Lure of Entrepreneurship Beckons Boomers

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Diane Smith, co-founder and chief executive officer of Aurorus Entertainment, an Internet Protocol TV (IPTV) services company based in Kalispell, Mont., says having a corporate background—she had been at Alltel Wireless for 15 years, most recently as senior vice-president of government affairs—helped her find funding for her business. "I wouldn't say [securing angel investment] was easy because I had deep experience, but it certainly helped us gain an audience more easily," says Smith. "You've still got to have a great business plan, and you have to show that you know how to execute."

Despite female-boomer success stories like Smith's and the fact that Census Bureau numbers depict a rapid increase in the number of women starting businesses—between 1997 and 2006, the number of women-owned firms grew by 42.3%—their combined annual sales grew only 4.4%. That's largely due to the inability of many women-owned firms to get the kind of funding they seek, at least partially due to cuts to the SBA loan program, says Margot Dorfman, executive director of the U.S. Women's Chamber of Commerce (see BusinessWeek.com, Winter, 2006, "Paying the Piper"). "The broadest trend that I see is that the majority of women-owned firms are in the service sector, because of the smaller financial investment to start up service companies," she says.

Other Self-Employment Ingredients

Pension cuts are another huge element in the number of boomers going out on their own. Controlling for wealth, having pension coverage in current wage and salary employment reduces the likelihood of becoming self-employed by a factor of three or more for both men and women, according to "Self-Employment and the 50+ Population," a March, 2004, study conducted by the Santa Monica (Calif.)-based research group RAND Corp. for AARP. Since 2004, many companies have cut pension or eliminated it altogether, so many older folks are seeing self-employment as the key to financial security in their older age.

Household wealth is also a predictor of who transitions into entrepreneurship. Men and women in the highest wealth quartile are more than twice as likely to pursue self-employment than their counterparts in the lower wealth quartiles, according to the RAND study. And overall, the number of wealthy people in the baby-boomer generation is high. According to the Government Accountability Office analysis of the 2004 Survey of Consumer Finances, 97% of baby boomers are in the top 50% of population by net wealth.

For Smith, starting her own business was something she could afford to do monetarily. "We had the resources to be able to take some time off and entertain new ideas. It is a second act and feels like a second act. It's invigorating and energizing, and it just feels right in a lot of respects," she says.

For Axisa, it was out of necessity.

Jeffrey Gangemi is a freelance writer based in Mendoza, Argentina.