Never To Old to Start
Our government believes they are responsible for creating jobs in this great country. Well, they have it all wrong. It is the American dream that has created most of the jobs. That's right—more than 60 percent of jobs created in America are created by the small businesses, according to the Small Business Administration.
Not that long ago, retirement meant long days punctuated by occasional games of golf and bridge. But today, with lengthening life expectancies and dwindling pensions, many Americans are looking to create their own jobs. Here are some tips for those of you that think you want to start your own business:
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Common characteristics. Mature entrepreneurs differ from their younger counterparts in several critical ways. For one, they are usually in a much better financial position than younger entrepreneurs. Their bigger financial cushion—retirement packages, nest eggs, or home ownership—affords them flexibility in the initial stages of a start-up, where funding is often critical. Because they can often rely on other sources for current income, they are in a better position to take entrepreneurial risks.
Creativity and business acumen are also key characteristics of older entrepreneurs. Having been tested again and again in their lives, they're not afraid of failure or worried about what others will think. Instead of that urgency to "make it," they get their satisfaction from the process of building their companies.
The type of businesses typically started by folks who have retired varies widely. Consulting, small retail businesses, and bed-and-breakfast establishments are perennial favorites. A growing number of late-life start-ups also involve Internet-based businesses. While most start-ups are related to an individual's former career, some break into completely new territory.
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Know your limitations. There are several considerations to bear in mind before taking the leap. Start-ups can be physically and emotionally draining. Are you willing or able to work the long hours that may be required in a fledgling business?
Then there's financial vulnerability. Compared with their younger colleagues, the mature rely much more on personal investments to supply a portion of their income. For this reason, they are advised not to sink too great a portion of their investment portfolio into a new business and should avoid pledging as loan collateral personal assets such as a home. Here are some other items retirees should consider before starting a business:
1. Build on already established contacts and expertise, which can give you a competitive advantage in virtually any business.
2. Start small and gradually work your way into a full-blown business. This will give you time to assess whether you're willing or able to take on another full-time career.
3. Consider your income needs before investing a portion of your nest egg in a new business, and think twice before taking on any personal debt.
4. Consider what business entity structure would suit your business the best—S-corp, sole proprietor, or partnership.
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Starting a new business can be one of the most rewarding ventures of a lifetime, but they don't become successful overnight. Being able to commit both mentally and physically for the first three years will help you make the most of your opportunity for success..
Good luck and prosper.
Doug Lockwood , CFP®, is a partner at Harbor Lights Financial Group, a full service wealth-management team that has been dedicated to assisting clients in the accumulation and preservation of their wealth for over eighteen years. He was recently named one of America's Top 100 Financial Advisors by Registered Rep Magazine (August 2010) based on assets under management. Doug Lockwood is a registered representative with and securities offered and advisory services through LPL Financial, a Registered Investment Advisor, Member FINRA/SIPC. For more information, go to