There has been a lot of talk of the entrepreneurial accomplishments by millenials, starting a company before thirty and becoming a millionaire before 35. I wanted to take a different approach and look at senior entrepreneurship. Before you start yawning, read on and you might be amazed at what you can accomplish however young or old you start. The trick it seems is how you use the time you are given. Time to look closer at the silver fox.
The topic took me on the road to speak with individuals who decided to start companies post forties, fifties and even sixties. Mainly driven by passion, they sought to deliver the idea that they had. Most didn’t really want to be rich. Others wanted to leave a legacy for themselves. Self actualization was the common trait. With that, I wanted to highlight one of the interesting start ups that I came across.
Long before Ofobike and the rash of other start ups hit our shores, a company in the states Pedego tweaked their particular model to target seniors. The key part of this the founders are in their fifities. The other interesting part is that it is an electric bike company. Co-founded in 2008 by Don DiCostanzo and Terry Sherry, the company marries the experience of serial entrepreneurs in their 50s–whose companies have the highest survival rate of any age group, according to Carmen Cotei and Joseph Farhat, finance professors at the University of Hartford and Central Connecticut State University respectively–with the enthusiasm of neophytes. The majority of those driving Pedego’s three-year 154 percent growth are retired or semiretired people starting businesses for the first time. They encountered the bikes as consumers and came to corporate Pedego’s rescue in the early days, when it was struggling for lack of distribution.
Now, the $15 million company, is the nation’s leading brand of electric bike, according to Navigant Research. (Electric bicycles, which can be powered by a motor or pedaled, are a $15.7 billion global market, which is growing fast.) Primarily a designer and manufacturer, the company, profitable since 2012, relies on independently owned branded stores for 85 percent of its distribution. Currently, it has close to 60 branded stores in the United States. All but a handful were launched by people in their 50s and older, a demographic that–not coincidentally–also makes up Pedego’s primary market.
When the company started, the then-existing electric bikes didn’t cater to that audience. Most came in black and positioned riders to lean forward. Older customers wanted colors and to sit upright. They also wanted models they could mount easily. DiCostanzo and Sherry believed they could design a bike that met those criteria and–by emulating a Schwinn beach cruiser–stoke nostalgia for simpler times and comfort. They sketched their first model on a cocktail napkin and hired a computer-aided-design professional to produce it. DiCostanzo loaned the startup $300,000 in personal (not retirement) funds.
Finding a Chinese factory and training its workers was a predictable struggle. But the greater roadblock was distribution. Bike stores shunned the product. “It was a narrow funnel to start with and they just would not let us in,” says DiCostanzo. “They think electric bikes are cheating.” Online prospects were just as poor: People buy the bikes only after they try them.
For a while, DiCostanzo and Sherry sold bikes to their friends, who in turn sold them to their friends through parties–hardly a sustainable business model. Unwilling to try retail themselves, the pair were largely out of ideas. Then, one day in 2011, a customer asked if he could open his own branded Pedego store. A business model was born.
Virtually everyone who asks about opening a store (Pedego says it receives roughly 400 inquiries a year) discovered the bikes by riding them–typically as rentals while on vacation. Many went on to buy one, paying $2,300 and up retail. Pedego’s average customers are a 58-year-old man and 57-year-old woman; some customers are as old as 95. As the dealer ranks swelled, the Boomer business model developed organically.
Among entrepreneurs who start businesses between the ages of 20 and 64, almost a quarter are 55 or older, compared with 15 percent in 1996, according to the Kauffman Foundation. The rate of entrepreneurship has grown faster in this demographic over the past 20 years than in any other. Boomers are living longer, staying healthier, and gaining more experience and education than any previous generation. A study by Merrill Lynch found that more than seven of 10 pre-retirees want to keep working.
Gallup reports that 80 percent of Boomer startups are built as lifestyle choices meant to supplement retirement income and keep the mind engaged. But some are far more ambitious. Of course, later-in-life entrepreneurship has its drawbacks. Just as DiCostanzo and Sherry have built their bikes to accommodate older bodies, they have also built Pedego to accommodate skill deficits–chiefly in technology and social media–among some of their dealers. And the business model intentionally minimizes risk for a demographic that has more money but also less time to make up losses.
For entrepreneurs, Boomers are a tempting market: a rich, juicy elephant passing through the demographic python. There will be 119 million Americans over 50 by 2020, according to AARP, one-third of the total population of the States. As for Asia, there will be 425 million seniors above 65 years old by 2025 according to the UN. Spending by that age group will increase 58 percent over the next 20 years, compared with a 24 percent hike among those aged 25 to 50, says data from Morgan Stanley.
And who is best positioned to serve that market? It takes gray to know gray. The recipe for Pedego’s model is dependent on signing up seniors who will sell their story” and adequately target the correct group of seniors through their networks.
By entrusting the Pedego brand to its Boomer dealers, the founders are drawing on a demographic with proven success in entrepreneurship. Companies launched by people in their 50s have a 50.3 percent survival rate over eight years, higher than those founded by any other age group, according to Cotei and Farhat. Much of that success derives from experience and networks developed in earlier careers.
Money is another concern. Entrepreneurs in their 50s have substantially more startup capital than any other age group–more than four times as much as the 20-somethings, according to Cotei and Farhat. Business owners over age 51 are 19 percent more likely to be approved for credit than their younger counterparts, according to Biz2Credit.
Yet if Boomer businesses do fail, their founders have less time to make up the loss. “When they are thinking about their finances, they don’t have time for a big mistake,” says Michele Markey, vice president of Kauffman FastTrac, an entrepreneurship education program that has developed courses for founders 50 and older. Yet, the Pedego folks took the plunge. In addition, DiCostanzo and Sherry don’t discuss exit strategies with Pedego store owners. (A couple of them have turned down attractive offers to sell.) But they say the business is set up to mitigate risk as much as possible. “We make sure their financial resources are in order so we are not putting them in harm’s way,” says DiCostanzo. The company, which is not a franchiser, offers all its support and services to dealers for free and charges no licensing fee. The only charge for a startup dealer for Pedego is roughly $50,000 for inventory that, DiCostanzo says, can typically be liquidated with an ad on Craigslist. Beyond that, Pedego advises dealers to get a three-year lease with a one-year opt-out. “That way, if everything goes to hell in a handbasket or you don’t like it, then your risk is one year’s rent,” says DiCostanzo. To date, only one of the nearly 60 Pedego stores has failed.
So you can do it whether you are old or young. Age brings with it benefits of experience, capital, networks and more. However, the safety net is a little smaller should you miss the leap. That didn’t stop the Pedego folks and it shouldn’t deter you. If (and that is an important if) you believe in the idea and are confident that you can execute it. Life is short, so do you want to live or leave a legacy?
If you are above fifites and an entrepreneur, please get in touch. Love to hear your story.
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