Working After Retirement - Thinking out loud

[Derek Meyer]

Dennis, you mentioned in one of your posts that you work in IT. If you have IT skills then you'd probably be better off doing side work in IT for people and businesses to generate that $2000/month. I also work in IT and I make extra money on the side doing work for a select group of people without even looking for work. You could probably work 10 hours a week or less and generate that amount.

[Mike Circo]

Dennis, you mentioned in one of your posts that you work in IT. If you have IT skills then you'd probably be better off doing side work in IT for people and businesses to generate that $2000/month. I also work in IT and I make extra money on the side doing work for a select group of people without even looking for work. You could probably work 10 hours a week or less and generate that amount.

Good for you Derek. I've worked in IT for 40+ years, from the mainframe/punch card days. I'm retiring in February 2019. I'll likely take some part time job to pass the time and generate some Mad-Money.
However I can guarantee you it will NOT be in the IT area. I am burned out on that profession. At this point in my life and with the technology the way it is, I'd rather be a greeter at Walmart than go back to IT.
*** Rant Mode Off ***

[Jim Becker]

I've also had a few inquiries about doing some consulting work with my former employer and business partners and while I agreed to it because $125 and hour speaks loudly, I'm pretty unexcited about the actual work and put some hard conditions into things, like no travel, review/advise only...no massive writing, etc. My shop is more "refreshing" after so many years in the 50-60 hour a week rat-race.

[John Sincerbeaux]

To me, some of the advice here seems a little over the top for someone who just wants to make a couple grand a month in WW? Why do you need an attorney if you want to make wooden signs or whatever niche product? I have been selling my work in galleries for 15 years and have never needed an attorney. Regardless of what you do for a living, EVERYONE should hire a CPA for their taxes unless you don’t mind leaving money on the table. My CPA includes my small WW business P/l into my regular tax filings.
Go to your county courthouse and file a DBA. Take the remaining years you’re working your “real job” and refine your WW product and start your small WW business. Hopefully you’ll be all set to suppliment your retirement with your WW passion.

Merry Christmas

[John Sincerbeaux]

If all you need is 2K a month ($500 a week) I would rethink starting a business. A business consumes time and money, even when you're not making any profit. If it was me, I would get a part-time job, maybe at Home Depot or Ace Hardware and then also have a handyman business on the side. A friend of mine left a great sales job over a decade ago when the owner retired and left the business to his sons. He couldn't work with new bosses so he quit. As a favor to a friend, he worked part time at an Ace Hardware during the Christmas season. Customers keep asking him for referrals for local handymen. Everyone they could find was booked out a month or more in advance. We are not talking major home renovations here, just simple things like leaking toilets, bad light switches, fixing lamps and installing mailboxes. Since they couldn't find a guy, he was nice and would stop by their house after work and take of these simple jobs. Word spread around and within two to three months he had a busy part-time handyman business on the side. It now pays much more than the hardware job but he still works at the store because that's were he gets the leads. The owner knows and it's fine with him.

Best advice here.
Probably the most important thing is letting someone else pay for your health insurance.

[Tim Bueler]

Maybe it's been brought up already, I didn't read this whole thread. A $2k/mo job won't necessarily generate $2k/mo. You may have a month where you make $6k and then 2 or 3 months of nothing. Be flexible.

I started 3 successful businesses without all the gobbledy gook previously mentioned. Nor did I have any $ for the first one (built out of pocket as I progressed). Part of it was I was too young and stupid to know better. Part of it was both my parents were entrepreneurs and that type of thing was normal for me. I wouldn't recommend that approach for the uninitiated.

