We all know that running a small business can be a frustrating, thankless, hopeless, pour-me-another-scotch type of affair.
But there’s some good news that might keep you going: being an entrepreneur and running your own business might make you happier in the long run. The bad news: it might not necessarily make you financially better off.
“We found that, despite making less money on average, becoming entrepreneurs triggered a significant increase in their quality of life,” the authors of the Late-career entrepreneurship, income and quality of life study said in an article for the Harvard Business Review.
The study looked at an interesting phenomenon that has gathered pace over the past decade that some have referred to as “encore” entrepreneurship. This is basically when people decide to throw in their long-time corporate careers and start a business of their own. The rise in older workers shifting into entrepreneurial endeavours has been noted across the US, UK and Australia, especially in the wake of the global financial crisis.
In 2013, the Roy Morgan State of the Nation report noted the demographic shift in business ownership, with over 50s becoming the fastest growing age group of business owners. Entrepreneurs over 50 accounted for 45.7% of business owners compared to 38.8% in 2002.
The Kauffman Foundation, a US small business think tank, found people aged 55-64 started 23.4% of all new businesses in the US in 2012, up from 14.3% in 1996.
As well as the global financial crisis, which left many employees feeling disillusioned with corporate life, the sheer bulk of Baby Boomers moving into their 50s and 60s has also buoyed this trend. Additionally, people now have access to so many cheap and easy-to-use online resources for starting a business.
It doesn’t take a lot of initial capital for someone to start up a relatively straight-forward e-commerce drop shipping business. People over 50s can often access those funds by borrowing against a mortgage or dipping into savings. There is also an abundance of information and advice out there to get most reasonably business-savvy people started. This has all made the entrepreneurial path more inviting for those over 50.
The study compared outcomes for workers in the 50-67 age bracket who switched from their original employment to entrepreneurship, another job or stayed in the same job.
“We found that switching to a new job increases the quality of life index compared with staying in the same job. However, the increase experienced by late-career workers switching to entrepreneurship is significantly larger, on average, than those experienced by all others. That is, transitioning to entrepreneurship increases quality of life significantly more compared with staying in the same job or switching to another paid job. Yet switching to entrepreneurship meant, on average, a significant reduction in income not observed in the other groups.”
We hear so much from our governments about the burdens of an ageing population and the need to cut pensions and consequently raise taxes. Maybe part of the answer lies in encouraging more older people to pursue their dreams of owning their own business.
People are living longer and many feel that they’re not ready to pack it all in at the age of 67 and still have plenty to offer. More should be done to encourage older people to start businesses, not only for the economic benefits, but also because it could make them happier.
You can read the executive summary and highlights of the full report here.