How to start a new business — after retirement

Q: I’ve been in the corporate world all of my life and retirement is now upon me. I could keep working but the retirement benefits package is enticing. I’d like to start a business but I’m not sure doing so at my age is a good idea. Is it?

— James

A: Well, I hate to sound like the lawyer I am, but it depends. There certainly is no shortage of older Americans becoming entrepreneurs these days.

Part of the reason is demographic — as the Baby Boomers hit 50, 60 and older, there are simply more and more people living longer and healthier, and many of them do not want to retire either. Another reason is that when older workers are laid off, finding comparable work is not easy, yet the need to make a living may remain.

A final reason increasing numbers of older Americans are starting businesses is know-how: After 50, you have gained skills and experience that can really make a difference. All of these have combined to create a new renaissance in older entrepreneurship.

So yes, there are many good reasons to want to start a business when you are older, but doing so requires some extra precautions that do not apply to the typical would-be entrepreneur. Simply, starting a new business when you are older is more risky than when you are younger.

When you are younger, you can afford to make a mistake, go out of business, even file for bankruptcy and still rebound. When you are older, there is simply less time to bounce back from significant business problems. Moreover, when you are older, the money you have to invest in the venture might just be the retirement assets you worked so hard creating. Betting your nest egg on an untried business venture may not be the best idea.

So if you are older than the average entrepreneur, you need to proceed with caution. Here are four rules to follow:

You want a franchisor that offers the following:

Rule No. 1: Don't bet the ranch. Borrow only the necessary capital to start your new business or check out Small Business Administration loans. Try to avoid either a personal guarantee or a second mortgage. While it is not my style to discourage, better you think twice and plan thrice.

Rule No 2: Pick a business you know well. Retirement is not usually the time to try something new. You may like to garden, but if you have never worked run a nursery, buying one at age 65 might not be a great idea. Instead, choose a business that you know, or at least one in which your considerable skills are easily transferable.

Exception to Rule No. 2: Because retirement is often a time to try new things, starting a business in a new arena often sounds fun. And it can work if you spend sufficient time learning that industry and the business. Go work in a nursery. Join trade organizations. Meet other nursery owners. This kind of homework is generally true for all new startups, but it is doubly true for you.)

Rule No. 3: Consider buying an established business. . Entrepreneurship is a risk, and the riskiest type of entrepreneurship is starting a new business from scratch. But great small-business owners work to reduce the inherent risk as much as possible. One way to do so is to buy an established business. Look in the classifieds under “Businesses for Sale” or contact a business broker (look in the Yellow Pages).

An established business has a track record, and financial statements you can follow. Go over them with your lawyer and accountant. You will have a pretty good idea how much money you can make by looking at how much money the current owner makes. Important caveat: Be sure that the business is not dependent on the current owner personally — his contacts, skills, contracts, etc. You are buying his business, not him.

Rule No. 4: Consider a franchise. Similarly, a franchise is a business system in which the kinks should have been already worked out. But note: Not all franchises are created equal, so the most important thing you can do is speak with current franchisees and discover what it is like to work with the franchisor, how much money the franchisee makes, and so forth.

Starting a business is always fun, and doing so when you don't have a family dependent upon you makes it that much better. Nevertheless, just be sure to be extra cautious.

How did Steve answer other questions? Read his previous columns

Steve Strauss is one of the country's leading small business experts, a columnist for USATODAY.com, and the author of the "Small Business Bible." If you would like to have Steve speak to your group, or to sign up for his free e-newsletter Small Business Success Secrets!, visit his Web site. Have a question for Steve? Send him an e-mail.