Retirees Start New Businesses; Doing It Right

Business Plans Critical, Especially For Retirement Startups
By Susan Klopfer,
Author, speaker, blogger

“Sue” and “Betsy” develop their biz plan.
“I thought I left business and work and all of that snarly stuff – and now you want me to write down my business plans? To write down my goals? NOT!!”

Sue is a newly retired office manager turned blogger who wants to make a small business of what she is doing — blogging about business.

She sees an eventual online bookstore, coaching and eBooks as her eventual dream. In fact, she would like to be wildly successful, now that she has the time and energy to help cover her retirement expenses. She only brings in a little over $700 through social security plus a small pension of $500, so how can she make this dream a reality?

Her friend, Betsy, believes they can work together and “come up with something creative that will make us some extra money.” A little way into the process, Betsy is telling Sue they must first write some business goals and a business plan before actually starting ANY business.

Sue’s reaction?

“Oh, dear. I just don’t want to get soooo formal. I just want to have fun and make some extra retirement money.”

So who is right? Plan (Betsy) or no plan (Sue)?

In a study of Harvard Business School MBA graduates from 1979, researchers found that ten years after graduation, the three percent who had written goals were making 10 times as much money as the other 97 percent combined.

Other studies over the years have produced similar findings. People who write down their goals are more successful. There is no reason these research findings would NOT apply to retiree businesses, as well.
Betsy wins. But, Sue could be a winner, too…

Business advisors, experienced entrepreneurs, bankers, and investors generally agree that you should develop a business plan before starting a business. Here is why: a plan helps you move forward, make decisions, and make your business successful.

However, not all business plans are equal and not every business needs the same level of detail. You might develop a simple straightforward plan before or as you start a business, and that might be enough for you. Start simple and then become more elaborate if needed – for example if you eventually decided to ask for a loan or needed to seek investors.

Consider a retired woman from New York who worked for a major communications company before retiring. Linda B. started her secondary financial retirement plan early by purchasing a small knitting machine to produce knitted headbands for skiers, complete with their company logos.

During her Norwegian childhood, she learned to knit traditional ski sweaters from her grandmother and actually started out knitting sweaters for several nearby Vermont skiers. The nature of imports changed in the U.S. and Linda found that she could not compete in price with similar types of sweaters coming into the U.S. from China. Because she started her business before her actual retirement, she had time to modify her existing business plan, finding a new, competitive product and was able to make needed, flexible adjustments.

“Where I grew up in Europe, we always had small businesses like this on the side. If there was an economic downturn, we had something to fall back on. I knew that my small business was perfect for adding to my retirement income, and would keep me connected. Having a flexible business plan, with goals, meant I could make this important switch, from sweaters to head band, and keep making money.”

Linda also benefits from having a simple sales and expense forecast, a profit and loss report, so she can plan how to use and develop her resources. She might not need to create detailed cash flow, balance sheet, and business ratios. A simple plan is what she needs to keep going.

Linda started out with a mission statement, an easy market analysis (she used a telephone book to discover major ski shops that might stock her sweaters), and a break-even analysis, to provide an important head start to understanding her business. Her yarn cost was minimal and she actually found herself making more profits from the head bans than the sweaters.

Of course, not all startups are this simple. Most of us are not wealthy enough, especially going into retirement, to finance such expenditures as product development, packaging, retail fittings and signage, office equipment, websites, and sometimes months or even years of payroll before the sales start. Like Linda, we will not be working with bank loans or investors, both requiring more extensive business plan.

Betsy’s suggestion to Sue for getting started is to develop a plan in stages that meet real business needs. She wants to add a basic sales and expense forecast, leading to profit and loss, as next phase. Adding business numbers will help predict business flow and match spending to income.

Here is what Betsy would like to see in their startup plan:

· Executive Summary
· Objectives
· Mission
· Keys to Success
· Company Summary
· Product Description
· Target Markets/Strategy to reach them
· Potential buyers, their needs, and how to reach them
· Competitive Edge
· Financial Plan with Projected Cash Flow
More sophisticated plans than Betsy’s are based on the type of business, financing requirements, and business objective. Regardless, here are several more points to consider that come from  blogger Tim Berry at

§ Even a one-person, small business benefits from written plans, because simply producing a plan is quite useful and valuable.

§ When others become involved, the need for having a written plan becomes even more important for communicating values, goals, strategies, and detailed implementation.

§ When you involve people outside the company, then you need to provide more background information and a written plan helps to describe company history and product or service features, for example.

§ A written market analysis helps spotlight opportunities that might not otherwise be obvious. For example, do you know why people buy from you? Who are your potential customers? How do you find them?

§ Do you sell on credit? This requires a more sophisticated plan than running a cash only business.

§ Do you do your taxes on a cash basis, or accrual basis? Hint:  If your business requires helps from a CPA, your business probably needs a more extensive business plan.

§ Need more money to make more money? Some banks will accept a less sophisticated business plan as long as the collateral looks good; a good bank wants to see a good plan. Professional investors will expect a business plan to provide solid proof including market data, competitive advantage, and management track records, along with comprehensive financial projections.

Tim offers even more ideas in his article A Simpler Plan for Startups.
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No matter how you cut it, a business plan is critical to your business, especially if you are retired, because your cash flow has more limitations than when you were working and bringing in more money.

Even at the early startup stage, and even if you can keep it in your head, a plan is very important. Betsy was able to convince Sue of this importance, and before they made any purchases such as business stationery, telephones, renting a location, they sat down together and did a simple business plan.

As it goes, their friendship survived, and so did their retirement business.