Special Tips for 40-Something Entrepreneurs

3 min read ·


I often hear small business gurus say that all entrepreneurs are the same. I don't agree. There is no one-size-fits-all advice that works for all startup businesses or their founders.

Certainly, the advice I give to 20-something entrepreneurs can be quite different than the advice I give to 40+ entrepreneurs. Older entrepreneurs have more family responsibilities, healthcare surprises, and a lower tolerance for lifestyle inconvenience. Sure older entrepreneurs can easily draw on family savings to help fund their business, but they also have less time to build back their financial position should the startup business stumble.

Some of the toughest letters I receive are from distressed business owners who put "everything" in their businesses. And when they say this they are not just talking about their creative heart and soul. "Everything" to them can mean their house, their savings, their retirement assets, their good credit record and of course their spirit. They are heartbroken and it may take years to regain their confidence, if ever.

How can rational, life-savvy 40-something business owners put everything on the line? It's a steady process. Year after year, owners keep adding to their investment to help cover payroll, pay travel expenses or solve other emergency business needs. At first the bills seem small and manageable but over time the total investment reaches the point where the owner doesn't really want to know the overwhelming number anymore.

Despite these warnings, I'm an ardent advocate of business ownership as a source of income growth and career fulfillment. On average, business owners earn more and enjoy three times the net worth as their salaried counterparts. All of this is possible, provided entrepreneurs are highly disciplined about how they invest their time and savings.

Here are some recommendations especially for 40+ entrepreneurs.

  • Not all hobbies make great businesses. Just because you love making something or doing something, doesn't mean there will be enough paying customers to support a business. Before morphing a hobby into a business, research customer demand with care. Asking if people like your work is less meaningful than asking if they would buy your work at a profitable price. And if they say "yes" test their resolve again by asking, "How many would you like to buy today?"
  • Cap your investment. At the time of startup, determine the maximum amount of hard cash that you will invest in your company. In general, my recommendation is for 55+ entrepreneurs to invest no more than 10 percent of their non-retirement savings in a startup. 20 to 40-something entrepreneurs can have more investment flexibility — perhaps up to 30 percent of non-retirement savings. Remember that most professional investment advisors encourage investment diversification. Putting too much savings in any single investment, especially in a non-liquid, privately-held business is risky.
  • Don't do it all. Startup entrepreneurs can't do it all and shouldn't ever try. Trust me, after years of working with struggling business owners, I know that there is nothing productive about acting like an octopus and multi-tasking through an endless list of work items. Your top priority as a startup entrepreneur is to focus on cash-generating activities: selling products or services to new customers or seeking capital from investors. Until your company reaches cash flow breakeven, allocate at least three full days of every workweek to cash generating activities.
  • Money doesn't solve all problems. Throwing more money at a struggling business won't make it a successful business. This is true for large corporations as well a young startup companies. Entrepreneurs who run enduring businesses are creative and favor low-cost or no-cost ways to turn problems into profitable opportunities.
  • Accept constructive criticism. Just because you have considerable work experience doesn't mean you can't benefit from double checking your ideas with other business professionals, mentors and advisors. Successful entrepreneurs don't have to be right all the time, but they do have to be open to correcting mistakes quickly.

You can do it!

Susan Schreter is a 20-year veteran of the venture finance community, MBA-level educator and policy advocate for small business owners. Her work is dedicated to improving startup operating performance with reduced personal risk to entrepreneurs. She is the founder of www.takecommand.org, which offers the largest centralized database of regional and national small business funding sources in the U.S., including angel clubs, micro-finance lenders, venture capital funds and more. Follow Susan on Twitter @TakeCommand