Encore Entrepreneurs

For more than 20 years, Tom Smith has developed pricing and proposals for automotive and light truck manufacturing equipment.

For the last seven months, he’s also sold doughnuts.

The 63-year-old Smith is director and owner of Serious Donut Co., a shop on South Garfield Avenue in Traverse City offering specialty and traditional doughnuts. It’s a business that’s part an eye to Smith retiring in a couple of years from his Traverse City-housed work for ATW Automation Inc. in Livonia, and part his desire to create and belong to a local venture that fits with the Traverse community and its foodie DNA.

Plus, he loves doughnuts.

“When we first opened up, we were making all the doughnuts I love,” Smith said. “And I quickly discovered that’s not a way to run a business. You have to make doughnuts the customer loves.”

Like many locally and throughout Michigan and the country, Smith is an “encore entrepreneur” – an individual over the age of 50 who starts a business, for any number of reasons. They’re significant drivers of new business growth: According to AARP, 63 percent of Americans plan to work during retirement, and in 2013, businesses started by individuals ages 55-64 accounted for 25 percent of all new start-ups nationally.

Challenges include financing and time commitments that often exceed expectations. On any given day, for example, Smith is recording daily transactions, paying bills, helping assemble an inventory order, addressing maintenance and equipment issues, monitoring regulatory adherence, overseeing six employees who make doughnuts in the evening and sell them during the day, and serving as an occasional delivery resource who keeps crates in his car to pick up milk.

Through the Traverse City Area Chamber of Commerce, he connected with the Michigan Small Business Development Center, which provided consulting, and Northern Initiatives, a nonprofit community development financial institution. Smith said Northern Initiatives helped him obtain a U.S. Small Business Administration loan to start his business and has assisted in other areas including social media and a website. Technical doughnut-making skills and training came from bakery ingredient suppliers.

Smith said people looking at starting a business later in life need to consider their age and their health and whether they can sustain the demands of a business for a number of years. And, they need to think about risk and the fact that they do not have as much time or flexibility to recover financially from any losses, as a younger entrepreneur would.

Marshall Persky, Traverse City SCORE chapter board member and mentor, said that many times people have an idea that relates to “what they enjoy doing and the talents that they have,” but have no business background. Drive is essential, he said.

“First of all, the person that I know is going to kind of make it has an incredible passion to do this … going to make it work, going to work 24/7 … has a great product that’s going to work,” he said.

Just ask Lynda Herkner, one of three sisters who are co-owners of Herkner Foods LLC, a venture born out of financial necessity that’s parlayed their parents’ recipe for cherry topping into products sold in Michigan, Illinois and Wisconsin and spreading to retail and restaurant accounts in additional states.

“It takes a lot of hours and a lot of dedication,” said Herkner, 76. “You really need to want to do this, because it is a lot of work. And it takes full time. It’s not anything you’re ever going to make something of, if you look at it part time.”

The business began five years ago to assist Lynda, who was ready to retire from a real estate career but lost her partner, forcing her to remain in real estate during a down economy and seek supplemental income.

One sister suggested selling their parents’ cherry topping to help Lynda. They connected with the Michigan State University Product Center and there received coaching and other assistance that’s included market research, legal contractual help, connections with chemists who determined how to multiply the family recipe, and entry into retailers such as Meijer.

“And it’s been a ride ever since. Just unreal,” said Herkner, an agent at Century21 Northland. “Three grandmas out there, talking their product like crazy.”

Individual funds and a $7,500 loan through a Traverse City Chamber loan program have helped finance the venture and orders have grown exponentially, with the business outgrowing companies it retained to process and pack Herkner’s Original Fruit Toppings. The business is now working with SCORE on a business plan to help it obtain a bank line of credit that Herkner said will make it easier to keep up with growing orders and customer base.

“Right now our challenge is to get with a co-packer big enough so that we can get our price down, and get a line of credit with the banks,” Herkner said. “Money has always been a struggle … we just never get caught up, each order is a bigger order.”

