When people think of entrepreneurs, many automatically picture young people. A prominent example of an entrepreneur who had just reached adulthood is Mark Zuckerberg. The Facebook CEO founded his company at age 19, and four years later he was already a self-made billionaire. So is it true that most founders got their start at a young age?
This myth persists. In fact, the current average age of founders in Germany is 38.6 years. This average age has remained unchanged since the Institute for Employment Research (IAB) began its studies. Additionally, a study by the KfW Banking Group shows that one in three founders in Germany is over 45 years old. According to the study, about 15 percent of those over 45 are involved in digital business models. The majority are active in the “old economy,” starting their own businesses such as restaurants or care services.
Average Age Is Rising
Experts are certain that the average age of entrepreneurs will rise in the coming years. The Federal Ministry of Economics points to a related study by the RKW Competence Center. The main reason for this trend is demographic change: by 2035, just under half of the population in Germany will be over 50 years old. At the same time, the birth rate is declining.
The Kreditanstalt für Wiederaufbau (KfW) points out that, due to demographic change and a shift in consumption patterns, the markets for health, care, and lifelong learning are becoming a greater focus of startup activity. Jobs in these sectors of the service economy are ideally suited for older entrepreneurs, who have an advantage thanks to their experience. At the same time, the likelihood that older entrepreneurs will succeed with their projects is increasing in the future because there are more and more so-called “opportunity-driven startups”—that is, startups that aren’t born out of unemployment or other emergencies, but rather because the founder has a business idea and wants to bring it to life.
A study by Carnegie Mellon and Duke Universities in the U.S. also shows that, of 549 founders from twelve different industries, 75 percent had at least six years of professional experience as employees, and one in ten had more than 20 years. The study’s authors conclude that a correspondingly long period of employment lays a solid foundation for a successful startup because “needs can be better understood.”
Another advantage of older founders is self-confidence. A survey by HypoVereinsbank of 249 female founders found that half of those over 40 reported being able to negotiate and persuade effectively—compared to only one in three of the younger respondents. In addition, older founders often manage to avoid misjudgments—because they have a better understanding of their own strengths and weaknesses.
What should older founders keep in mind? They should either already possess the necessary entrepreneurial knowledge or acquire it. In addition, older founders in particular should think about succession planning early on. This is especially important when applying for a loan.
It is important to the bank that the founder can name a representative who can continue running the business in an emergency. Starting a business with a team therefore offers significant advantages; it spreads the risk. Note: The higher the loan amount and the older the founder, the more important it is for the bank to clarify the facts of the matter.
There are no special financing programs specifically for older individuals. However, the subsidized loans offered by KfW—such as the ERP Start-up Loan (StartGeld)—take into account the fact that older individuals often lack equity capital.
What about retirement planning? As a self-employed person, you can remain in the statutory pension insurance system, either as a voluntary member or through mandatory coverage upon application. Anyone who does not wish to enroll in the German statutory pension insurance system should not only set up a private retirement plan but also consider private disability insurance.
Anyone over the age of 65 who has reached the so-called standard retirement age and is therefore receiving a standard old-age pension may earn additional income as an entrepreneur without restriction. Note: In the case of a pension due to full disability or an old-age pension received before reaching the standard retirement age, the self-employed person may earn only up to 450 euros gross per month.
What about unemployment insurance? Especially those who have already paid into unemployment insurance for several years should take advantage of this as entrepreneurs to continue making contributions. A corresponding application must be submitted within three months of starting self-employment. During the first calendar year, entrepreneurs pay only half the standard rate.
