Chapter 3

Joining the Ranks of the Self-Employed

IN THIS CHAPTER

check Making a living as a contract worker

check Building a business and hiring yourself to run it

check Doing a world of good while supporting yourself as a social entrepreneur

check Getting up to speed on the franchising biz

If you’re like many workers in the United States, your American Dream is to be your own boss and set your own hours. If you’ve ever freelanced, owned your own business, or worked on contract, you know how silly that notion really is. Instead of being your own “boss,” a self-employed worker has dozens of bosses. They’re just called something else, such as “customers” and “clients.” “Setting your own hours” means choosing to work between 60 and 80 hours whenever you want across all seven days of the week instead of working five 8-hour days.

Still, the dream is alluring. You become the master of your own destiny, sinking or swimming according to your talents, skills, and vision. Although you do face the risk of your enterprise going belly up, you don’t have to worry about landing a job; you simply hire yourself. And you’re a lot less likely to get fired or laid off.

If you’re not scared off yet and you’re still interested in flying solo, you’ve come to the right place. This chapter presents four approaches to becoming your own boss:

  • Finding gainful employment as a contract worker
  • Starting your own business
  • Working as a social entrepreneur
  • Buying a pre-fab business (a franchise)

Working on Contract

Part-time and contract staffing is on the rise. Recently, the big online job site CareerBuilder released a Harris Interactive survey of more than 3,000 hiring managers and human resource professionals, showing that more than a third of U.S. companies are operating with smaller staffs than before the latest recession. To keep business trucking along, these companies hire contract or temporary workers. It’s an easy way for employers to get great, experienced staff and save money at the same time. That can be good news for you.

Being a contractor has its downsides, of course, such as, typically, no health insurance and no paid holidays or sick leave.

Getting sold on the idea

Contract work can be great, especially for people who are retired or are considering a job or career change, for several reasons:

  • It gives you something to do if you’re not currently employed. Don’t discount this. Having a sense of purpose improves your mood and attitude.
  • It gets you in the door. It may lead to full-time work with an employer eventually. Don’t miss the opportunity.
  • It brings in some cash. You can make your experience a plus. Employers are typically willing to pay you generously, providing you have the chops and can solve their problem or meet their need quickly. It lets them bypass the hand-holding and learning-curve stage that a younger, less experienced but lower-paid worker may require. And when you’re making money, you feel better about yourself. You feel valued, more confident.
  • It provides an opportunity to test drive different jobs. With a short-term “dip in the pool” assignment, you can find out whether this is something you really want to do. Do the job first — moonlight, apprentice, volunteer. If you can get paid for it, go for it. That’s the only way you’ll know whether the new career is all you dreamed it would be.
  • It builds your professional network. Nurture relationships with coworkers during your assignments. You never know where contacts may lead you.
  • It secures new and up-to-date references for future employers to contact to find out about what you’ve been up to lately.
  • It pads your résumé with current experience. It’s a great way to fill the gaps in your résumé.
  • It sharpens your skills. You know the mantra: Use it or lose it.
  • It gets you psyched about a work project without the pressure of long-term expectations. No job is forever, anyway. This one may be shorter than most, and that can be tremendously liberating.

tip Consider yourself the CEO of your own small business, even if you have a full-time job. Your primary employer is simply your largest client. Consider doing side jobs if you have a full-time position. That prepares you for self-employed status and starts building a ready list of clients.

tip Hone your yarn spinning. Even if the assignment was the pits, and that’s always possible, find a clever way to use the experience in a positive way. It can be a great example of your work ethic or your ability to helicopter in and solve a problem, or it can fill a professional need for a company. Make the time spent part of your personal career story. Exercise your poetic license.

Lining up contract gigs

Lining up contract gigs isn’t all that different from finding a job, except that you now must find jobs, plural. Your former employer may become your first and biggest client, and then you can expand out from there, perhaps working for your former employer’s competitors, clients, and vendors (assuming you don’t have an agreement not to do so). To expand your clientele, network, search the job boards, and let people know that you’re looking for projects or temporary assignments. You may also want to tap temp agencies. Another way to expand is to add services, if you have additional skills that weren’t needed in your previous position but that your clientele would be willing to pay for.

tip When you’re engaged in a project or temporary assignment, collect names and contact information for all the people you work with. One project or temporary assignment often leads to others.

tip You can drum up additional work online by using service marketplaces that connect freelancers with clients. Setting up an account is free, but you usually pay the marketplace a percentage of your earnings. Here are a few sites you can use to hawk your services:

