September 1, 2015 — Note: This is continuing series. See the latest installment: “The Sharing Economy Could Be Your Ticket to a Comfortable Retirement“.
Elaine (Brickhorse), a longstanding member at Topretirements, recently asked if we could write an article about working and/or starting your own business in retirement. We think it is a great topic so we have shared some thoughts about it here. Best of all, we look forward to reading the experiences, hopes, and dreams of all the great people who contribute to this website in the Comments section below.
Sure, lots of people dream about starting their own business. It sounds great: be your own boss, make lots of money, work when you want to, do something you love – there are many good reasons (or fantasies!) to be an entrepreneur. On the other hand there are plenty of negative realities to think about. This article will explore the pros and cons, as well as summarize some of the current best practices for how to go about starting your own business, large or small.
We think there are at least 4 great reasons to start a business in retirement:
– Do what you like to do. We read a survey this week that claimed that 9 out of 10 people don’t like their jobs. While we find it a little hard to believe, even if it is half that figure it is depressing. So if you are looking for a post-retirement job or to start your own business, for heavens sake pick something you like!
– Make lots of money. Well, maybe. Some people have succeeded in producing good income, but they are undoubtedly in the minority. Rather a better goal might be to make enough to help maintain your pre-retirement standard of living. Or enough to justify the time and effort you put into it. Since you are in charge, you can decide whether you want to go all out, or just have fun with it.
– Be your own boss. One of the main reasons why people don’t like traditional jobs is that they don’t like their boss or co-workers. So a great reason to work for yourself is you only have yourself to hate. Another plus is that you generally get to set your own hours, and how you do your work. But there are plenty of downsides too, as you can see in the Cons section.
– Exciting new experiences. In your editor’s and his wife’s experience, starting a new career/business in retirement has been so enriching. We’ve met hundreds of new people, learned great skills, and had a sense of purpose. You might have the same experience, we hope!
Do not think for one moment that creating a new business is all fun, and a sure thing – it’s not! Here are some of the drawbacks:
– No backup. Depending on what you decide to do, you might find yourself wishing you had someone to help out. As an entrepreneur you will find yourself as head of all of these departments: Marketing, Sales, Accounting, Bookeeping, Tax Reporting, Collections, Purchasing, and IT. When the Internet goes down, the state sends you a tax inquiry, the toilet stops working, or a customer has a problem – you are the person who is going to have to drop everything and solve the problem. Likewise if you are in a retail situation, you are the on-call backup staff for every hour you are open.
– It’s lonely at the top. Are you the kind of person who thrives on human interaction? Unless you get big enough to hire employees there won’t be anyone at the water cooler (except maybe the cat) to share and work out problems. You are the boss – all by your lonesome.
– Working from home can get old. Yes, it is nice to be in your PJs at 10 in the morning. But your significant other might have other ideas about you taking over the common space, telling him you are too busy to take the dog out for a walk, or to do the grocery shopping. Some people miss the ability to separate work from their play spaces.
– Succeeding and making a profit. Most new businesses fail. Bloomberg says 80% fail within 18 months (see article in Further Reading below), the Census Bureau says only around 45% are around after 5 years. Businesses fail because of bad planning, inadequate finances, poor marketing and sales, inadequate contact with customers, or lack of effort. There are no guarantees that you will succeed, or that you will make anywhere near the money you expected.
5 Steps to Take Before You Start a New Business in Retirement
It is the rare person who stumbles into a successful new business in their retirement. The ones who do make it have planned carefully and followed most of the steps outlined below.
1. Brainstorm ideas
You need to take some uninterrupted time to consider all the possibilities for your new business. You might want to do it on a long airplane flight or at a retreat. The process requires quiet thinking. Here are some of the questions you need to answer:
– What do you like to do, and what are you good at? What kind of product or service could you create in those arenas? Is there something creative you could do, like becoming a writer or artist?
– What un-served needs are there in the marketplace or your community?
– Have you seen a product or service succeed in another community that is not available in yours?
– Is there something you could do on the Internet that might turn into a business?
2. Survey the competition and talk with potential customers
You can learn so much from the competition and from your customers. How difficult is what your competitors are doing? Are their hours reasonable, are they thriving or just surviving, could you do what they are doing better? Is there room for a new competitor? You can go online and find out a lot if you search. Talk to customers and see what they are looking for. Visit stores and places of business, read comments and feedback online. If what you want to do is in the arts, how do successful writers, artists, etc. get published and sold? There is usually a lot of spade work to be done on the road to success.
3. Write out a plan
There is no substitute for creating a well-thought out business plan. You can find samples online. The objective is to have a document that clearly states what you are doing to do, how you are going to do it, and what your goals are over time. Pretend you are preparing a document for an outside investor – would you invest your money in the business you are describing? Businesses require systems and infrastructure – how are you going to provide those? It is the process of writing the plan that is important – by thinking through each step you do the hard work of examining options, discarding those that don’t make sense, and making what you think are the best decisions.
4. Set goals and measure your performance early on
Goals and measurements against them will be your reality check. If your new business isn’t working out as planned, early intervention gives you time to try something else. It can also tell you to pull the chute if nothing seems to work. Better to know this earlier than later. But one of the biggest advantages of tracking how you are doing is that you can change things up. It is the rare business that works exactly as it is supposed to – the hallmark of success is the ability to change in the face of the unexpected.
5. Have an exit plan
What, you want me to think about leaving before you get started? It does seem a little backwards, but it won’t hurt to think ahead a little bit. What will you do if you don’t meet your goals – at what point, and how, will you extract yourself (more complicated if you have repeat customers who count on you). On the other hand, what happens if you go down the road 15 or 20 years and the business is doing well? What will your exit strategy be? If it is to sell the business or turn it over to your children or employees, it would be good to have at least thought about that ahead of time so you could prepare.
Kinds of businesses and jobs – coming up next
We are hoping that our Members will help fill in the blanks about the types of retirement jobs, careers, and businesses that you have started in retirement – full or part time. Where did you find work? Did this impact your pension or taxes? Please share your success stories, what you could have done to avoid your failures, what was great and not so great about the experience, in the Comments section below. We will use your Comments, if we get enough, to write a follow up article.
These are just some basic pieces of advice about starting your own business. There are tons of good books and articles to help you in the process. Read those, and talk with as many people as you can. Anybody who has their own business, whether it is related to yours or not, probably has some good advice, won at some cost, to share with you.
For further reading
“The Sharing Economy Could Be Your Ticket to a Comfortable Retirement”
8 Good Reasons to Be Your Own Boss After 50
8 Reasons Not to Start a Business in Retirement
5 Dream Jobs for Your Retirement (there are links to more articles about retirement jobs in this one)
Topretirements Members Very Confident About Their Retirements
5 Reasons 8 Out of 10 Businesses Fail