Dreaming of a Retirement in Business

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It’s the typical dream of many older adults. Quitting the 9 to 5 corporate jobs and opening a little bookstore (coffee shop, floral shop, boutique) near a beach (national park, quaint tourist town, hometown). The plan is to open the shop doors when you feel like it, hang out and talk to friends and customers all day, and close up when the mood strikes you. It’s not working; it’s a place to socialize and live your best life. Familiar sound? It is a beautiful story.

Dream or Nightmare?

I’m here to pour a little cold water on the fairy tale. And that is what the story is, for the most part. It’s not based on the cold hard facts of business and life. There are some faulty assumptions being made that are coloring how wonderful the tale sounds. That doesn’t mean the story can’t be real. It certainly can be your retirement story. However, there are not-so-rosy details to consider before you plunk your hard-earned dollars down on a cute little corner store at the beach.

My Story

First, let me say that my point of view comes from my experience as a small business owner who is not retired. I have owned two small businesses. My first was a 2,500-square-foot coffeehouse in a suburb of Cleveland in the late 1990s before coffee was a thing (which contributed to its short-lived life). And after two decades of working in corporate and non-profit marketing, I now own a small branding and marketing agency. However, the basic principles of business and finance apply when operating a small business regardless of the stage you are in life. And those principles are very often not conducive to retirement.

Operating Expenses Add Up

It’s expensive to own a brick-and-mortar business, even a small one. The average rent for retail real estate in the United States was $20.85 per square foot in 2021. However, it can be even higher in tourist areas. For example, the average cost in Miami Beach is about $72.54 per square foot. For even a tiny 1,000 feet shop, that is more than $6,000 per month. That is just rent. Consider other business expenses such as utilities, equipment, inventory, marketing, advertising, insurance, vehicles and more. Your business expenses can easily be four or five figures per month. That’s a lot of cups of coffee or books you need to sell. And many of these expenses must be paid regardless of whether you are open for business.

HR Issues Never Go Away

Let’s talk about employees. For many small businesses, your most significant cost will be labor, as much as 70% of your expenses. At $30.71 per hour, the average hourly rate small businesses pay their employees has risen by $1.51 since 2021. If you can afford them, having employees can give you the freedom to come and go as you please. The reality is that it is notoriously difficult to find trustworthy employees willing to stick with a small business employer for the long term. They want benefits, upward mobility, guaranteed PTO, and many more things that many small business owners can’t provide (or maybe you hoped you didn’t have to provide them to avoid the headaches.) Spoiler alert — you do if you want good employees.

The Buck Stops With You

And when employees don’t show up for work, or you can’t afford to pay an employee, you are left holding down the fort alone. This was one of the things I didn’t consider when I opened my coffeehouse. I employed part-time staff for busy morning and evening hours. Still, I was often alone for long hours every afternoon, taking care of customers when they were there and worrying about my business when there weren’t any customers. Even as an introvert, I was lonely.

And as the sole proprietor, there wasn’t anyone I could lean on with my questions, concerns, and doubts. I was in charge, on my own. There was no co-owner or manager to share the workload or make decisions together. I was working every day, sometimes more than 12 hours a day. The beautiful coffeehouse I poured my heart and soul into felt like a trap sometimes.

Are You Expecting a Salary?

Being an owner isn’t all that lucrative, either. According to Forbes, the average small business owner’s salary is just 3% above the national average mean wage of $58,260 at $60,151. Even with savings on supplements, it might be challenging to do the traveling and fun things you want to do in retirement. I never paid myself as a coffee shop owner and I only pay myself enough to cover my personal bills now. It will take a few more years of growth before my agency will be profitable enough for me to draw a larger salary. That growth will only come from my hard work.

Capital is King

38% of small businesses fail because they run out of capital. Starting and running a small business is expensive, even a tiny one. You need enough capital (remember, 5 figures per month) to cover your operating expenses for at least five years to give yourself time to become profitable. This is above and beyond the money you need to live on.

The “Going Fishing” Sign is a Dangerous Myth

As wonderful as it sounds to just decide to close up and spend the day at the beach whenever you feel like it, the reality is that never happens. If you want to stand a chance at success, you have to provide consistent, exceptional service to your customers, and pay your bills. That means staying open during published business hours and making those connections and sales. Customers do not care that you are “retired” and want to relax. They want their coffee (books, flowers, jewelry, new shoes), and they want you to be there to sell it to them. And, as we said, you need to sell a lot of coffee (or whatever) to break even. Closing down for a day is not the way to do that.

Take Heart

I’m really not here to rain on your parade. Owning a small business is an exciting adventure and can be incredibly fulfilling. i love it. However, it is not restful, relaxing or quiet. It’s not always fun or easy. It can also be expensive and risky. I think people planning their retirement business would have a better experience if they faced those truths ahead of time and decided if owning a small business was really right for them.

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