Buying or starting a business after retirement

Retirement can mean different things to different people. For some, it is a chance to finally kick back and leave the rat race behind them. But for others it is a thing of dread – an overabundance of free time that threatens to drive you slowly mad. It’s no wonder then that more and more retirees are choosing to start or buy a business.

There are many great reasons to start a business after retirement. With success, you will be earning a regular income that may beat the average annuity rate or state pension fund. When you’ve had enough, you could sell the business on, regaining your capital investment and maybe even making a profit. If you have children or grandchildren you may wish to create a legacy for them by founding (and funding) a company that they can someday take over.

But most importantly of all, starting or buying a business in your retirement is your chance to take control; pursue your passions and be your own boss on your own terms.

Before taking the plunge and deciding to buy or start your own business, make sure you know what you are getting yourself into.

1. What sort of business should you consider?

If you are starting your own business, its best to stick (more or less) to what you know. During your career, you will have built up a huge cache of contacts and niche experience that will give your business instant credibility. If you are looking for a complete change, pursue a business that is related to a hobby – your passion for the job will be contagious and it will see you through tough times.

Lifestyle businesses such as running a pub or a B&B are popular with retirees. When you run your business from your home, you can better control your work/life balance, allowing the business to complement your day-to-day life while keeping you busy and producing an income.

If you know you want to run a business but don’t know where to start, consider buying an existing firm. Franchise buy-ins are popular for the security they offer, while buying into start-up firms can be both immensely profitable and hugely exciting.

2. How should you approach buying a business?

If you are buying a business, be extremely thorough. You need to make sure that the business you are buying into is financially viable, and has the potential to make a profit (if it hasn’t already). Be aware of how much time and money is required to improve or alter the business, and negotiate on the terms from the outset so that you get the best possible deal.

Most importantly of all, never overspend. You shouldn’t be taking on masses of debt to fund your retirement business, so if you fall in love with a business but don’t have the capital to buy it – walk away.

3. How does buying a business compare to other retirement investment options?

As you approach your retirement, you will be inundated with people trying to convince you to part with your pension savings in a variety of different ways. There is no shortage of retirement investment options. You can invest in an annuity to guarantee your income year on year; you can bank larger sums in offshore investment bonds, withdrawing tax-free ‘segments’ to sidestep taxation; you can invest in stocks and shares or start-up firms; you can buy up property for commercial or residential letting; the list is endless.

If you want to sit back and let your money do all the work for you, investment bonds, annuities, stocks and shares may be best for you. However, do not underestimate the risk which comes with any investment. Create a diversified portfolio and hire a trusted financial adviser to help manage your allocations.

By buying a business in your retirement, you are essentially investing in yourself. While there is still an element of risk, you are much more in control and you can use the wealth of your experience to guide the business to increasing profit. Yes, that may mean hard work, but you will be rewarded with a steady income, capital appreciation and the legacy of your great idea and business success.