My advise is my opinion and could be (and probably will be ) argued against by others here.
Find a good accounted who understands, at least, small business. Even better if they have a working knowledge of what you want to do. Not all do. Perhaps find some sort of local mentorship program where you can get advice from a successful business person, in person, in real time. It doesn't have to be in your chosen avocation, but it'd help if that person has/had a similar business type, i.e., business to business, service industry, manufacturing, etc. Why? Someone in manufacturing may not understand the needs of the direct to consumer marketer, etc. A huge part of why my businesses were successful is I had a great accountant and absolutely fabulous mentors. Another part of my success was I kept strict control on finances. I can only recall twice when I got a loan for something business related. In both cases those loans were paid off in short order and far less than the loan term (NO early payment penalties!). Paying someone else interest $ was $ out of my pocket.

Finally, I had the fortune to marry a good woman. She has been fully supportive of my entrepreneurship (though sometimes it did take some convincing) and has physically participated in all but the first. I could have done it all without her but I doubt it would have been as successful and it certainly wouldn't have been as much fun.

Good luck!

[Van Huskey]

Well, I've talked to my new financial advisor. I've lost a lot of money over the past several years

Not to reiterate what is probably painfully obvious to you at this point but the NEW FA is probably going to be a big help. If you lost much in terms of percentage any year since 2008 (except maybe 2015 and of course the last 3 months) your old FA did a fairly poor job, especially so close to retirement, or they had sticky fingers.

One thing to look into is how machine acquisitions prior to operating as an actual business may hurt you in terms of taxes.

[Jim Becker]

One thing to look into is how machine acquisitions prior to operating as an actual business may hurt you in terms of taxes.

Yup...which is why some of us have suggested that the ground work for setting up the business take place now prior to retirement so that any capital purchases get tax advantaged while he still has his higher pre-retirement income and tax liability.

[Terry Lewis]

Dennis, I don't think you are thinking too big at all! Relative to financing the business, while having cash is a nice thing, if you do your homework, have a business plan and set things up optimally with your accountant, you really can use "other folks' money" for any additional capital equipment you want balanced by tax advantages. IE, you're paying tax now, so if you can shift that same money toward the business to cover some or all of your startup cost, you can do things without having a huge pile of money. That's one of the reasons that working with a qualified and competent small business accountant is so essential. I'm not in any way suggesting that anyone go deep into debt to start a business! But there is "good debt" and "bad debt". Making the first one work for you is all I'm saying is a potential way to get this thing done and again, if you time things while you have your current higher income, your end-state out of pocket could be reduced substantially. It's a numbers game that really needs good advising on the accounting/tax side.

Hello Jim,

I retired 3 years ago and can't just sit and wait till the time comes to say goodbye to everything and everyone I love. I think I did work hard as a teacher, as I taught Liberal Arts and Sciences at TAMUCC and later worked at Utah Shakespeare Festival. But I've been always interested in woodworking though. My late wife didn't take it seriously, of course, but I've been always planning to start a small business.
What is the best and easy way to create a good business plan and calculate all the possible pitfalls?

Thank you,
Terry

[Jim Becker]

Terry, there are a lot of resources available to help with a business plan...I know I was able to download a very extensive document from my bank. (TD Bank) But before diving into a formal business plan if you want to create one...the back of a napkin is sufficient. Initially, faddle around with things like:

• What do I want to accomplish...a certain amount of income, satisfaction of creating things with the income being a nice thing, but not required, etc.?
• What do I need to learn (in the short term) to allow me to move forward with what I want to accomplish?
• What changes do I need to make to my workshop and tool setup to allow me to safely and efficiently do the kind of work I want to do and if I need to make changes, do I have some funding available to do that?
• How formal do I really want to make the business including provisions for protecting myself, my assets, my family and my taxation?
• Do I have at least some funds available to establish my business in the appropriate, legal way?

