Why not spend your retirement working for yourself?
By Olev Edur
When she retired at age 65 from her job as a facilities planner in Ottawa, Irene Flanagan she had no intention of not working (her name has been changed for reasons of privacy). She wanted to continue, but working for herself rather than for someone else. She’s not alone.
In an effort to stay active, to earn income during retirement, and sometimes to satisfy lifelong dreams, increasing numbers of Canadians are going into business for themselves. According to Statistics Canada census data, almost 330,000 men and women aged 65-plus were self-employed in 2006—one in three working seniors—and subsequent analysis showed that this number was on the rise.
A study of the census data also showed that while participation in the job market drops significantly at age 65, 14.8 per cent of men and 5.8 per cent of women continued working, with 6.6 per cent of men and 1.7 per cent of women self-employed. In fact, self-employment was more prevalent among those aged 65-plus than among younger workers. Perhaps surprisingly, the incidence of self-employment was highest among older seniors—those aged 75-plus.
Planning and Rethinking
Flanagan has always had a love of fine clothing and over the years amassed a collection of top designer pieces from the early-to-mid-20th century. Now that retro is firmly back in style, she foresees profit in selling these heirlooms. Her early efforts at setting up her own vintage clothing consignment store hit a snag, though, when finding the right location proved a challenge.
“With one,” she says, “the price was reasonable, but it needed an awful lot of work—wiring, plumbing, you name it—and they expected me to pay for all the leasehold improvements. Another was billed as central, but it was on a residential side street two blocks away from the shopping street and there was no foot traffic. I had to stop and rethink my plan. Now I’m taking a different approach in a more central location.”
Flanagan’s temporary setback illustrates the trickiness of starting a business: despite all your product knowledge and preparedness, unexpected hitches can (and usually do) arise. Murphy rules.
Regulation can be a stumbling block, too. A CBC News report produced last year by Holly Moore about home-based food businesses cautioned: “There are no specific cottage food laws in Canada and guidelines vary by province. Canada has a patchwork of provincial and municipal laws and guidelines that can be confusing to people starting out.
“Prince Edward Island sets out cottage industry guidelines that require a completely separate area in the home for food preparation,” the CBC report continued. “Manitoba, Ontario, and other provinces allow producers to sell some lower-risk homemade items like jams, jellies, and baked goods at farmers’ markets with permits issued by the government. All other food preparation must be done in licensed food premises, and that can be very expensive to set up.”
The report went on to note that some would-be food purveyors were able to succeed by making use of relatively low-cost shared facilities, such as the Knox Community Kitchen in the basement of the Knox Community Church near Central Park in Winnipeg, which charges only $10 an hour.
“There are always going to be barriers in the form of regulations and red tape,” says Darcia Armstrong, manager of marketing and online sales strategy at the Canadian Federation of Independent Business (CFIB) and manager of the organization’s My StartUp program for small businesses. “That’s why planning is so important.”
“The first thing you need to do is some soul-searching,” Armstrong says. “Lots of people have hobbies, but do you really see yourself turning your hobby into a business? You may love gardening, for example, but do you really want to run a farm? And how much time and money are you willing to invest? Is this what you really want to do in your retirement?”
An article on forbes.com by author and business start-up advisor Martin Zwilling entitled “10 Reality Checks Before Starting Your Own Business” advises: “Don’t make the mistake of assuming it is a way to get rich quick, or an escape from all problems. Starting a business is hard work, requires a lot of determination and learning, and only pays off in the long term. Take an honest look at yourself before leaping.”
Assuming that you have what it takes and aren’t simply looking to get rich quick, the next question to ask yourself is whether there really is a need for your product or service. “Who is your target market?” Armstrong asks. “This is often the harshest part of a start-up. If you can’t identify a need and a market, then you don’t have a viable business.”
Needs and Markets
Establishing needs and markets comes down to research—the more the better. Ask friends and associates, conduct your own informal surveys, pore through published information and data—there’s a ton of it online. Check out what the competitors are doing.
“It’s important to seek advice wherever you can get it,” Armstrong says. “You can get it from friends and associates, and organizations including the government. People are often nervous about getting negative feedback, or nervous that someone will steal their ideas, so you need to have a will of steel and take whatever you can get.”
Armstrong also advises that in starting out, you should avoid trying to be all things to all people.
“You need to narrow your scope,” she says. “Your resources and time are not unlimited, so you need to aim for specific products and audiences. You can always expand the business later.”
Once you’re sure there’s a profitable market for your product, that information has to be incorporated into a comprehensive business plan, both to guide your own progress and to help obtain any required funding.
