For many people, the prospect of leaving their job and spending their golden years on the golf course or playing bingo at the senior center simply doesn’t hold much attraction. Instead, they decide that they want to fill their retirement with other activities, from volunteering to working part-time to starting their own business. If you or an elderly loved one of yours sees the elder years as time to start a business doing something you have always wanted to do, here are a few things to keep in mind.
Do your passions match the market opportunities?
If you’re in retirement, hopefully you have adequate savings and/or retirement benefits coming in to be able to work for pleasure and not out of necessity. If this is you, then the first thing you want to consider is what you enjoy doing. If, like many retirees, you would like or need extra income, it is important not only to follow your heart but the markets. Is there a market for what you want to offer? Knitting scarves in Hawaii may not be that lucrative–although an Internet-based business can, of course, be situated anywhere.
Do you wish to invest the necessary time?
They say that when you are self-employed you have the world’s worst boss. In many ways this is true. Many small business owners end up working 60 or even 80 hours a week; this often happens without them even planning on putting in those kinds of long hours. Starting a new business and doing all the attendant tasks yourself can eat up time.
As a retiree, you surely have the time to invest, but do you really want to spend that type of time on your business? If you do, there’s nothing wrong with jumping in and going for it. Yet if you know that you only want to work 10 or 20 hours a week, you should at the very least have a plan in place to limit your involvement to that amount of time.
Where will the startup money come from?
Some businesses can be started out of your spare bedroom and require very little capital to get going. Other businesses can require hundreds of thousands of dollars of investment before they are ever ready to generate a dime. You need to be aware of your potential costs before you get started, and you should be absolutely certain that you do not tap your retirement savings or investments to spend on the business. You don’t want to be in the position of needing the business to succeed in order to get by financially. That is simply too risky.
How will you wind the business down or pass it on?
Some people start a business without ever giving a thought to what they will do when it’s time to lock the doors and move on to something new. Nor do they consider what might happen if they passed away and the business still had substantial obligations to fulfill.
If your business is going to involve a significant amount of capital being tied up in inventory, equipment, or other assets, or if it is going to potentially leave your heirs with a burdensome task when it comes time to wind it down, it is better to have a written exit plan in place now.
Perhaps you could come up with a plan for how it should be passed along in the event of your death or incapacity. Or perhaps you should just set an age—say, when you turn 75—and plan on winding things up then so your heirs don’t have to.
Starting a business in retirement is a great way to do something you like and make a little cash on the side. However, you need to be aware of a few key factors, and plan accordingly.
Mears, Teresa. 11 Tips for Starting a Business in Retirement. Available at http://money.usnews.com/money/retirement/articles/2015/06/11/11-tips-for-starting-a-business-in-retirement?int=9d3608&int=9cf908&int=9d3608&int=9cf908. Last visited November 12, 2015.