Once you set the "ground rules", I really, really do recommend having a conversation with an accountant who specializes in small businesses. The goal of that conversation should be to convey your general ideas so that they can recommend the best way to legally establish your business. There are multiple choices for that and no one way is best for everyone. Each has its own cost structure to establish, too, but you CAN do a lot of the paperwork yourself to keep that cost down. 'Just be sure to have guidance with that because errors can be costly. (I chose to have my accountant do most of this, but in retrospect, I should have done a little more of it myself)

A formal business plan gets into more detail for sure. If you're going to "make stuff" to sell direct to consumers or on commission, there needs to be an appropriate plan for marketing it. If you're going to do subcontract work (B2B), that also has a marketing need. Know up front that these things have cost involved and that's beyond just your time to regularly promote your business. It's easy to get caught up in the "making" and then suddenly find no orders waiting because you didn't ask for them. For most businesses, there also needs to be a "separation of church and state" when it comes to money and financial records. IE...you need an accounting system and you need to use it religiously. If you are "old school" you absolutely can do it manually if you know how, but that's a royal pain compared to using current technology. That is, of course, balanced by cost. Some accounting systems are "free to use", but have fees for certain things beyond basic record keeping and limited adoption by actual accountants who assist small businesses. Others like the QuickBooks I use, have a monthly cost, but a broad community of accountants to work with...and you really do need to have an accountant, even if it's just for quarterly reviews and taxes. Speaking of taxes, if you establish a business, there will be a regular cadence of tax filing even if you have no employees. The specifics are tied to the kind of business organization you choose, but they are state specific. I have no employees and as an officer of the corporation have an exemption from WC. But I still have to file the quarterly reports despite them being covered with just zeros. So part of the business plan is the cadence of any legal reporting. Know it up front and have it in your plan.

The business plan needs to include milestones so you can establish your business and financial goals, track them and then make adjustments as necessary. This really should be done formally for anything beyond a "hobby with a few shekels of benefit" type activity. The goals need to be realistic but provide incentive to meet them. My business took nearly six months to get "dollar one" of paid work in the door...there was a learning process involved with the CNC and marketing takes time. I actually did hit the date I thought it would be. My next goal was enough cash flow to pay for the monthly costs for insurance, accounting, tooling, etc. I've been successful at that to-date, but I did have to make some adjustments from strictly commission and subcontract work to using down-time to produce small things to sell as finished goods. (I'm using ETSY for that now) Most of that utilizes scrap material to keep cost down so that the prices on things are not out of line. That piece is paying for itself, keeps me busy in the shop regardless, keeps me learning new things and takes material that isn't good for larger projects and turns it into things that have financial value. That was a change to my original business plan based on reality and wanting to meet the milestones I had set. I'm currently working out my next milestones, but they include adding a local retail business to sell certain equestrian related products I produce for more exposure and seeking out more subcontract work for general cash flow.

Another part of the business plan, IMHO, revolves around suppliers. Even the smallest of hobby businesses can benefit from optimizing who they buy from to help with material and tooling costs as well as making things like physically getting the materials to the shop easier. I buy my sheet goods from a real sheet goods supplier rather than grabbing my trailer and seeking out stuff from retail sources. I get better pricing for better (north American produced) material and they deliver to my shop's door. Get setup with a number of suppliers so you have choices when availability is important. Most are comfortable with small businesses that are low volume, too...it's not uncommon.

When you are thinking about what you want to do, don't panic if you don't have "everything" you need to produce what you intend to make. By example, I sometimes make table surfaces that can benefit from a wide belt sander. I do not own one, do not intend to buy one and don't actually have the space for one even if I wanted one. But I know a local concern that does have one and I can "buy time" on the machine for my occasional needs. I'm about to do that soon with a project I'm currently working on. On the other hand, there may be something you want to do that is "key" to your intended business and that might mean making an investment. That was the case with me (and potentially with the OP, Dennis) in that I wanted to add CNC capability as part of setting up the business. It's actually what drove me to set things up formally in the way that I did, both for capability and for tax purposes. This is where you really need to work with your accountant to decide what's the best way to do things, whether you choose to invest personal funds as ownership investment or if you choose to finance an acquisition. Taxes do matter and if things are done carefully, adding something like the CNC I did, can effectively shift money from taxes to equipment.

