Experience: An asset for older entrepreneurs
When it comes to helping entrepreneurs in the 50-plus age group start a business, Michael Troyer, Ph.D, can speak from personal experience. He was associate professor of the University of Wisconsin-Green Bay Business School when he left tenure in 2001 to run his business, Strategic Management Associates full-time.
Leaving the security of a long-term position is a risk that many are hesitant to pursue. Yet, Troyer saw the move as the realization of a passion. After years of teaching business strategy, creative process, leadership and management, he wanted to share that knowledge.
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SMA has changed in focus over the years, but one of the foundation parts is what he calls “50+ NewStart.” His goal is to assist entrepreneurs in identifying the issues and prioritizing the tasks to get a new business underway. He also addresses the major concern of taking a risk at a time when many are protecting retirement funds.
“This is a critical question,” Troyer said. “Ask yourself how much you need in the way of funds to maintain your lifestyle and how much you are prepared to lose in order to start a business. You need to be cautious about tapping into retirement funds. Have a risk attitude and assess that risk.”
One of the first things he asks clients to do is write down the amount of money they think they can afford to lose. That number should be the absolute ceiling.
“If you’re about to reach this number, you need to walk away," Troyer said. "Emotionally, it’s like being at a slot machine and continuing to put in coins. It will always take more time and dollars than you anticipate, and you either leave now or lose more.”
But, with proper planning and research, he wants his clients to avoid this. Instead of recommending that entrepreneurs start on a business plan, he says the development of a business model should be the first step.
“My approach is to build a business model together. I have a format that really scores how the concept will work in a real way. Are the estimates of cash flow going to sustain the business? Will it grow and build?” he asked.
Once the model is in place, the next step is a feasibility study to test the concept. This will require an evaluation of the market and demand, a customer survey where you watch and study potential buyers, a competitive analysis, and an objective review of where your product or service will fill a void.
Troyer says that a good predictor of success is something called the “abundance theory.” This requires a model that serves a specific sector of the market and shows a solid understanding of the target customers. Risk increases if you go into a general market and try to serve everyone.
Beyond this, success often depends on the type of business selected. Should a new business be based on previous experience, a hobby, or a longtime passion?
“Possibly, all three,” Troyer said. “As to experience, the more you know, the better off you are in terms of success. Longtime passion means that you’ve really studied that topic or area and have acquired some of the knowledge that will be required for growth. Hobbies add the fun factor, but you need to be careful that it will make a good business.”
An advantage for the older entrepreneur is the skill being brought to the business; especially if it included a variety of managerial and human resources tasks. There is every reason to put this to good use.
“Given our culture, we expect people to retire at age 65 or 70, but a study showed that 80 percent of people in that age group want to stay active mentally and physically,” Troyer said. “There is often a fire in the belly to go and create something, and that passion might include running your own business.”
Tina Dettman-Bielefeldt is co-owner of DB Commercial Real Estate in Green Bay and past district director for SCORE, Wisconsin.