By: George Rose, Wells Fargo V.P., Business Relationship Manager
An increasing number of Americans aren’t ending their careers at retirement – they are launching encore careers by starting their own businesses. In fact, according to the U.S. Bureau of Labor Statistics, the rate of selfemployment is higher among people in their 60s than even those in their 50s, let alone those in their 20s or 30s.
Even so, starting a small business in your 50s or 60s can be a daunting task. Since it may take several years before your new venture turns a profit, launching a business requires smart design and careful execution.
From our experience working with customers who started businesses after retirement, we have identified several ways to increase your chances of success. Start small and carve out time to run the venture before you retire. If that’s not possible, work on your business idea during your last few years on the job. Work with your financial advisor to make certain you’re saving enough money to get you through the transition period by using these four tips as a guide:
Research the startup costs for your business and develop a business plan with a clear vision and objective on how to obtain your goals. Retain an accountant to set up your bookkeeping properly from the beginning, even if you plan to use an accounting package for ongoing management.
Set up a business checking account to keep your personal and business finances separate. If you plan to sell your products or services online or accept credit and debit cards, you should explore your options for establishing a merchant account to process these payments.
If you have the resources, using your personal assets is by far the easiest way to fund your business. Many new businesses must seek outside investors, borrow, or do both to meet their initial funding needs. Weigh the potential risks and rewards of each approach carefully before you put up your own capital, issue equity, or take on debt.
Since financial institutions in general want to see revenue and credit payment history for a business, you may not qualify for a conventional business loan at the outset. Talk with your banker about how to establish business credit, particularly if this is your first venture.
Prepare Plan B. One important step before you launch your new enterprise: Have a Plan B. What will you do if the business doesn’t work out? You can probably afford to lose a small investment; but make sure you don’t endanger your home or wipe out your retirement income, particularly if you are starting a new business close to retirement age. Ensure that you have the
resources and cash flow to cover a startup period of a year or more. Financial advisers can help you compare your work and retirement options and assess your assets.
Don’t ruin your hobby by turning it into your business. Make sure you are prepared for the time it will take to invest in a new business. Seek guidance on managing your own shop from experienced peers. You can find advisors, as well as potential clients, by joining business associations and visiting your local business development center or chamber of commerce. Organizations such as the and offer a wealth of advice forstarting a business.
Choose a career that has the potential for success and is something that you will continue to enjoy. Some of the most successful postretirement businesses have been started by people who combined their professional skills with their passions.
In addition, it is important to prepare your family and yourself for the long hours and stresses that will inevitably come with the new venture. Running a small business can be a rewarding experience, but it’s wise to do your research and prepare properly before going out on your own.
Before your new venture is up and running you’ll need to retain professional services, such as accounting, banking, and legal advice. Involve your financial advisor, who can help you evaluate the benefits of delaying fulltime retirement, the financial risks of starting a new business, and the steps you need to take to begin a profitable and rewarding encore career.
(1) U.S. Bureau of Labor Statistics, Monthly Labor Review, Steven Hipple, September 2010.
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George Rose is a Wells Fargo Vice President, Business Banking Relationship Manager. He is based in Houston, Texas. George can be reached via email at [email protected].