A business plan isn't all that different than the planing you did for your role as a teacher over the years... What needs to be accomplished in general? What is needed to do that from a resources standpoint? What are the measurable goals and milestones? What do I need to invest in myself to make it happen? Etc.

[Edwin Santos]

A business plan isn't all that different than the planing you did for your role as a teacher over the years...

Hello Jim,

I retired 3 years ago and can't just sit and wait till the time comes to say goodbye to everything and everyone I love. I think I did work hard as a teacher, as I taught Liberal Arts and Sciences at TAMUCC and later worked at Utah Shakespeare Festival. But I've been always interested in woodworking though. My late wife didn't take it seriously, of course, but I've been always planning to start a small business.
What is the best and easy way to create a good business plan and calculate all the possible pitfalls?

Thank you,
Terry

Terry,
The subject you have asked about is extensive enough that it warrants reading a few books. There are many out there that cover the subject in much greater detail than you can get in a woodworking discussion forum post. Jim has given you plenty of excellent pointers. However, I would respectfully disagree with his opinion that a business plan is not a lot different than your planning as a teacher, and by extension, I do not think you should expect any similarity whatsoever in the two endeavors because there is almost none.

This is not to talk you out of it. I just think its important for anyone considering a proper business to have their eyes open to the demands, and the risks.

Two very important words that had no existence in your old career are "cost accounting". For example, even for a one man retiree business, I would say it is necessary to track your time by the hour (you can use a logbook or a time keeping app) and impute a cost even if you don't pay it out. After all, you wouldn't work at that crummy part time job for free, so why would you assume your time is free in your own business, that is if it really is a business. I think might be surprised how low this "wage" may end up to be if the business is to break even (or the inverse would be how much money your business is losing at the wage you imputed).
Anyone who assumes they enjoy woodworking and their shop is at their home, thus their time is free and has no cost is operating as a hobby or at least a quasi-hobby, not a business.

One other point, I took a B2B woodworking job this year. It was great until it came time to be paid. I took a deposit to cover the materials plus a little, but the balance was to be paid net 30. Turns out my B2B customer encountered some installation problem with his end user that escalated into a dispute, and I became an accidental passenger on the ship because when he was not paid, I was not paid. In the end I did get paid but it took six months, lots of follow up calls, lots of listening to his sob stories about what a victim he was, etc. So build an allowance for bad debt or at least a cash flow forecast that assumes something other than prompt, automatic payments. What's the expression, hope for the best, plan for the worst?

Again, not to throw cold water on this idea, because if it works out for you it could be great. Just trying to help you eliminate the surprises. Best,
Edwin

[Rich Engelhardt]

What is the best and easy way to create a good business plan and calculate all the possible pitfalls?

I'm going to repeat the advice I gave earlier in this thread.

https://www.sba.gov/ - is a treasure trove of useful information on how to plan, how to get started and how to fund a small business.

https://www.score.org/ - the Service Corps of Retired Executives is a true national treasure. The volunteers are from all different businesses and from all different levels. They are retired executives that offer everything from being a personal mentor, to online training courses - - - all free of charge.

[Brian Tymchak]

I realize I'm late to the party on this thread, but I have a thought that I didn't see in any of the other posts. Apologize in advance if someone did and I missed it.

With a well-equipped shop, is there a possibility of leveraging that asset and offering shop time annd instruction to other users? I've read in the past few years of this type of service being available. Here is a local (to me) business like that: http://www.buildmoreworkshop.com/

[Jim Becker]

Brian, possible for sure, but a major liability challenge...likely well above a normal business liability situation.

[John Goodin]

If you know any realtors or a way to meet them, they are a great source for handyman type jobs. People always need things fixed before listing a house and the repairs after a home inspection. One realtor can generate more work than a gaggle of individual homeowners.