6 Steps to Starting a Small Business in Retirement

Mature woman yoga instructor

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Starting a small business can be an exhilarating and rewarding journey – especially in retirement. It can give you a renewed sense of purpose while also bringing new people and adventure into your life. However, taking the leap to entrepreneurship in your next chapter can come with challenges. 

It’s prudent to ensure your retirement business venture is balanced with your desire to pursue your passion – especially with the realities of needing financial security in this season of life. Laying a solid foundation from the start is crucial, and helps you avoid needlessly risking your retirement savings in the process. 

Here are six essential considerations when starting a small business post-retirement that can prime you for success.

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1. Doing Your Homework: Define Your Business Idea and Target Market

The first step in starting a small business is clearly defining your business idea. Start by identifying the products or services you plan to offer and determine how they fulfill a need or solve a problem for the market you’re targeting. 

Conduct thorough market research to understand your customers, their preferences, and the competitive landscape. This will help you refine your business idea and position your offerings effectively.

For example, you decide to open a yoga studio in retirement after achieving your RYT (Registered Yoga Teacher) 200 certification. Ask yourself the following questions:

What problem are you solving? 

You may personally love maintaining your practice, but what problem are you solving for your students? You might be offering a safe space for them to practice, creating a welcoming environment for self discovery, or building a place for community connection. You may feel like you’re solving all of these problems, or you may want to focus on one goal for your practice.

Who is your target market? 

Even yoga studios have a unique target audience. Although your goal may be attracting everyone in your local area, that may not be realistic. Everything from your logo to where you advertise to when your classes are scheduled can impact who is drawn to your unique practice. 

Say you wanted to attract other retirees, you might schedule sessions during weekday mornings or create unique, small-group sessions designed specifically to foster connection between women in your local community. You might include imagery of retired women in your advertising or incorporate some of your “why” for launching your studio during this season of life – and how you want to help other women in retirement find their passion too.

Who are your competitors? 

There may be a few larger studios in your local area. You may also find other small studios nearby with a similar business model and schedule. Remember – the ocean is vast. There are so many potential customers out there and plenty of room for everyone to thrive. Awareness of your competitors lets you understand your strengths and weaknesses better, and even opens doors for future collaboration as you and your fellow business owners grow.

Through answering these questions, all of this information can help refine your business plan, marketing strategies, price points, and potential retailers, setting you up for a successful, unique, and desirable small business.

2. Develop a Comprehensive Business Plan

A well-crafted business plan is like a roadmap for your entrepreneurial journey. It outlines your business goals, target market analysis, marketing strategies, operational plans, and financial projections

A business plan not only helps you stay focused, it can also be a valuable document when seeking funding from investors or financial institutions. 

Let’s look at a business plan using our yoga studio example:

What are your business goals?

  • Provide a centering, holistic yoga practice for local retirees
  • Connect with others in the community
  • Earn $10,000 in gross sales during the first quarter in business
  • Have enough revenue to support your retirement lifestyle while your previously-saved nest egg continues to grow

What is your operational plan?

  • How much do you need to spend on supplies for your studio? Will you provide yoga mats and towels? Do you need to provide snacks, water, or other supplies?
  • What is your estimated advertising budget?
  • Will you need to pay for continuing education?
  • Will you need an additional partner or employee to help you?

Having a detailed business plan can only help you in the long run. Be proactive and take time to develop a detailed and realistic business plan that aligns with your vision and values. 

3. Secure Adequate Funding

Starting a small business requires financial resources for equipment, inventory, marketing, and operational expenses. 

Evaluate your financial needs and explore various funding options such as personal savings, loans, grants, or crowdfunding. 

A word of caution: just because you’ve saved the funds to launch your business without finding funding or taking out a small business loan doesn’t mean that’s the best way to go. Part of starting a business during retirement is safeguarding your nest egg and letting your business positively impact your finances as it grows. It’s crucial to develop a unique plan that supports your individual financial and lifestyle goals – and that includes choosing how to fund your business venture in retirement.

Consider consulting with financial advisors or experts who can guide you on securing suitable funding sources for your business. Remember, having a well-managed budget and maintaining a healthy cash flow is essential for long-term sustainability.

4. Decide How You Want to Incorporate

There are many different ways to incorporate your business:

Sole Proprietorship 

A sole proprietorship is a business with one owner (you). It’s unincorporated, and you are directly responsible for the business’s debts and other liabilities. Many freelancers and consultants fall into this category. 

Limited Liability Company (LLC)

A Limited Liability Company (LLC) is a legal entity created for your business at the state level. With an LLC, you have a level of protection between yourself as the business owner and your business. You can have multiple owners and can choose whether you want to be taxed as a sole proprietor (taxed both on business income and your personal salary), or an S-Corporation (taxed on business income, with an expectation that profits will be distributed to shareholders – even if that’s just you). The primary reason business owners pursue an LLC is to provide liability protection. In other words, you aren’t on the hook for business debts or obligations.


A corporation is owned by its shareholders (even if just you), and offers some possible tax advantages. S Corporation is a tax status – not a business type – so it doesn’t provide any additional liability protection. 

5. Create a Plan For Your Nest Egg

Starting a business in retirement may be your dream, but it comes with certain risks for people who don’t have time to “make up” lost revenue if their business doesn’t succeed. This is why it’s important to have a plan that protects your nest egg in retirement as your business grows. 

First, have an idea how you’ll continue contributing to your retirement savings through your new business. From the moment you’re profitable, you’ll want to set up a retirement savings vehicle for yourself to keep growing your nest egg. Whether that’s a Traditional IRA, 401(k), or a SEP IRA, you can set aside a small amount each year to continue growing your savings. 

Next, create a strategy to draw down from your current savings in a tax-efficient way. Even if your business financially supports your lifestyle in retirement, there may be a time when you’re required to take RMDs (required minimum distributions) from your retirement accounts, or when you need to enroll in Social Security to receive benefits. 

A comprehensive strategy also includes knowing and understanding what savings you have available, when you need to draw down your accounts, and where else you’ll receive income from in retirement (i.e. your business, Social Security, a past pension).

6. Build a Capable Team and Seek Professional Guidance

As your small business grows, you may need to hire employees or work with freelancers and contractors. 

Surround yourself with a capable, dedicated team that shares your vision and values. Delegate tasks wisely and foster a positive work culture that promotes productivity and collaboration. 

Additionally, seek professional guidance from mentors, business coaches, or industry experts who can provide valuable insights and help you navigate challenges. 

Starting a small business is an exciting endeavor that requires careful planning and execution. By fully exploring these six considerations, you can establish a strong foundation for your business and increase your chances of long-term success. 

Perseverance, adaptability, and continuous learning are the cornerstones of progress as you embark on this entrepreneurial journey. At Abacus, we love helping people align their money with their values, especially when it comes to expanding what is possible with retirement. Schedule a free phone call today to see how we can help plan for your small business dream.

Disclosure: This material is not intended to serve as personalized tax, legal, and/or investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Abacus Wealth Partners, LLC is not an accounting firm. Please consult with your tax professional regarding your specific tax situation when determining if any of the mentioned strategies are right for you.


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