Dear Money Lady,
I have been thinking about starting my own business. I am still working full-time and in my 60s.
Do you think that is a good idea or is it too late in life?
No, Jamie, I don’t think you are too old to start a business.
Many people start home-based businesses to further a hobby or to continue working while in retirement. Lifelong workers who have always earned a wage in their careers may want to now reap the benefits of self-employment as they enter retirement.
There are indeed a lot of benefits. Being your own boss, having a flexible schedule, doing something you love, these are all the reasons many Canadians aged 55-plus are now considering an employment change.
However, you must also remember the following phrase:
"The self-employed person works 16 hours a day for himself rather than eight hours a day for someone else."
Working for yourself will demand more of your time and effort and then there are the dreaded start-up costs, all of which are not necessary at a conventional job.
Raising capital to start a new business venture, especially later in life, is always a bit tricky. Here are some of the questions you need to ask yourself:
• How much of your own savings will you need to invest in your business?
• Can you get a loan from your bank or can you use the equity in your home to secure a business line of credit?
• If you are funding the start-up from your retirement savings, how will this affect your future plans?
Once you have determined your financial plan it’s a good idea to work out a detailed business plan.
Here are some of the things you want to consider.
• Marketing and societal impact plan;
• Sales strategies;
• Industry overview and competition;
• Plan of operation, product and services;
• Strategy for growth and future financial concerns.
The type of business will depend on whether you want to run it by yourself or with others. There are three basic business structures:
• Sole proprietorship — This is a non-incorporated business entirely owned by one person;
• Partnership —This is also a non-incorporated business; however, two or more people contribute to the business;
• Corporation — This is very different than the other two styles with more detailed legal and tax considerations. A corporation is a separate legal entity, and the owners own shares in the company.
Having your own business can be very rewarding and well worth the time, effort and money invested. But don’t forget that starting up a new business venture close to or in retirement could be risky.
Make sure you do your homework since you have very little room for mistakes. It is often impossible for someone to recover from a bad investment choice once in retirement.