Starting a business later in life
- Financial Planning
Should age be a barrier to entrepreneurship? A quick look at the statistics suggests that the answer is a resounding “no”, with nearly 30 per cent of business owners in Australia aged over 55. This includes 11.8 per cent who are aged between 55 and 59, 9.7 per cent between 60 and 64 and 7.8 per cent 65 and over.*
So, what motivates people to start a business later in life? For many, it may be a case of fulfilling a dream that was simply impractical earlier in life, due to family or financial circumstances. For others, it might be a desire to take a new direction in life after becoming stagnant in their current job or being made redundant. Some may also see it as a way of staying engaged and active in their retirement years, rather than just putting their feet up.
Whatever the reason, starting a business offers some real benefits, as well as some challenges. So what key aspects should you consider?
What are the positives?
On the plus side, you will have lifetime of experience to draw upon. Your experience in your previous jobs may have given you skills and attributes that are essential to running a business, such as technical know-how, an understanding of human relations, and a more sober ability to assess what you are good at and what you may need assistance with. These are qualities that you would not necessarily have had in your younger days.
You may also have developed a strong network of contacts and experts with specialist knowledge whose experience you can draw on, such as accounting and finance, legal, sales and marketing, and tradespeople.
Financially, you may also be in a better position as an older person, since you may have the expenses of family and a mortgage behind you, and you may have savings, superannuation or a redundancy payout available to help fund the venture.
Consider the negatives
It is equally important to consider what may hold you back. For starters, the skills required in the business you are starting may not correlate to experience you have gained from previous employment. For example, if you have been working in a white-collar business all your life and want to start a café, there may be a steep learning curve about suppliers, food service regulations, and retail practices.
It’s also important to be realistic about your physical stamina and health. You’re not as young as you used to be and you don’t want to end up running a business that becomes a burden. You need to have a real passion for the business, so that you enjoy it as part of your lifestyle and are not doing it purely for financial gain. In other words, make sure it is a joy and not a jail!
Ensure your spouse is happy with the venture, too. The last thing you want is for the business to drive a wedge between personal relationships.
Possibly the biggest negative, however, is the financial risk. Assuming that one day you will want to retire completely, you need to be wary about overcommitting your financial resources to the business. If things don’t work out as you plan, or if selling the business proves to be a struggle, you may find yourself risking your retirement lifestyle.
Once you have weighed up the pros and cons, and have decided to go ahead, you need to get your planning in place.
Before you jump into a new business venture, you need to do your homework. That means doing some research and analysis on the market for your product or service to understand your competitors and your target customers. If you are buying into an existing business, get a professional to help assess its financial state and viability.
Once you have established that there is a good business case, the next step is to put together a business plan. This is essential for articulating concrete business goals, sales and marketing plans, financing arrangements, cashflow projections, staffing issues, and regulatory/compliance obligations. It is vital to seek professional input on your plan to make sure it is sound.
Have an exit strategy
Before you commit to going in, make sure you have a defined path for getting out too. That means:
- Ensure you are not overcommitting retirement funds and superannuation, so that you have a fallback if things go belly up.
- If you are dipping into retirement funds, have a plan to allocate a portion of your profits to replenish your retirement savings, so that your retirement is not overly dependent on business income or the sale of the business.
- Have a succession plan for a smooth and financially successful exit from the business down the track. Will it be passed to another family member? What financial records will you need to keep on top of to maximise future sale value? How will the business be sold?
To get such a plan in place, it is wise to speak with a financial planner who has the experience to integrate your business plans with your overall financial plan. They can also work with your accountant to make sure all the bases are covered. Drawing on the expertise of competent advisers is a critical aspect to making your venture the success that you want it to be.
*Australian Bureau of Statistics: Counts of Australian Business Operators by Selected Characteristics, 2012
Do you know of someone who has gone into business later in life? What lessons have you learned from their experience?
Why not check out our 5 step guide to starting a business.