Creating a Business Plan
Basically, a business plan consists of:
a) a brief overview of the business—what it does, where, and how this will make a profit,
b) a description of the product/services on offer,
c) a description of the market,
d) an explanation of how the product will be delivered to that market,
e) a summary of potential risks to this plan, and
f) detailed financial statements.
The key component is the financials—statements of income and expenses based on sales versus all your production and related costs (raw materials, salaries, facilities, phones, website, licences and other fees, taxes, etc.), plus cash-flow statements showing when the money goes out and when it comes back into the business.
These statements should cover anywhere from one to five years of operation, depending on size and scope.
“Your financial and marketing plans need to be very well-thought-out,” Armstrong says.
“You must determine the profitability of each unit or service sold,” says Anthony Lipschitz, chief strategy officer at Thinking Capital, an online small business loans and business funding company. “It’s important to know how much profit is in each sale and how much customer revenue can fund the overall cash needs of the company. Businesses that get most of their gross profits through their customers grow in a healthy way.”
Zwilling cautions, “Passionate entrepreneurs tend to develop rose-coloured plans, overestimating early sales and underestimating costs. To convert your passion into tangible business value, write a business plan that makes financial sense for the needs and future goals of your start-up, and then have it checked by an expert.”
If you need financing, Lipschitz suggests that there may be alternatives better than the big banks.
“Alternative lenders are now making it easier for small businesses to access capital that they couldn’t get from banks,” he says. “In fact, lenders are eager to lend to small businesses and they are offering more programs to help them start, manage, and grow their establishments.”
In the process of starting up, you’ll also need to deal with a variety of details, including:
– a descriptive and hopefully memorable name for your business
– name search and registration
– bank and tax accounts
– patent search, if intellectual property is involved
– signage and stationery
Thankfully, as is evident from the box below, there’s a lot of free help available online these days for those who want to start a business, whether it’s a one-person cottage industry, a consultancy based on your professional skills, or a full-blown corporate entity.
And finally, like Irene Flanagan, don’t get discouraged.
“You need to be focused, do a lot of research, plan, plan, plan, and then just do it,” Armstrong says. “And don’t let your desire to be perfect get in the way,” she adds. She quotes Reid Hoffman, the founder of LinkedIn (akin to Facebook for the business set):
“If you’re not embarrassed by the first version of your product, you’ve launched too late.”
Online Help for Start-Ups
Thinking of starting a business in your retirement? Wondering how to get going? There’s plenty of help online, including the following:
- The 109,000-member Canadian Federation of Independent Business (CFIB) has a program called My StartUp (mystartup.ca) for first-time entrepreneurs with registered businesses; it’s available free for the first six months and allows for a discount to the regular CFIB membership fee for the following 18 months (a one-year membership is $250 plus $30 per employee, to a maximum of $3,500/year). The program provides access to all CFIB services including the organization’s discounts on a variety of business-related products and services, as well as unlimited access to advisors and business education programs.
- CIBC’s Small Business Start Strong Program (go to cibc.com/ca and search for “Start Strong”) provides “ideas, insight, and hands-on planning tools to help launch your new business.”
- Scotiabank’s Running Start for business program (go to scotiabank.com/ca and search for “running start business”) offers “customized tools, resources, and financial services designed to help you to take the next steps to realize your dream to become self-employed and achieve business success.”
- About.com’s business start-up pages provide extensive guidelines on the steps involved in starting a business in Canada—go to about.com/money and search for “Steps to Starting a Business in Canada.”
- The federal government operates a website that has extensive information on what to consider before starting a business—canada.ca/en/services/business/start.html—including registration, business plan templates, regulations and incorporation, and start-up guides and checklists.
- The government’s Canada Business Network provides a wide variety of free guides and checklists for starting a new business—go to canadabusiness.ca/eng/page/2856. It also provides a toll-free number (1-888-576-4444) you can call for any business-related questions, and provides answers within one business day.
- Innovation, Science and Economic Development Canada’s Small Business Financing Program (go to ic.gc.ca and search for “Canada Small Business Financing Program”) can help provide up to $1 million in loan financing for small businesses (over the past 10 years, small businesses have received more than $9.4 billion in asset-based financing, representing more than 76,000 loans made).
- The Leadership Grants Organization of Canada (leadershipgrants.ca), a recently founded industry-sponsored non-profit funding organization, can provide up to $100,000 in cash awards and in-kind resources to small-business owners and entrepreneurs in order to start or grow a small business in Canada.
- BizPaL (bizpal.ca/en) is a free service provided by federal, provincial/territorial, and municipal governments for identifying the permits and licences you may need to start or grow your business.