With life expectancies continually increasing, our retirement years are extending, too. As a result, you may be considering starting a business in retirement to supplement your income to transform a dream into reality. As many as 15 percent of people age 55 and older expect to start businesses, according to the U.S. Small Business Administration.
If you’re one of them, you can expect to be confronted by the same challenges any entrepreneur might encounter — and some unique ones. In order to succeed, it’s best not to fall into one of these five traps:
1. Misaligning your goals with your lifestyle Often, retirement entrepreneurs decide to start a business out of boredom and only later realize there are other things they’d rather do with their time.
Perhaps they imagined driving cross-country or spending more time with their grandchildren. By then, however, it may be too late to reverse the decision. Either they’ve invested too much time, capital and energy in the business or the operation ties them down.
So consider this: Running a business may be the most challenging job of your life. If one of your major retirement aspirations is to spend more time with your family, you may be doing yourself a disservice by committing yourself to a launch that’ll have you working harder than ever.
Before bringing your idea to fruition, it’s imperative that you evaluate your goals for owning and operating a business and then determine how well they align with your lifestyle — or the one you want to create. By doing so, you’ll be able to construct a balanced approach toward your life in retirement.
2. Taking on too much risk Once you’ve done a thorough assessment of your goals and decided your business idea is worth pursuing, the next step is to understand the risks.
A business that requires significant startup capital can place a great deal of pressure on you if your financial lifeline is at stake. A grave mistake would be to fund the business with your retirement savings because if the business fails, your nest egg will go down with it. And rebuilding your savings won’t be easy. A better option would be seeking other financial resources, such as a home equity loan or a reverse mortgage.
(MORE: Becoming a Farmer in Retirement)
3. Lacking the physical stamina Starting and running a business can be a mean feat for any entrepreneur. If you have health issues, you should assess them honestly before deciding to open a business. Also, ask yourself how much time and energy you’ll really need to devote to the operation, since the risk of failure can further impact your health.
The most successful businesses can be extremely demanding, especially during the startup phase. So before diving in, make sure you’re in good enough shape to keep up with the demands and that you won’t push yourself too hard.
4. Being overly optimistic As an older entrepreneur, time is not your ally. You won’t have as many years to correct mistakes as someone younger — and there will be mistakes (as well as unpleasant surprises). You also won’t have decades to grow your business, unlike your junior counterparts. A wise approach is to accept that success isn’t guaranteed.
(MORE: Challenges of Starting a Business in Midlife)
5. Not focusing on a target segment you understand For any aspiring entrepreneur, one of the foremost preliminary steps is finding out whether there’s a market for the goods or services you want to offer. But the market must be one you can relate to easily. Pursuing a business targeted at college students, for instance, could be a disaster unless you went after them in your former job, too. You need to be able to communicate with your target customers, so it’s best to focus on a market segment you understand well.
Steer clear of these five traps and you might find yourself with a business that's rewarding to you psychically and financially.