As you approach retirement, you might think that a favorite hobby — cake decorating, landscaping, woodworking — could provide you with income after you’ve left your full-time position. After all, retirement provides you the time to pursue that dream.
However, time is not the only thing you’ll require. Keep in mind that starting a business is a major undertaking. According to the U.S. Small Business Administration, just seven out of 10 new ventures continue after the first two years. Once you’ve identified your niche and market, you’ll need to consider several questions before starting the journey from entrepreneurial dream to business reality.
Answering these questions honestly can help you determine if your personality is suited to entrepreneurial life, and if your hobby has the makings of a viable venture. What are my entrepreneurial goals? Some entrepreneurs are simply looking to be their own boss or make a positive impact in their community — making a large profit is not the end goal. But others may evaluate success primarily in financial terms. Understanding how you define your goals and success can give you a better idea of your own road to happiness.
Is my business plan viable? A detailed business plan is an important first step. Understanding your market, costs, competition and other critical information can help you objectively evaluate your idea and decide if your venture is worth pursuing. Having a comprehensive business plan will be necessary if you plan on seeking financing from outside investors or lender, the U.S. Small Business Administration and your local SCORE affiliate have resources that can help you write your first business plan.
Am I prepared for the business side of my business? Remember that owning a business also involves taking inventory, invoicing, cash flow and many other important tasks. Some business owners may like these duties, but others may view these tasks as chores, which can quickly drain the joy out of being in business.
Am I comfortable with financial risk? People may be overly optimistic about how soon they will be able to evaluate the success or the failure of a business. Even if a company is thriving, success seldom happens overnight. In order to give your business the best chance to succeed, you need to be comfortable with the possibility that it might not be profitable soon, or ever. A conversation with a financial adviser can be beneficial as they might see ways to adjust your portfolio to help offset various business risks.
Can I dedicate my life to my hobby? A new business can be all-consuming, thereby limiting the time you have to spend with grand kids, travel, or enjoy other retirement activities. You need to consider if your enjoyment of the entrepreneurial venture will exceed the pleasures of having ample time and flexibility in retirement.
Do I have the support of those around me? Your spouse or partner probably also has an idea of their ideal retirement. Your family and friends will become integral to your success, sharing in the business’s highs and lows. If you were to explain your plans to those who will be affected and detail the commitments involved, would they be willing to support you through thick and thin? It takes passion, commitment and desire to turn a favorite hobby into a business. But it also takes a strong sense of who you are, what you want and whether you’re the type of person who will truly enjoy the everyday adventure of entrepreneurship.
For more information, contact Jeffery Price in the Southlake, Texas office at 817-410-4940 or [email protected]. *** Merrill Lynch Wealth Management makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated , a registered broker dealer and member SIPC, and other subsidiaries of Bank of America Corporation.