Reliable Small Business Support and Guidance for All Seasons of Life – Graduation to Retirement
When you think about financial health, what comes to mind? For SaverLife members, defining financial health can look very different to each person. Why? Because there’s no one way to navigate your financial situation: everyone is working toward different goals for themselves and their families.
This is also true of entrepreneurship. Starting and maintaining gig work, a small business, or a side hustle can vary greatly depending on the person. And age is a major factor of this experience.
No matter what age you pursue entrepreneurship, you can set yourself and your business up for success with information and resources that are tailored to your unique situation — starting with this article. Read on to learn more about reliable small business support and guidance for all seasons of life.
Considerations for Anyone Wanting to Start a Business
No matter when you start gig work, a small business, or a side hustle, there are components to self-employment that you should consider.
First, you should think about the proper legal structure for your business. By setting the structure up properly, you can protect yourself and your personal assets. Plus, this will help you determine how your business will be taxed. For information about different business structures for self-employment, you can consult the IRS Website to learn more.
Whether you’re 18 or 58, if you’re starting a small business or side hustle, you’ll also want to think deeply about your goals for the work. Do market research, learn about your competitors, and be sure you understand the people you’re going to serve. What pain points do they have and how can you offer help and solutions? Having a clear understanding of what your business will do and how you’ll do it is important no matter your age.
Understanding the Risks
You’ll always face risks as you start your own business. But some risks are more impactful at different ages or stages of life. Here are some risks that all business owners face, as well as some that primarily affect people who are starting out and some that affect those who are starting their businesses later on in life.
Risks All Business Owners Face
No matter their age, a big risk business owners face is the possibility that the business might fail. Data from the Bureau of Labor Statistics shows that 20% of new businesses fail within the first two years and 45% fail during the first five years of operation.
However, with good market research, a clear view of your customers, and something that differentiates your product or services, you can proactively plan for challenges that could impact your business and take steps to avoid them.
Another risk that can equally affect both younger and older entrepreneurs is obtaining health insurance.
While you can get health insurance from the marketplace, the plans often come with higher premiums or higher deductibles that make them more difficult to afford.
Young people who are just starting their businesses will need to consider coverage as they move into adulthood, lose their parents’ insurance coverage, and consider starting families. Older entrepreneurs will need to maintain coverage to help with any health care and medication costs.
To help mitigate these insurance risks, you can shop the exchange for a plan that works best for you. It can also be helpful to see if you can open a Health Savings Account (HSA) or a Flexible Savings Account (FSA). These accounts allow you to set money aside for health-related expenses without being taxed on it.
Starting Out Early in Life
Starting gig work, a small business, or a side hustle as a young adult? There are two risks to keep in mind.
First, if you’re pursuing entrepreneurship early in life, you might not have many resources to put toward your business. This might mean you put more of your personal savings into the business or your start-up budget is smaller. If your business does well, you can recoup your investment. But if not, you could run out of money quickly.
Second, while there are retirement plan options for entrepreneurs, when money is tight, it can be hard to find enough funds to set aside. If you’re starting a business early in life, you could miss out on key contribution years for your retirement.
Blooming Later in Life
If you’re pursuing entrepreneurship later in life, you should also be thinking about retirement. If you leave your job to start your own business, be sure to protect the retirement fund that you’ve already earned.
Using your retirement funds as seed money can seem like a great idea, but it decreases the value of your entire retirement account. And between market conditions and whether the business is successful, there’s no guarantee the funds will be paid back.
How Age Might Affect Your Support Options
When starting a business, entrepreneurs of all ages often need financing. There are two main types of financial support available, and depending on your age, you might have different results when applying for them.
Credit
Having credit for a business is extremely important. It allows you to make bigger purchases and pay your vendors and bills before you get paid. While it’s possible to establish business credit, if you have a low credit score or no established credit, this can be challenging.
When you apply for a business credit card, the credit companies will review your personal credit and borrowing history. If you’re a young entrepreneur with little established credit, this can impact your ability to qualify. Similarly, if you’re an older entrepreneur with a low credit score, the credit company might disqualify your application until you demonstrate that you’ll be able to pay back the money you borrow.
In short, credit can be intimidating to navigate. But as long as you understand what your credit looks like and how it can affect your entrepreneurial plans, you can plan for financing options that meet your needs and don’t impact your business.
Loans
Like business credit, securing a business loan relies on personal information that might impact your business financing options, especially if you’re a young person.
Typically, when applying for a business loan, the lender will want to see your business plan or proposal, understand your revenue projections, and get to know your business better. On top of these components, they’ll also want to learn more about your personal finances. This typically includes your:
- Credit score
- Personal banking records
- Tax returns
Depending on your records and credit score, you might only qualify for financing with higher interest rates. You might also need to provide collateral on the loan, which can impact younger borrowers who may not have many assets to offer yet.
For all small business borrowers, it can be helpful to start with banks you already have a relationship with. This is because they already know you and how you manage your money. But it’s also important to shop around and consider online lenders as well. Always understand the terms of any loan you take out.
Resources
No matter what stage you’re at in your entrepreneurial plans, there are some great resources that can support your work. Check out the SaverLife article Resources to Help You Take Your Small Business to the Next Level that can help you understand what resources are available.
You can also visit the Small Business Administration for information and resources on starting and operating gig work, a small business, or a side hustle.
No Matter Your Age – You’ve Got This
No matter what age you’re starting self-employment, there are a lot of factors to consider. You can navigate any unexpected challenges by creating a well-thought plan for your business, keeping a close eye on your personal finances, and taking advantage of resources and tools that can help you build relationships with customers.
Congratulations on your new business venture! It’s exciting to pursue entrepreneurship, and we’re excited to hear how it goes. If you have a story to share about how you’re navigating gig work, a small business, or a side hustle, reach out to the SaverLife team. Complete this brief survey to connect with us.
Kimbree Redburn is an Accredited Financial Counselor® with a background in economic development. She works with her clients to help them understand their financial options and make money decisions with confidence. She believes that financial education gives people a chance to build a better life.