The Golden Age of Entrepreneurship: 3 Tips for Starting a Business in Retirement
As today's Baby Boomers prepare to say goodbye to traditional employment and lifelong careers, a growing number of them are choosing to remain engaged in the workforce in a new way—as their own bosses and on their own terms. People ages 55-64 are one of the fastest-growing demographics of entrepreneurs in the U.S., according to a 2014 report by the Kaufman Foundation, and now represent nearly a quarter of all new entrepreneurs.
The trend toward “encore entrepreneurship,” as it's called, is attributed to many factors. Today's seniors plan to live longer and healthier lives. So instead of slowing down as they near retirement, they're gearing up for the next chapter, which may last 30 or more years. At the same time, many Boomers who are approaching traditional retirement age have yet to recover from a recession that took its toll on retirement savings and home values. Owning a small business is one way to generate additional income in retirement.
Whatever the motivation, launching a business in retirement has become big business. Everywhere you turn, there are resources devoted to the trend: organizations, websites and blogs that offer practical tips on everything from how to work from home to hiring your first employee. The U.S. Small Business Administration has even teamed up with AARP to provide free online courses, webinars and mentors to help entrepreneurs over the age of 50 start or grow a business.
The secret to succeeding with a business in retirement, however, may boil down to just three basic fundamentals:
1. Stick with what you know. Consider a venture that is closely aligned with your area(s) of expertise, so you can leverage the knowledge you’ve acquired and the contacts you've made throughout the course of your working life. For example, if you've built a career as a journalist, retire to freelance writing. If you've been a teacher, tutor. If you've been a tax accountant or attorney, offer your services in retirement as a consultant.
2. Be careful about start up costs. Because every business is different, the amount of up-front capital you'll need can vary tremendously. If you plan to offer your services as a consultant, for example, you may need little more than a computer, a phone and a website to get your business off the ground. Depending on the services you offer, however, you may also need to apply for state or federal licenses or obtain professional liability or malpractice insurance. Other ventures may also require considerable investment in inventory, equipment, office or production space and the hiring of employees. Regardless of how much you may need to launch your business, resist the temptation to use your retirement nest egg as seed money. Instead, talk to a financial professional about your options or check out some of the tips for financing your business as offered by the U.S. Small Business Administration.
3. Get help with the business of running your business. As the subject-matter expert, you know the technical aspects of your business’s work product or service. But do you know what it takes to run a business? Have you drafted a business plan? Structured and registered your business? Do you know how to develop a profit-and-loss statement? And if your venture takes you beyond the world of consultancy, do you know how to write a job description and recruit and retain valuable employees? How about managing suppliers, contractors and inventory? And what about your exit strategy? While you may be looking forward to this new chapter in your life, you probably won't want to work forever. Do you have a plan for when and how you'll sell your business? When launching a new business, the considerations can be overwhelming, which is why it's critical to partner with professionals who understand the business of business.
Encore entrepreneurship can be a great way to stay active, follow your passion and supplement your retirement income—as long as you approach this chapter of your life with your eyes wide open. So as you consider the possibilities for your retirement business, remember to leverage your expertise, be realistic about startup costs and get help with the business of running your business. By taking those three steps, you'll be well on your way to joining the ranks of others who are creating new, exciting careers for themselves in retirement.