Should I Retire and Start My Own Business?

Thanks to the GFC, baby boomers are facing the reality of having to work past the age they hoped to retire. For many, the idea of starting their own business appeals - either because their own job has disappeared, or because they can't face the thought of working in the same old job for another ten years.

But for every person who successfully transforms from office worker to vineyard owner (or whatever), there are many others who try and fail - and even some of those that succeed financially, regret their decision.

Before you chuck in your job and start your own retirement business, it's important to confront the potential downsides of small business.  Just because you're your own boss, doesn't mean you'll have less stress or be able to take it easy!

Let's look first at a common downside of running your own business - time.

If you're approaching retirement, you've probably looked forward to having more time to play golf, see the kids or spend time with your partner. Maybe you've been planning that big trip to Europe or to use the holiday home more often.

If a small business is part of your retirement plan, you can wave goodbye to those dreams for another three or four years - because most new businesses require long hours of work in the early years, for not much - if any – profit.

Ask any new business owner - they'll tell you their work spills over into evenings and weekends - and they can't have a holiday, because they can't afford to leave the business.

A twenty-year-old can afford to sacrifice a couple of years of his or her life to building up a business, knowing that one day, he’ll be able to sit back and enjoy the fruits of all that hard work.

Can you?

How old will you be, before you’re able to take a break from the business?  Is there a chance your health might not be as good by then?

Is there a risk you'll miss out on enjoying the rewards because you devoted your healthiest retirement years to your business?

I'm assuming that if you had the money, you wouldn't need to keep working. That means you can't afford to lose the money you do have, doesn't it?

For most businesses, you need to spend money to earn money. It's quite likely you'll have to spend quite a bit of your precious nest egg on stock, premises, advertising and many other business expenses.

A young entrepreneur has the chance to pick himself up and build up his savings again if the business fails. What will you do if your venture goes belly-up?

Another aspect of entrepreneurship which is often overlooked, especially by baby boomers, is loneliness.

Independence means working alone! It's well known that many retirees find it hard to adjust to spending most of their time with their partner, instead of in a busy office full of people. Start a small business, especially online, and you're likely to end up spending many hours all on your own.

Of course we all yearn for our own space, but do you want to be in it 100% of the time? We often underestimate the role business colleagues and acquaintances play in keeping us in touch with the world, even though they’re not close friends.

When you take into account the financial risk, and the likelihood of working MORE hours instead of less, and in relative isolation, most baby boomers should think twice about the virtues of being your own boss!

However there are situations where mature-age entrepreneurship can work:

• If your business idea is linked to a long-held passion (i.e. not just a desire to make money). Hours spent doing something you love don't feel like work.
• If you already have a reasonably secure retirement income. Then you can start your new business in a small way, rationing your hours to suit you. It could take several years for the business to get off the ground, but you won't mind if you're doing it for an interest or for pin money.
• If you’re still several years off retirement. You can kick your business off while you’re still working your day job, so that by the time you're ready to retire, it's a reliable income stream which allows you some free time.
• If you buy a franchise instead of starting from scratch. Buying a franchise means you can hit the ground running and make some income from day one. However, be sure you'll be able to work for long enough to recoup your setup costs and start making a profit.

Research your business idea thoroughly. Understand your costs and work out a plan for surviving the lean times at the beginning (and how long they're likely to last). Establish where your market is and know how to reach them. Estimate your profits and ask yourself whether they will be enough to make it all worthwhile.

The bottom line is - if your business dream is your passion, have the courage to overcome the initial obstacles and you have every chance of success. But if your business dream has more to do with easing back on the workload, you may be wiser to consider a part-time or contract version of your existing job.

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All text copyright Marisa Wright. Photo courtesy of Heydrienne on Flickr