Plan to turn a hobby into a business? More and more people in later life are becoming self-employed and starting their own ventures. According to data from the Office of National Statistics, four out of 10 new businesses are started by entrepreneurs aged 50 or over. What’s more, the number of people aged 65 and over who have launched their own enterprise has also doubled in the last five years.
It’s thought to be partly due to age discrimination and the fact that older people can find it more difficult to secure full-time work, according to the Financial Times and Age UK. Those in their fifties can unfortunately find themselves a target when companies are making redundancies as they may be more expensive than their younger colleagues.
However, on the bright side, businesses set up by older people are more likely to be still running in five years’ time compared to those started by younger entrepreneurs.
Starting a business over-55s can come with challenges. Speak to our loan experts Fluent Money who are on hand to give you the best advice on where to begin. Book a free call now.
Another factor in the growth in self-employment among other people since 2000 is also thought to be the pension freedoms introduced by the government over the past decade, which enable savers to take a lump sum from their pension when they reach 55 or even borrow against it. Some ‘oldpreneurs’ as they are sometimes called are using the cash - along with redundancy payments - to start up their own ventures.
However, it’s worth remembering that starting your own business is risky – especially if you are borrowing money or using cash from your pension to fund it. That’s why it’s important to get as much advice as you can and to ensure there is actually a market for your product or services before you splash out on expensive equipment or office space.
Could you run a franchise?
One way to start up a new business is to run a franchise. This way you’ll have a tried and tested business template to follow that has worked elsewhere. Plus you’ll usually get guidance, support, training and advice from the parent company. There are many different franchises available in different sectors, from education, beauty, finance, to food, care and fitness. Visit the British Franchise Association website to find out more. Home | British Franchise Association (thebfa.org)
However, usually you have to pay a fee to secure the franchise – generally £15,000 to £20,000 – and you may be tied into purchasing all your raw materials or ingredients if you are running a restaurant or fast food chain from the parent company, so your upfront costs may be significant. You may also have to sign a legal agreement or contract. Make sure that you consult a solicitor before you take out a franchise and that you read all the small print before signing.
Putting together a business plan
It’s important to do your research before starting up your business and find out whether there is a genuine market for your venture. This may simply involve speaking to a small group of potential customers to find out if they would buy your products or services and analysing the competition.
If you plan to borrow money for your new business from a bank or other institution you will also need to write a business plan. This will include a breakdown of your new business idea, how you plan to fund it and projected costs and cash flow. However, even if you don’t plan to borrow money from a third party, writing a business plan is still a vital part of getting it all down on paper and making sure that your venture is well thought out.
Advice and funding
You could take advantage of current low interest rates and take out a personal or secured loan from a bank or building society or remortgage your home to finance your new venture. It’s important to remember, however, that if you take out a secured loan that your home could be at risk if you fail to keep up repayments.
If you are currently receiving the Jobseekers Allowance you can get advice on how to start your own enterprise from a business mentor at the Job Centre. If you receive certain benefits you could also be eligible for the New Enterprise Allowance Scheme. This provides support and advice for unemployed people looking to start their own business or self-employed workers wanting to develop a new business idea, as well as a weekly allowance worth up to £1,274 over 26-weeks and access to start-up loans.
The government also has a Start-up Loans service for people planning to start their own enterprise in the UK and lends £500 to £25,000 at a fixed interest rate of 6 percent a year. To be eligible, you will need a business plan and to pass certain credit checks and have started your new business within the last 24-months. Often applicants have been unable to secure financing through other channels.
It’s important to find out the tax implications of starting your own business or becoming self-employed, especially if you plan to start receiving some or all of your pension or if you are in receipt of certain benefits. You are likely to need to pay tax on your income and will need to register as self employed. Contact HMRC for more details.
Always think carefully before taking money from your pension and investing it elsewhere.
Written by Piper Terrett, Fluent Money Group