You’re ready to retire or recently retired. But, you’re not ready to spend all your time on the golf course or playing mahjong. So you’re thinking of starting a part-time business to help fill your retirement years.
You’re not alone. According to a study of business start-ups by the Kauffman Foundation, 25% of businesses started last year were headed by people aged 55 to 64. Add in a few aged 65 and up and you can see that you’re not alone.
But starting a business, even a part-time one in retirement, isn’t easy. The majority of businesses fail. So we contacted John Stevenson, owner of Stevenson Consulting and John Stevenson Real Estate for over 14 years. John is also a MCNE (Master Certified Negotiation Expert) and has built multimillion dollar companies.
Q: Many baby boomers are considering starting a part-time business after they retire. And many of them have never been in business for themselves before. As a business coach, what do you think is the most important thing that they need to know before they start?
John Stevenson: The first thing for anyone looking to retire and start a business is to make sure you have enough retirement savings and that you are not putting your nest egg in jeopardy in case your business venture goes bust. You may have heard the saying “If you fail to plan, you plan to fail.” A lot of times we see a great idea and start headlong without any plan. The top things to keep in mind when starting a business are:
– Foundation: Do you want to incorporate? Do you want to shield current assets?
– Income needed in 6-months, 1-year, 5-years?
– How much do you have for marketing?
– Are you going to incorporate online marketing?
– How big or small do you want to be?
– Employees? If so, how many?
– What are you going to charge for your service or product?
– What is your profit margin (after cost of goods sold, employees and miscellaneous expense)?
– Have you worked in the industry before and if not do you have a mentor?
Q: It’s estimated that three in four new businesses fail. Are there any advantages that retirees have that might help them beat the odds and be successful?
John Stevenson: The biggest reason why most businesses fail is because they are undercapitalized and do not have enough money set aside for the rainy days and the growing pains of the new start-up. If you are going to retire, first make sure that you are not risking your retirement surplus. It is a good idea to have one to three years of business expenses (assuming no income) in the business bank account. When there is not enough money for the long term then new business owners tend to make mistakes because they feel pinched financially. When this happens, they end up not making investments into the future growth of their company.
Q: Experts generally encourage a prospective business start-up to do thorough planning. But how much planning is necessary if you’re just going to try to turn your hobby into some part-time income?
John Stevenson: A detailed plan is important, but some of us will keep planning and not take action. The rewards are given to the risk and action takers. If a retiree is taking a hobby and turning it into a business, then he may only have to do simple business start-up procedures, such as opening a business bank account and setting up accounting, and then he can just start prospecting for new business.
Q: What thing is most often overlooked by prospective owners who have never been in business for themselves?
John Stevenson: The biggest thing new owners don’t plan for is the time involved in starting the business, as well as having enough financial reserves set aside for growing the business. To succeed and thrive, the new owner must plan on having the resources available and be willing to put in the additional time and work required in the beginning.
Q: How much attention should be paid to legal issues? If I’m just selling a few homemade items from my garage or at the flea market, do I really need to incorporate?
John Stevenson: A small business with little income usually does not need a complex tax planning strategy. One can simply file as a sole-proprietor and get started right away. Incorporating does more than just provide tax breaks. It also protects your personal assets.
Q: Are there one or two things that successful micro-businesses have in common? If so, what are they?
John Stevenson: One thing in common is that all successful businesses give excellent customer service. They will also ensure that their customers write 5-star reviews online for them. I have made millions of dollars from 5-star referrals alone. It has been one of the biggest things that have given momentum to any company I have built.
If there was a second thing in common with these successful businesses, it is that they are able to differentiate themselves from other competitors. Basically, as a new business owner, it is important to be able to communicate to your potential customers who you are, what your product is, why they need it, and why you are the one they need to buy it from.