I know a woman (let’s call her Sarah) who was a vice president at a major Fortune 500 company. She was a sassy 48-year-old single MBA who was very successful climbing the corporate ladder. She worked in marketing, managing a brand at her company and making a handsome six-figure income. Then one day she decided that she wanted to start a business.
She did her research and decided to invest in a food franchise. She learned that franchises are 10 percent more likely to be successful than startups, so she decided to go for it. She hired an attorney to look over her franchise agreement. She spent weeks finding the perfect location and then hired an architect and contractor to develop her space. She gave notice at her job and invited everyone to her grand opening. She was so excited. She had prepared a thorough marketing plan and invested in local advertising through a coupon mailer.
Within two years, Sarah was back working in corporate America, grateful to have a job. I bumped into her and asked her what happened. She said, “I cannot be a slave to anything — especially something that does not fulfill me, and on top of that I hate teenagers and that’s who my employees were. I am grateful to be back at work with a regular paycheck.”
For baby boomers, making the transition from having a job to starting a business can be a tough road, no matter how successful you were in your previous life. Some of the issues that come up may have little to do with how well the business is doing financially.
Here are nine common trouble spots that cause baby boomer businesses to fail. These are the things that can destroy your entrepreneurial dream if they go unaddressed.
1. Not being coachable
To be successful in business, you must be a life-long learner and understand that you can learn something from anyone, even your interns and teenage employees. You also must be able to seek out– and take — advice from mentors and other entrepreneurs. Sometimes when you’ve been successful in the corporate world you might ask yourself “How hard could it be to run a small business?” Don’t be fooled; the hard work is endless!
2. Not developing a life plan
You need a life plan before you ever write a business plan. Take the time to think about what you want out of life, and then build a business around that. You need to know things like “How much money do I need to earn to be happy?” and “Is day-to-day variety important to me?” You do not want to start a business that is NOT a good business for you and your family.
3. Not having the energy
You must be honest about what you are willing to do to make your business a success. One of Sarah’s complaints was that she could not be a slave to anything. But that’s what it takes. In the first few years of running a business, your business owns you: 14- to 16-hour days are common, especially if you open a retail business that has long store hours. Can you physically sustain working seven days a week?
4. Not having a network
As a startup business, your network is your net worth. People do business with people they like, know and trust. You had no problem getting calls returned when you had a big corporate job, but once you are on the outside pounding the payment, it might be another story. Before starting a business, spend at least a year cultivating the market. If you are not good at making friends or are one of those people who never keeps in touch, entrepreneurship might not be for you.
5. Not willing to scale back your lifestyle
When you’ve been working a long time, and making good money, chances are you spend what you make. When you decide to become an entrepreneur, the first thing you should do is end your addiction to your paycheck. You must scale back your lifestyle to the essentials — and you need to cut back at least 12 months before you start your business. If you are someone who regularly enjoys retail therapy, eating out, extensive travel or indulging in the latest electronic gadgets, you might not adjust well to the entrepreneurial lifestyle.
6. Not saving enough money
In my book, Become Your Own Boss in 12 Months, I outline three pools of money that you should ideally have before starting a business. First, make sure you have the money to start your business. Then set aside enough resources so that you can survive for up to two years without a salary. On average it takes 18 to 36 months for a small business to break even, let alone replace your corporate salary. The third pot of money is your emergency savings. Your car may need to be replaced, your air conditioner may die, and your children may need college tuition. Your ability to start a business has everything to do with your ability to save money.
7. Having competing priorities
After age 40, you may have aging parents and perhaps a first grandchild that you’ve welcomed into the family. If you need to stay on top of your mother’s doctors’ visits or help out your daughter and son-in-law with the new baby, it may be really tough to get a new business off the ground because you will not have any spare time.
8. Lack of a niche target market
Too many small-business owners sell to anyone they think has money. Define your niche customer and make sure you know why your customer will buy from you. It is so much easier to develop a marketing strategy when you know who you are trying to reach. You have limited time and limited resources. Customers want to hire businesses that specialize in solving their problem.
9. Lack of personal and fiscal discipline
If you do not run your household on a budget, you likely will struggle to run your business on one. You must make business decisions based on up-to-date financial information. Will you make money decisions without consulting your budget? How will you focus on tasks that generate money? Will you raid the cash register whenever you need money? You should know in advance how much money you are making on each sale; otherwise, you might have an expensive hobby.
If you focus on these nine areas as you are planning your midlife transition, you are far more likely to start a sustainable and profitable small business.