Starting A Business After 50: How To Manage The Financial Risk
Starting A Business After 50: How To Manage The Financial Risk
Transitioning from your nine-to-five career to becoming a business owner after 50 may sound enticing, with the freedom to set your own hours and profit from your passions. But midlife entrepreneurship comes with financial risks, too. Here’s how to manage them and set yourself up for success:
Be Mindful of Your Financial Commitment
Since you’ll need to continue saving for retirement or live on your current fixed income in retirement, it’s crucial to establish a budget for how much you can, and will, invest in your business. Ask yourself these questions:
How much money am I able to invest without taking on debt?
How much revenue do I need to be profitable?
What other financial commitments and expenses do I have? (e.g. insurance, mortgage, utilities, travel)
You may need to dig into your financial statements and do some research to get these answers. But putting in the time to do so will help prevent you from endangering your financial future. And before starting a business, get your debt paid off, says Chane Steiner, CEO of the personal finance site Crediful.
5 Funding Ideas for a Midlife Business
Once you’ve determined your monetary limits, consider the five funding ideas Business.com recommends: Bootstrapping, personal loans, government or venture capital, crowdsourcing and retirement accounts.
Also on Forbes:
Bootstrapping If you own the right equipment and have the knowledge to launch your business without help, use your own capital for initial costs. Just bear in mind that doing so will likely limit your financial ability to hire employees or invest in marketing.
Says Rob Stephens, founder of CFO Perspective, a small business advisory site: “The question I would ask is ‘How much money can you lose and still live the retirement you want to live?’
Steiner suggests leaving “six months’ worth of expenses in savings, in case things tank.”
Personal loans If you need money to buy materials, hire staff or contractors, or pay for advertising, borrow funds with a personal business loan. It will most likely have a lower interest rate than if you charged the expenses on a credit card.
