When it comes to starting your own business, you’ve undoubtedly heard about what is sometimes referred to (rather unflatteringly) as the epidemic of the “olderpreneur”. The number of starts ups in the UK has been increasing year on year, particularly as a result of various government funding initiatives after the credit crunch of a decade ago.
According to The Financial Times last year, “There were 4.6m self-employed people in the UK at the end of 2015 – up from 3.8m in 2008, according to ONS data. The over-50s account for 43 per cent of those who start their own businesses. Furthermore, the number of self-employed people aged 65 and over has more than doubled in the past five years. By the age of 70, almost 60 per cent of those still in work are self-employed.”
There are, of course, many reasons to start your own business when you’re a little older, and most of the reasons are sound. The most obvious being that it can be a good way to supplement your pension income. It can also offer an opportunity after redundancy, when jobs for the more mature can seem thin on the ground.
A more fulfilling career
According to anecdotal evidence, starting your own business later in life isn’t normally about making a mint. It’s often about leaving a legacy, supporting a cause close to your heart or helping children or grandchildren. For some, it represents a chance for a less stressful work life balance after years of working long hours in the city. It’s also not unusual, in our experience, for baby boomers to want a chance to do something which is more fulfilling, to live life with a greater sense of purpose and alignment with personal values and passions. It may just be that you’re not the type who wants to sit around doing nothing, and you’re all too aware that the skills and experience you’ve acquired over many years, shouldn’t go to waste.
It may just be that you’re not the type who wants to sit around doing nothing, and you’re all too aware that the skills and experience you’ve acquired over many years, shouldn’t go to waste.
Good for your health
There’s even evidence from the Chief Medical Officer for England, that becoming an “olderpreneur” might be good for your health.
“Staying in work, volunteering or joining a community group can make sure people stay physically and mentally active for longer. The health benefits of this cannot be overestimated.”
A new journey and experience
Of course, it’s likely to involve hard work, soul searching and can be financially risky. There is no guarantee of success. So, at a time in your life when your financial security has never been more important, it’s essential to take professional advice as to affordability and put whatever safeguards you can in place.
Starting your own business has never been easier and the internet makes it cheaper, more portable and less physically demanding than ever before. Many who have made the leap, describe it as a fun, fascinating and rollercoaster of a journey, which involves learning new skills and meeting new people. Although not always a journey that earns enough money!
Two essential pre-conditions to starting your own business
1. Your life plan
We’ve said it before and we’ll say it again: before you even begin to think about accessing finance or re-organising your assets to fund a start up, you need to start with life planning. You can of course undertake this alone or with your partner. You’ll find it’s a much more productive, insightful and enjoyable process when done with the guidance of a professional life planner.
The key is to get as clear as you possibly can about your values and what matters to you, what you want and need financially from a business now and the sort of future you want to protect.
This is not just about uncovering what business or new career will bring you fulfilment now and or in retirement – although of course, that’s very important. It’s about looking at the whole picture – short and long term, financial and emotional. What you want and need now will of course vary from what you want or need in your 80s or 90s and you don’t want to jeopardise your later lifestyle and standard of living. How much time do you want to invest in a new business both now and in 10 years’ time for example, and how much do you need or want to earn from a new venture? There may be things you haven’t thought about, such as what you want to happen in the event of your unexpected death or serious illness. There may be ways you can turn your business start up idea into a life legacy and or a vehicle for doing good and giving back.
Whatever your vision, the key is to get as clear as you possibly can about your values and what matters to you, what’s holding you back, what you want and need financially from a business now and the sort of future you want to protect.
2. Can you afford to start your own business?
With clarity as to the direction you want to go in, the next step is two-fold: can you afford to start your own business and / or how can you finance your start up?
There are multiple ways to fund a new business. These include (but aren’t restricted to):
- Using your pension, redundancy payment or savings
- Borrowing against property or assets
- Securing government lending or funding from other initiatives
- Relying on business loans and borrowing
- Peer to peer lending or crowd funding.
And of course, there are multiple different business models which may affect start up costs, such as buying a franchise, becoming a buy to let landlord, running an online only business, offering consultancy etc. This means this is the stage at which you need a thorough audit of your assets and income and good financial advice. The different methods of funding are all complex in their own right, and you’ll need to consider: tax issues, allowances and reliefs, asset valuations, different asset structuring and lending facilities, and interest rates. You also need a complete bird’s eye view of your financial situation and how any decisions you make now, will affect your future in any number of different situations.
You need the details too. Will you still have enough cash in your pocket to enjoy regular meals out and if you’ve got to economise for a while to make the dream happen, how long for and by how much? Will your home be at risk and what happens if it goes wrong or you want to cease trading? A good financial advisor should not only be able to provide the detail you need with professional cash flow planning software. They should also be able to create a financial strategy that helps you achieve your goals and vision but still protects your future, long term.
Daunting but do-able
Starting your own business can offer a wealth of opportunities and experiences. And in fact, in their report last year, The Financial times concluded, “For anyone considering starting out again, there is one very encouraging statistic. Businesses set up by the over-50s are more likely to still be trading five years later than those established by younger age groups.”
It may not be all plain sailing but: if you put in the ground work, if you get clear on what you really want and enjoy, if have a sound financial strategy in place which protects you (even if it all goes wrong), then you can approach your new career with confidence in your financial circumstances and give yourself the best possible chance of success.
