You might assume that those in their 50s are pining for retirement, but in a surprising twist, a new survey from TD Canada Trust shows that what boomers really want to do is start a business of their own. According to the survey, 39 percent of boomers were considering making one last career move, while 15 percent had already taken the plunge. But while boomers certainly have the knowledge, experience and energy to make waves in yet another arena, new business owners face some serious risks, especially as they approach retirement. We talked to Dan Demers, Vice President at TD Canada Trust, about what late-in-life entrepreneurs need to think about...
Determine your motive
Many boomers are able to start a business with a distinct advantage as compared to young entrepreneurs: money. After years of work, says Demers, they may already have financial security, even a pension. What they're looking for in a business is the chance to fulfill a lifelong passion. The TD poll found that two-thirds of those who had thought about opening their own business would do it in a field outside their field of expertise.
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"They want to do something that they're passionate about and didn't get to do in their careers," Demers said. "It's pretty exciting because you get new entrepreneurs thinking outside the box and growing some interesting small businesses in Canada."
Of course, on the other side of the coin are boomers who are getting into the business world to make up for lost time, pay off debts and — if all goes well - pave the way to a cushy retirement.
According to Demers, those are different types of entrepreneurs, and they need to consider different approaches. That's because unlike younger entrepreneurs, boomers need to balance saving for retirement with investing in their business. And unlike younger entrepreneurs who have time to make up for financial failures, if boomers 'go for broke', well, that's exactly where they might end up.
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Never mix business and personal finances
Many entrepreneurs see their business as their baby. But remember how you had to learn to say "no" to your kids to avoid busting your budget? Piling money onto your business won't spoil it rotten, but it could quickly disintegrate your personal assets, including precious retirement savings.
"You don't want to put your personal finances at risk by starting a small business," Demers said. "A key component of successful business ownership is sticking to your business plan — and that includes how much you'll contribute to the business - or retract from it."
Demers recommends that business owners keep their personal and business finances separate, and make firm rules about when the two will intersect.
"By keeping those distinct, you can avoid putting any wealth you've accumulated over the years at risk. And make sure you really understand the risk you're willing to take," Demers said.
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Steer clear of common mistakes
If there's one piece of advice any successful businessperson will give, it's to keep an eye on cash flow. Demers said it's the key issue he runs into when he comes across battered businesses.
"That's where we see businesses struggling," Demers said. "It's important for entrepreneurs to look at cash flow on an annual basis, and look at seasonality."
According to Demers, that means looking at whether you'll be able to reserve some funds for down times in the business, or even for when you want to take a vacation.
Financing can also be an issue, although Demers said boomers often have the upper hand on this if they've saved enough to invest in the venture themselves. Getting a start-up loan is often a different story.
"To borrow up-front you have to have a strong business plan and some guarantees behind that loan, such as a home or savings that can be used as capital," Demers said.
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Strike a balance
More than one-third of boomers see work/life balance as a challenge for business owners. For potential entrepreneurs, that means knowing what you're getting into is key, especially if the business is more for pleasure than profit.
"The commitment of time and energy are key challenges," Demers said, and noted that it's important for entrepreneurs to get advice not only on the financial aspects of running a business, such as structuring financing, but also on the management aspects.
Boomers: it's your move
Boomers have always been trendsetters, so a bold move into the business world only makes sense; after years of learning the ropes, this career-oriented crew wants to do things their own way. If you want to be one of them, get smart - and get advice. Whether your entrepreneurial bent stems from love or money, boomers face some additional risk. Make the wrong moves, and you might come up empty-handed. But make the right ones and business could be, well, booming.
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