One retirement option: Start a business
Many professionals approaching retirement aren’t quite ready to hang up their spurs and embrace a life of leisure. Rather than working for someone else, though, entrepreneurial-minded retirees may consider a different option: starting a new business.
In 2013 nearly a quarter of new businesses (23.4%) were started by people between the ages of 55 and 64, according to the Kauffman Index of Entrepreneurial Activity. If you’re thinking about starting a business during retirement, these four factors may be worth considering.1) Time for your business to succeed
Approximately half of all new businesses survive five years or more, and a third survive 10 years or more, as tallied by the U.S. Small Business Administration (SBA). While these statistics may sound the opposite of encouraging, they suggest some realistic aspects of longevity and persistence. How much time are you willing to allow?
It’s also worth noting that many new entrepreneurs of retirement age bring a wealth of relevant experience, resilience, and professional networks that may be an advantage in starting a new business, as Nancy Colamer reports in her book “Second Act Careers.”2) Proper investigative diligence
Starting a business is taking a risk, whether it’s done during your 20s, 30s, 40s, or during your retirement years. There are no guarantees. That doesn’t mean there aren’t steps you can take to help minimize your risks.
Conducting due diligence includes assessing the physical toll the business may take on you. This isn’t just about physical activities like bending, standing, and lifting heavy boxes and materials. It’s also about the understanding and committing to the long hours that are often required to get a new business off the ground.
Proper investigative diligence also includes assessing things like demand in your area for the product or service the business will provide and how much capital you actually want to devote to a business venture during retirement.3) Is there a backup plan?
AARP notes an important caveat for retirees considering launching a new business: Have a “Plan B.” While this may sound like a cup-half-empty view, the reality is new businesses are laced with uncertainty. What will be your course of action if the business fails?4) Succession planning
It’s important to know what you plan to do with the business when you’re no longer interested in running it or able to run it. Do you have an exit strategy? Will you leave it to your spouse? Your children?
For more on the basics of creating a succession plan, I encourage you to read my colleague Kristin Nelson’s blog post, “Making a Plan for Business Succession.”
One final point: I encourage you to consult with a financial advisor as part of your planning process, as he or she may help you understand how starting a business may (or may not) fit with your overall retirement goals and savings.
Starting a new business may help you make the most out of retirement by beginning something that keeps you active and fulfilled, utilizing talents, skills, contacts, passions, and interests you’ve developed during your first act. Perhaps that’s why so many people of retirement age are taking the time to begin businesses of their own.
To learn more about wealth management services at Bank of the West, visit our site.