Hi and in this podcast would like to take a little bit of time to think about a few things you need to examine ponder take into account before you start your retirement business.
I’ve spent the last 30 years plus running my own businesses some successful some not so successful I’ve helped hundreds of people start new businesses lectured about business skills and provided accounting, bookkeeping and tax advice for small businesses. In that time I’ve got to know some of the things that work some of the things that definitely don’t work and identified a few issues that are definitely relevant to anybody planning to start a pre-retirement or a retirement business.
So in no particular order of importance let’s get started.
#1 what are your personal and business goals? Are you thinking just about money or are you desperate for something to do in retirement. The idea of something to do is not that crazy. I’m reminded of the story I was told where several very good friends all retired at the same time all but one of them disappeared off to Florida where they enjoyed the winter sunshine and a daily round of golf. When this guy went down to visit his friends they took him golfing every day but by the end of the week it was driving him crazy. He loved golf but he wanted more out of life. Running a small business is one option. On the other hand for the majority of people it’s probably going to be about the money. If you’re lucky it’s just the top up but for some people it might be quite a significant part of their planned retirement income. It’s very important to be clear about this goal as it affects how much committment of time and money is needed.
#2 family and friends can be a big issue when you’re running a business especially if you’re running it from home. Is your significant other on board with your ideas or is are going to be conflict. Maybe you’re both comfortable having your own interests but for some partners retirements is a time where they think they’re going to have you all to themselves. There is no substitute for sitting down and discussing this, I recommend a nice take-out mail and a couple of bottles of wine.
There are a whole lot of things that you’ll need to be discussing, where you’ll do your work, are you going to have people visiting the house, what are the risks, how many hours a week will it take up and is it going to affect travel or leisure plans. And these are just for starters but it is important to get it all you out in the open so there are no surprises down the line. Always keep lines of communication open with your partner this discussion is an ongoing thing. Trust me my partner has run her own business from home for the last eight years and we still spend several hours each week discussing different aspects of how the business is going and plans for the future.
You might also want to think about how your friends and relatives are going to react to your new business and whether they’re going to respect the boundaries that this new venture is going to impose. One of the biggest problems that all people no matter what their age at some point will come face-to-face with is that because you’re at home they think you’re always ready for a coffee, lunch or that you’re free to help out with the house run O project. Good friends and understanding relatives will work with you but you have to be clear up front about your work commitments. It really is about setting boundaries and accepting that some people will be ticked off with you.
#3 low-cost or no cost startup. Chances are that you’re going to run the business from your home or garage and you’ll have most of the general office equipment that you’ll need. Most of us have a home computer, mobile phone, pens, paper and paper clips. And the chances are that even if you’re going to do something requiring more specialist equipment there’s a good chance that you have some of this already available. Say being a handyman you’ll probably have drills hammers screwdrivers that sort of thing.
Will talk about business risk in a bit but for now just take care about how much you spend starting your business. Not a retirement business but I did see somebody startup a cleaning business where they were persuaded by a very effective salesman to buy cleaning materials and equipment in bulk. If they run their business for four or five years it might’ve been a great investment but unfortunately an accident resulted in it only lasting about six months. They ended up with a garrets full of cleaning materials but it cost them a lot of money that was now effectively worthless. So the mantra you need to start with low cost or no cost and when it comes to spending money baby steps to keep your risk to a minimum.
If you already have your business idea great if not then listening to some of the following podcasts where I’ll be giving you some ideas for no-cost and low-cost businesses.
#4 cash flow is king. You need to find a retirement business that is going to give you a positive cash flow. A successful retirement business is all about the money and you need to be bringing in more money than your spending.
Nothing says it better than the character Mr. Micawber in Charles Dickens is book David Copperfield. “Annual income 20 pounds, annual expenditure 19 pounds 19 shillings and six pence, result happiness. Annual income 20 pounds, annual expenditure 20 pounds ought and six, result misery.”
Quick tip. Don’t confuse profit with cash. One of the things I’ve always tried to make clear in my training courses is “any full can make a profit, it’s making money that’s difficult.” Without getting too deep into it profit is an accounting principle and plenty of businesses make a paper profit but still going to business. Money in the pockets and cash flow are much more real. It’s about doing the work, asking for payment and actually getting paid. Plus you need to be checking where the money is going whether it’s expenditure for the business, but buying new equipment or your living expenses. This is another important area that I’m going to be talking about in much more detail in another podcast.
