills. You know a little finance, a little HR and a little marketing.”
—Klaus Fink, Anglers Port Marine

“I’m battle-hardened,” agrees Klaus Fink, who bought Anglers Port Marine, a marine dealership, at the age of 52. “I went through the 2007–2009 economy in a home products company. I’ve laid people off and closed factories. It was a nightmare, but I learned a lot.”

When Fink, who holds a doctorate in materials science and spent more than 20 years in research and development with Fortune 500 companies, parted with his employer, retirement didn’t figure in his plans. “I don’t do retirement,” he declares. Instead, he went looking for a business to buy. Through a business broker, he connected with Travis Beazley, an SBA loan manager at $900 million-asset OakStar Bank in Springfield, Miss. And while Fink’s work experience didn’t include running a marine dealership, he had accumulated a wide and useful range of skills. “Once you have been on the executive team of a half-billion-dollar business for 10 years, you have a set of skills,” he explains. “You know a little finance, a little HR and a little marketing.”

That and Fink’s passion for marine sports—he’s a lifelong fisherman—was enough for OakStar to work with him to secure funding through the SBA 7(a) loan program. Fink credits Beazley with easing him through the program.

Now in his third year running the business, Fink’s Anglers Port Marine was up 25 percent in sales in 2018.

The experience of older entrepreneurs creates strong work habits. Karen Williams, certified mentor with SCORE, a nonprofit resource partner with the U.S. Small Business Administration, has noticed the discipline of her 50-plus-year-old clients. “They have had wonderful careers and understand what hard work is,” she says. “The older clients always do their homework. The more mature really are more diligent, and they’re wiser, calmer and more patient.”

In addition, individuals with long careers behind them have usually created strong networks. “The typical startup plan we work with has more than 3,000 connections,” says Bizstarters.com’s Williams. “They are very well networked, and that helps them get things done more quickly and effectively.”

Community banks fund more than half of small businesses under $1 million, and baby boomers are increasingly inclined to start businesses. It seems natural that community banks would benefit by targeting older entrepreneurs. But few community banks seem to have specific initiatives capitalizing on the encore entrepreneur trend.

“It does strike me as an opportunity,” says Bob Howard, CEO of $525 million-asset CBI Bank & Trust in Muscatine, Iowa. “We are all so focused on the next generation of customers and trying to get young people in the fold. We may need to be more focused on the other end of the demographic spectrum.”

An open goal

That demographic is growing disproportionately to the rest of the country. The U.S. Census Bureau reports that by 2020, there will be about three-and-a-half working-age adults for every retirement-age person, which means there could be fewer workers and entrepreneurs.

“Entrepreneurs are so important for jobs, wage growth and development,” says Dane Stangler, president and chief policy officer of Startup Genome, a data and advisory company in San Francisco. “It’s really important for communities of all sizes to do what they can to help support and promote older entrepreneurs. Sheer demographics dictate that you [should] pay attention to this demographic.”

In many cases, community banks’ standard outreach efforts, like networking, will reach seniors. Amy Henderson, a vice president and business loan officer at $4 billion-asset Amarillo National Bank (ANB), co-runs the bank’s Summit Business Center branch. She met Jim Belcher, 63, through a networking group.

“I don’t believe in retirement,” says Belcher, who had a 37-year career in public accounting and private industry, and skipped retirement before becoming a partner at B2B CFO, a firm of consulting CFOs. “I still have good health, and I’d probably drive myself nuts if I tried to retire.”

Belcher became an ANB client and has taken advantage of the unique capabilities of the Summit Business Center branch, which connects to an independently run coffee shop and two conference rooms that can be reserved for meetings.

However, community bankers might consider more targeted networking to better connect with seniors, such as partnering more actively with agencies and organizations serving older populations, such as SCORE, AARP and some SBA activities. Beazley has established relationships with companies that specialize in 401(k) rollovers, a popular way of funding startups for older entrepreneurs. “That puts us in front of people who have significant retirement assets and may be entertaining starting up a business,” he says.

Encore entrepreneurs and community bankers say they both have a lot to offer each other.

“I’m 63 years old,” says Foothills president Lenz. “I don’t feel like I have an expiration date. People who are retiring or in their early 60s are looking for the next chapter.”

Cold feet no more

Beth Carter and her husband, Earl, opened a bridal shop following retirement.

The Beth Carter Exquisite Bridal and Formal Wear shop in Huntingburg, Ind., is a late-in-life dream for Beth Carter, 56. She and her husband, Earl Carter, 75, both had full careers in the dairy industry when they retired and took their pensions in 2013.

But in the back of Beth’s mind was a dream to start a bridal wear shop. “Who doesn’t love fashion and a good wedding?” she laughs.

The two did their homework, traveling widely to different bridal stores and talking to shop owners. They went to biannual wedding industry markets and took short courses in the bridal and formal wear business.

Earl created a business plan and contacted Kenneth Schnaus, a commercial lender with $400 million-asset Springs Valley Bank & Trust in Jasper, Ind. Even though neither Earl nor Beth had retail experience, their equity and business experience were strong positives. “They knew how to run a business and knew how to manage employees,” Schnaus explains.

With a conventional loan from Springs Valley Bank & Trust, Beth and Earl opened up a 6,000-square-foot shop. It carries bridal gowns, bridesmaids’ dresses and other special-occasion attire, and features a “man cave” for men’s tuxedos.

Springs Valley has provided additional funding, such as loans for fashion purchases at the biannual markets. Earl regularly consults with Schnaus, particularly on inventory and cash control in the shop’s early days. “Springs Valley has been very gracious to us,” Earl says. “Ken’s worked with us very well.”

Five years later, the business has grown every year. Beth is thrilled that they followed through on her dream.

“Our area needed a nice bridal store, and now it has one.”
—Beth Carter, entrepreneur

“Even though there are many of these stores, we felt we could do better,” she says. “Our area needed a nice bridal store, and now it has one.”

Brewing a post-career cure

Mark Mitchell

After spending more than 20 years at the U.S. Post Office, Mark Mitchell decided in 2015 that it was now or never. “It was time to make a decision whether I wanted to carry mail for the rest of my career or try something different,” he recalls.

The “something different” was brewing beer, a hobby he’d only done in his basement before. At 52, Mitchell decided to take an entrepreneurial leap. Using a home equity line of credit (HELOC) from CBI Bank & Trust in Muscatine, Iowa, he opened Contrary Brewing Co., a microbrewery.

He started modestly with two small barrels and a taproom. As it happened, one of his regular customers was CBI CEO Bob Howard. Howard steered Mitchell to Rick Gosney, a commercial lender with the community bank, who provided him with crucial financial guidance. “I was in the business of making beer,” Mitchell says. “But I was not well acquainted with the financial part of it and the different data you need to be concerned about.”

Gosney walked Mitchell through the financials and helped him come up with sales projections for his business. After a couple of promising years, Gosney advised Mitchell on ways to expand, ultimately funding the expansion through a combination of a conventional loan and an SBA 7(a) loan.

The funding allowed Contrary Brewing to add equipment and expand to a 15-barrel brewhouse with large fermenters that will allow it to sell wholesale. Mitchell also hired taproom servers and four staff members to help with brewing and distribution.

The town of Muscatine has embraced the microbrewery, and Mitchell is living the life of a brew master. “We have 18 brews on tap,” he says proudly. “We bring in a new brew every week or two.”

Contrary’s flagship brew? The Cure for Pessimism IPA. Cheers!

Judith Sears is a writer in Colorado.