Despite what The Apprentice and Dragons Den may suggest, entrepreneurs are not all young tech gurus looking to launch the latest app that will revolutionise an everyday task or industry sector. In fact, rising numbers of “Olderpreneurs” are giving the younger generation a run for their money by setting up innovative new businesses, with the latest ONS figures showing the amount of self-employed over 50s is close to breaking the two million mark for the first time.
Research has shown that these businesses set up by more experienced entrepreneurs are also more likely to succeed. According to a survey by Age UK, the charity for older people, more than 70 per cent of businesses started by people in their 50s survive for at least five years compared to only 28 per cent of those started by younger people.
What’s driving the rise in Olderpreneurs?
The 2014 ONS Labour Force Survey showed that the number of self-employed people over the age of 50 had increased by over a fifth (21 per cent) in just six years. And with the Labour Party Report, Work Till You Drop, published earlier this month finding that many people are saving too little for their retirement, it is very likely that the number of olderpreneurs will continue to increase.
A factor in the rise of the over 50s start-ups is life expectancy. The number of people aged 60 or over is expected to pass the 20 million mark by 2030. And as we are all living longer, we’re all having to work longer. And, when you have gained years of experience in a particularly industry or profession, what better way to continue work (and benefit directly from the financial rewards!) than to work for yourself. Technology is also playing a part, and over the last decade it has become easier to run a business from home, with just a laptop and an internet connection.
Despite technology enabling olderpreneurs to kick-start their businesses from a spare bedroom, many still speak about ageism when you ask them about the challenges of setting up a business later on in life. Although they have a lot of experience (both in life and professionally), there is still a prejudice that setting up a business is a young person’s arena.
Funding is also an issue. The Chairman of the Federation of Small Businesses (FSB) recently said: “Unfortunately, older business owners can experience particular challenges, such as securing adequate finance to grow their business.”
So, what different types of funding are available to olderpreneurs?
There are many types of business funding available, but Nesta found that awareness of some of these is still low. Aside from the more traditional bank loans and overdrafts there are many alternative forms of funding. Perhaps the best way to determine the most suitable type of funding is to visit a portal such as alternativebusinessfunding.co.uk, which matches business owners with a form of funding and lender after filling out a few details.
Another advantage of setting up a business later in life is the potential to use personal pensions to fund a business. When the UK government introduced ‘pension freedom’ legislation in April 2015, this allowed anyone over the age of 55 to use their accumulated pension funds in any way they wish, including taking the entire pension pot as cash, subject to tax. As a result, the natural reaction from some olderpreneurs was to simply withdraw part of their accumulated pension pot and put it directly into their company. For some this has resulted in a large tax bill.
This is because under existing pension regulation, only 25 per cent of the accumulated, untouched, pension fund is available tax-free. Therefore, it is crucial to assess all of the options available, including Pension-led funding. This form of finance is aimed specifically at business owners and directors who, in order to make it commercially viable, have accumulated pension funds greater than £50,000 to enable them to back their own business. They don’t need to be 55 or over, and should there be more than one owner director in the same firm, the pension funds can be amalgamated to invest in the business.
What government help is out there?
There is some support for over 50s entrepreneurs, for instance PRIME (Prince’s Initiative for Mature Enterprise) recently became part of the Business in the Community (BIC) and still offers advice and support for anyone over 50 looking to start a business. There is also the more general, Business is Great website, which is run by the government and offers advice on what loans and finance is available for entrepreneurs of any age.
In summary, the UK is faced with an ageing population, but instead of viewing this as a potential issue, this could be a chance to see a wave of experienced entrepreneurs setting up businesses and contributing to the economy. Two years ago a report from BIC found helping older people back into the labour market could lead to a potential £88billion boost to the UK’s GDP. Not all of those will want to set up their own business, but with the right support, advice and funding we could see the number of olderpreneurs not only break the two million mark, but swiftly head towards three million.