The Chamber loan enabled the business to have enough product to be in the 2013 National Cherry Festival while continuing to fill existing orders, and it came together in a matter of weeks.

“We’ve got great partners at the table, we’re able to act pretty quickly,” said Laura Galbraith, the Chamber’s vice president of business and finance. The organization works with counselors at SCORE and the Michigan SBDC – which provides counseling, business education, information-based planning and technology commercialization services – to assist clients interested in its loan programs and determine if a business is viable and “and how can we help them grow and succeed.”

Galbraith said encore entrepreneurs bring to the table experience and maturity and often physical assets, which can be benefits in considering funding requests.

Jennifer Feuerstein, associate state director for outreach at AARP Michigan, said entering into a new venture later in life can be full of unknowns – how to start, where to turn for assistance – but resources available through organizations like AARP, the SBA and SCORE can make a difference. For example, AARP’s website has webinars and a number of online resources to help 50-plus entrepreneurs launch or grow a business.

Helping encore entrepreneurs has been a focus of AARP in Michigan and nationally, in partnership with the SBA. In April, AARP Michigan and the SBA held a workshop in Traverse City, as part of their annual encore entrepreneur mentor month of events matching entrepreneurs with successful business owners, community leaders and resources for advice and assistance.

Feuerstein said enterpreneurs need to ask questions, network, be patient and accept mistakes.

“It really is a journey, it’s a process. People need to be patient with it, but it’s absolutely attainable,” she said. “Most encore entrepreneurs will tell you that they’ve made mistakes along the way, but it helps them to do it better, so that they can move in a different direction.”

A common pitfall, she and others said, is not having a solid business plan.

It’s an essential exercise even if an individual isn’t seeking a loan, said SCORE’s Persky, because it requires individuals to write out their mission, determine how they are going to run the company, how the venture will work, cash flow and other details, said SCORE’s Persky.

“We think when you don’t do one, it’s setting yourself up for not doing well. It’s how business is done,” he said.

But it’s also a task people dread. “You can see the eyes go behind their head,” Persky said. “No one wants to do it.”

SCORE mentors help with business plans and numerous areas of business operation. They can also be objective guides and fill other roles: For example, an advisory board formed by Herkner Foods includes a SCORE member and other retired business executives.

Herkner said that board has been “just a wealth of help to us. When we go to make a big decision on anything we go to them, and they help guide us on this process.”

Businesses aren’t the only entities SCORE helps. Linda Fletcher, 66, who started a nonprofit called A Matter of Honor to build knowledge and understanding of Post-traumatic Stress Disorder, said Persky and a team of other SCORE mentors have provided encouragement, support and guidance in areas like organizational structure and her role as a CEO. “I could go in … and discuss whatever was the roadblock d’jour,” she said.

Fletcher, a retired Lt. Col. U.S. Army nurse, organized the nonprofit after teaching a PTSD extension class at Northwestern Michigan College in April 2013 – a session that left attendees wanting to continue to meet, learn more and act, she said.

In its first year, the nonprofit’s activities have grown to include quarterly town hall meetings, a conference in April and another planned in November, and numerous speaking engagements for Fletcher. She said the organization has made a lot of progress in a year, a reflection of “such tremendous need.”

A $10,000 contribution from Fletcher supported the first year and she said the nonprofit is at a point where it needs raise funds and is evaluating whether it might eventually might hire an events coordinator or a full-time fundraiser.

She said she never intended it to become a full-time venture, “but it’s certainly what I do 24/7,” including work specific to running the organization as well as staying abreast of literature. “It takes up every minute of my day, and many of my nights,” she said. “Retirement is not on the horizon, I’m fully employed, let there be no doubt. Without pay.”

Amy Lane is a former reporter for Crain’s Detroit Business, where she covered energy and utilities, state government and business for nearly 25 years.