Mini Business for Retirees
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By Stan Spector
New retirees are looking for a different type of mini business than the general public. If they are on Social Security, they may be penalized if they make over $12,600. Some private retirement policies will also penalize you if you earn money in your retirement years.
New retirees dream of taking extended vacations or wintering in Florida. They want their new business to work around their life. Many insist that they do not want to have employees, since having employees complicates the business and necessitates payroll services, accountants, and workers’ compensation insurance that quickly eat into their profits. They want a business that they can run, possibly with the aid of their spouse, and any outside labor would be hired through an independent contractor. Some of the retirees are looking for a hobby business, making some money while enjoying their hobby and traveling around to locations and conventions for their hobby.
Business brokers try to sell mid-sized businesses costing $100,000 to $1 million. If the business were to fail, this would put a big dent into anyone’s retirement savings. Brokers wouldn’t make much money if they got a 10% commission selling a $3,000 business so they push the larger-sized businesses. Likewise, franchises require large up-front franchise fees and most of them are centered on businesses that have high startup costs. But retirees should look for businesses that cost under $5,000 to start and try to fund these businesses out of their own pockets. Most of the low-investment businesses would fall into the service sector where you are really selling the time and labor you spend exercising your specialized skills.
All of these retirement goals are possible. The businesses in this column meet the following criteria:
• They are a mini-business run by the owner and the spouse with no payroll.
• The couple should be able to start up the business for $3,000 to $5,000. Many of the people who start these businesses may decide to grow the business with more investment after they have proven their business can produce good cash flow to them.
• The couple should have to enter into no long-term lease commitments (space or equipment).
• They are seasonal or part-time businesses. They will not require the 60 to 80 hours a week to start them that most startup businesses require.
• The cash flow may be small but on an hourly basis it should be worth the owners’ time. Some may provide a real benefit in tax savings by utilizing portions of your house or apartment, allowing you to travel to hobby conventions as a business expense, or renting property you own to the business.
Stan Spector is the author of Baby Boomers' Official Guide to Retirement
Income
The book web site is www.StanSpector.com
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