Upon reaching retirement, you’ll likely have a strong combination of experience, perspective and passion – the perfect entrepreneurial
attributes. Learn about what it takes to start a new business in retirement.
After spending an entire career doing what you have to do, retirement finally provides the time to do what you want to do. And for some retirees, that might mean starting a business you’re passionate about. Although it’s an exciting opportunity, starting a business requires a lot of thought and planning. It’s important to consider all your options so you can embark on your new enterprise with both passion and preparedness.
Field of Dreams
As Vice President, Business Banking Regional Manager for First Midwest Bank, Jodie Speers has helped retirees start up businesses in a variety of fields – everything from sandwich shops to dry cleaners. When helping retirees start a business, Speers cautions that although your new business venture might be something you’re passionate about, that doesn’t necessarily mean you have the professional skills or experience to make it successful.
She recommends conducting a market analysis to uncover what’s been successful in your area and industry. For example, you might decide to open a franchise instead of starting a business from the ground up because there is less marketing involved for an established brand, Speers says.
Creating a Business Plan
The first step to launching a business is drafting a business plan, says Anthony Denovellis, Vice President, Business Banking Manager, First Midwest Bank. “Many people in their original careers were not responsible for planning or strategizing a business,” he says. “You need to structure your business appropriately for success.” Your business plan can be as extensive or as detailed as you need. Denovellis recommends including the following:
- An executive summary describes you as the business owner by detailing your educational background, accomplishments and experiences in the industry.
- A financial summary includes first-year projections, as well as proposals and upcoming strategies.
- A market survey analyzes competition in the area.
- A SWOT analysis examines four areas: Strengths, Weaknesses, Opportunities and Threats.
Financing Your Start-Up
Denovellis strongly emphasizes the need to be in a “position of strength” when starting a new business. You want to have strong credit and solid cash flow. If you’re in a negative net worth situation – where your debt exceeds your income – you should reconsider starting a new business because the first year as a new business owner will likely be a strain financially, Denovellis says. He also recommends having some money reserved for both living expenses and unexpected expenses.
To make sure you’re financially prepared to start a new business, Speers says to have your banker help you complete your personal financial statement, which will include your list of tangible assets, liabilities, marketable securities, etc. It will help you determine what capital you can fund upfront and how much you might need to borrow. If a loan is necessary, your banker can examine your credit history to determine your eligibility and as well as your potential assets for collateral, such as home equity and Certificates of Deposit.
In addition to your business plan, it’s important to look ahead to the business’s future beyond your involvement, Speers says. You should consider who might take over the business if you choose to step down or become unable to continue working. “You’ve built something of value,” Speers says. “It’s important to have a plan to have someone succeed you.” Many business owners choose to leave the business to an heir, so succession planning should involve your family. “It takes planning and open discussion between parents and children to make sure fair conclusions are established at the time a business ownership may occur,” Speers says.
‘Hopes, Plans and Dreams’
When Speers meets with customers who want to start a new business, she always has a “Hopes, Plans and Dreams” conversation that touches on long-term goals for their business and life. She asks such questions as, “What is this business meant for?” and “Where are you now, and where do you want to eventually be?”
“The discussion of hopes, plans and dreams helps us craft a unique plan to meet the immediate need of establishing the business,” Speers says, “and the ultimate goal of where they want the business to be.”