#5 You need to be looking at businesses that can be up and running quickly. And not just up and running quickly but, referring back to cash flow, one that’s going to give you positive cash flow as quick as possible. With a retirement business, especially one where it’s being done to give you extra retirement income, you don’t have the luxury of spending years building your brand, generating excitement and waiting for the big money to roll in. That works for big players like Amazon and Facebook but not for you and me.
#6 this is a big one that people frequently get confused with. A hobby does not become a business just because you start selling a few things that you make. Yes it might cover some of your hobby costs but that doesn’t make it a business.
A little story might illustrate what I mean. Couple of years ago I was looking at her retirements magazine that even now I feel really annoyed with. The monthly theme of the magazine was all about retirement income and retirement businesses. The example they use was a lady who clearly loved animals and decided that walking dogs during the day was a nice way to earn a little extra income. The magazine went on to talk about how to she enjoyed herself, love the exercise and was now looking at buying a new larger car so that she can get all the dogs in one vehicle. This was the point at which steam started coming out of my ears. Didn’t no one clue into the fact that the cost of this new car was probably going to cost her more than she was making from her activity. I absolutely refuse to call it a business. I nothing wrong with the fact that she loves walking dogs, that she gets paid a few bucks to do it but that doesn’t make it a business.
In the same vein my a brother-in-law enjoys wood turning. He makes wooden fruits, bowls and some nice wood fountain pens which she sells through a local craft store added a few events he attends. Great, it helps with the cost of his hobby but a don’t think he or even the tax people are ever going to think of it as a business especially if you look at the cost of his chisels and lathes etc. to make it into a business he’d have to manufacture items in bigger quantities and faster. Even then making a profit is going to be pretty difficult. What he would probably be better off doing, if he planned on wood turning is a business, is to offer courses for people wanting to learn the craft.
The take away from this is that there is no substitute for looking at the numbers. Figure out what your income is and what your costs are going to be. If you want to make your hobby your business understand that it is not all about the fun you’ll have but what people are willing to pay for and how much they’ll pay. You need to be looking outside the box.
#7 are you looking for full-time, part-time or seasonal work. Maybe you want to travel part of the year, are you looking to top up your income in which case a part-time business might be ideal or do you need the income from a full time enterprise.
You might also want to think about whether you can dictate when you do the work or, if it’s a personal service, are you going to be having to commit time when you’re clients or customers are wanting to be serviced.
Is your business going to be a regular commitment. If you’re looking at a bookkeeping venture you can probably go away on vacation for a couple of weeks but know that you need to work a little harder and longer in the week before you go and after you come back. Now if you also offer invoicing services that need to be completed at the end of the month then this might restrict when you can go on vacation and for how long.
The last four items are all related.
#8 do you have any existing skills that can be turned into a business? A retired teacher or college lecturer can probably transition quickly and profitably into being a subject tutor. A retired plumber, electrician or carpenter already has the basis for a successful handyman business.
#9 can you repurpose existing skills. A person with office experience can probably quickly create an office support business for local entrepreneurs and small businesses. Bookkeeping, typing, invoicing and debt collection, even arranging appointments and scheduling work are skills often in demand.
#10 can you easily acquire new skills? Gardening, cleaning junk removal.
#11 are you willing to do you have the time, and are you able to financially invest in new skills and knowledge. Increasingly there is a demand for financial planners, personal support worker’s and probably a whole lot of other opportunities. You already come with a bunch of important attributes including maturity and life experience but use need to spend perhaps 6 to 12 months training to get the professional designation. Yes there is a cost in time and money but possibly less competition.
So there you have it 11 things to think about before even deciding on what your retirement business is going to be. Please don’t let it put you off but instead reflect on the fact that if you take your time to carefully consider each point your business is likely to be more successful and at the same time ensuring that your family and friends are more likely to understand and support your decision to start a retirement business.
No one plans to fail but lot’s of us a guilty of failing to plan. Maybe be put that one on the fridge door .
As a final thought, and quite possibly the most important, discussing and making decisions with your significant other will go a long way to increase your chances of success.