Topic 4: Pursuing a new passion: The decision to start a small business in retirement
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If retirement is getting closer, you may be tempted to use some of the extra time and capital at hand to chase the entrepreneurial dreams you’ve always harboured.
Launching a small-medium enterprise (SME) is an exciting prospect, whether it’s digital or bricks-and-mortar in nature, especially if it’s a business you’ve spent many years thinking about. But it’s also important to thoroughly consider whether you’re properly prepared to commit the time, money and sheer mental energy to a new commercial venture.
Starts at 60 spoke to an expert on small business planning financing, plus a 60-plus who built his own successful SME from scratch. Find out what questions you should ask yourself before pursuing your own small business idea.
David Steadman, a builder by trade, had already had a long career running a successful construction business when he decided to launch a sideline business in a somewhat different field.
Steadyrack started from a personal frustration with the lack of effective bike storage in his garage. After coming up with his own solution – a space-saving, vertically wall-mounted bicycle rack – he decided that it was an idea worth pursuing so he spent five years prototyping, refining and patenting his design. Since its inception in 2010, Steadyrack has continued to expand into overseas markets, with no plan to wind down its pace anytime soon.
Are you ready to do the homework?
Steadman says this ‘homework’ process is essential to business success, noting that it was important not to simply understand how your own business would be structured and create its product and service, but also to have an in-depth knowledge of the specific industry you hope to crack.
It’s not dissimilar to starting your career all over again, in the amount of knowledge-building required, he cautions.
“Physical health is fundamentally important because [starting and operating a business] is taxing, wearing mentally,” he says, suggesting that wannabe SME-owners ask themselves if they’d be confident starting a new job in a completely different industry to the one in which they’d spent a lifetime. If the answer is yes, then you’re more likely to be ready for the challenge of starting and operating your own SME.
Are you willing to stick with it?
Steadman also notes that the key is to look into the future and decide whether you’re willing to allocate what may be years in developing a business to the point at which your initial cash investment, as well as your time and energy, will see a return. He estimates that all new business projects have at least a 10-year lifecycle, at the end of which the founder can sell or otherwise exit the business.
The grandfather describes himself as “not the retiring type”, which is why he was confident that he would see his business plan to fruition. During the 15 years it took for his business to go from inception to being a successful, profit-making entity, Steadman was also fortunate enough to have additional income, so he wasn’t entirely reliant on Steadyrack for his living.
“Age, in and of itself, is not a factor, not an issue to consider,” he says. “It’s how old you feel and how much energy you bring to the process … Are you energized and do you want to keep working or would you prefer to wile away the hours playing golf? It’s such a personal thing. But you’ve got to be energized! If you’re not energized, don’t do it.”
What role does the business income play in your plans?
Scott Parry, Westpac’s state general manager in Queensland for SMEs, agrees that older entrepreneurs should consider the potential timeline of their business project, and the role they envisage that business playing in their retirement plans.
“For retirees running a business, it’s important to consider the level of capital investment, what long-term gain you’re planning to make, or whether you’re simply seeking a passive income stream that you might eventually plan to wind down,” he says, adding that it was important to be aware that any business income could impact your eligibility for the Age Pension and seniors concessions.
Have you found great sources of business guidance?
There are many free, online resources available for entrepreneurs in the early and middle stages of creating a new business.
The Davidson Institute offers webinars, workshops and tools to assist Australians in operating and growing a business, covering topics such as getting started, business planning, cash flow, breakeven analysis and managing growth.
If you prefer face-to-face support, Westpac’s small business team offers insights and understanding to small business owners at all points of the journey.
Scott also urges potential business-owners to thoroughly plan their venture with a financial advisor, who can help create plans for the income the business may create, advise on potential exit strategies, and also ensure your will and power of attorney documents encompass your business.
“Find advisors you trust – a good lawyer, accountant, banker, and financial advisors,” he recommends.
Things you should know: The information in this publication is general information and factual only. It does not constitute any recommendation or financial product advice. It is an overview only and it should not be considered a comprehensive statement on any matter or relied upon as such. You should consider obtaining your own independent professional advice. Read your product T&Cs available at westpac.com.au before deciding.© Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714
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