  • Elance (www.elance.com) is for freelancers in many fields, including writers, editors, graphic designers, translators, marketing specialists, and web developers. Elance keeps 8.75 percent of whatever you earn.
  • Fiverr (www.fiverr.com) is another freelancer marketplace like Elance. Fiverr keeps $1 for every $5 gig you sell.
  • Freelancer (www.freelancer.com) enables clients to post projects they need done and allows talented freelancers to bid on them. Freelancer generally collects 3 percent of all payments from clients and 10 percent from the freelancer.
  • Guides.co (www.guides.co) is a service that “connects people who know with people who want to grow.” You create a multimedia guide with text, images, audio, video, and so on, and interested members can purchase your guide. When they do, you receive 95 percent of the proceeds.
  • Guru (www.guru.com) helps businesses connect with freelance workers in more than 160 fields of expertise.
  • HourlyNerd (www.hourlynerd.com) is an online, on-demand freelance marketplace connecting MBA graduates and students with businesses looking for a flexible, cost-efficient way to address business challenges. Those who work for HourlyNerd can make as much as $300 an hour. Many of the companies are seeking marketing, funding, or strategic planning advice. HourlyNerd charges the client 15 percent and the contractor 5 percent.
  • Skillshare (www.skillshare.com) connects teachers in all fields with students interested in those fields, so if you have valuable skills and a knack for teaching those skills to others, check out Skillshare. Compensation is based on the number of students enrolled in your courses. You’re also paid a referral whenever someone clicks your unique teacher referral link and becomes a member.

These types of marketplaces generally value older workers, says Jeff Williams, CEO of Bizstarters (www.bizstarters.com), a company that provides coaching and training to older entrepreneurs. “If you can deliver the solution, your age is not important.” The keys to success: a solid knowledge about a specific subject, a knack for consulting, and an ease with selling services online.

Running your contracting operation as a business

When you work as a contractor, you’re a business, and you need to run your operation as a business. Here are some of the business chores you must attend to:

  • Become a legitimate business entity. Check with the Small Business Administration (SBA at www.sba.gov) in your area to find out what you need to do in terms of registering your business with the state and obtaining a business license and permits to operate in your area. You also need to determine whether you want to operate your business as a sole proprietor or as a corporation, such as a Limited Liability Company (LLC), S Corporation, or C corporation. Certain legal protections and tax benefits and responsibilities are associated with each. Consult an attorney and tax specialist to find out more about your options.
  • Withhold and pay estimated quarterly income taxes. Independent contractors are required to pay quarterly estimated income taxes to the federal government, the state, and perhaps even the county and city in which they live, or pay a fine. Consult a local tax expert to find out more about your tax obligations, get assistance estimating the amounts you’re obligated to pay, and find out when and where to send payments.
  • Pay attention to the paperwork. You’ll need to keep a detailed record of payments received and expenses, including travel expenses (mileage, restaurant and hotel receipts, and so on). In addition, unless you get all your work through a third party, such as Freelancer.com, you’ll need to invoice clients for payments and perhaps provide them with receipts. You may also need to draw up a standard contract (with the assistance of a contract attorney).
  • Check your insurance. Add a rider to your homeowner’s or renter’s policy to cover any business equipment and supplies. You may also need liability insurance, just in case a client decides to file a lawsuit against you. Each state has rules about insurance that can be offered to home-based outfits. Talk to your insurance agent to assess your needs.

Avoiding common pitfalls

Not everyone makes it as a contract worker. Some workers perform better in a standard workplace setting where nearby coworkers provide social interaction and hold one another accountable just by being in close proximity. To boost your success, consider these suggestions:

  • Set and keep a regular work schedule. A schedule serves two purposes. First, it helps to ensure that you work a set number of hours per week. Second, it prevents work from bleeding into the rest of your life.
  • Set a monthly financial goal. If you need $30,000 a year to survive and $60,000 to live your desired lifestyle, add 30 percent or more to cover income taxes and expenses. That’s $39,000 to $78,000 you need to gross, which represents $3,200 to $6,400 a month.
  • Know what you’re worth. Research the going rate for what you do. Many contract workers have websites where they post their rates. Contact other contract workers in your field and discuss rates. If they’re reluctant to share, tell them that you’re looking into entering the field and you don’t want to undercut others on price; they should be more cooperative after hearing your concern.
  • Don’t agree to a fixed price for unlimited work. Be very specific about how much work you’re going to do for X dollars. Otherwise, you either find yourself earning about $1.75 an hour or upsetting clients who feel as though you’re changing the terms of the agreement. Setting a fair price is a huge challenge, because many times you enter into a project not knowing the amount of time involved. If you can charge by the hour, that’s usually best.
  • Calculate a day rate. Some clients hire contractors for three- to six-month assignments and require them to work onsite like a standard 9-to-5 job. If you’re working in a client’s office, consider charging a day rate — for instance, $500 to $600 per day. Some clients will pay overtime by the hour above that amount.
  • Track the time you spend on projects. By tracking your time and knowing the total paid for a project, you can calculate your hourly wage and adjust your quotes for projects accordingly.
  • Expect and plan for tech crises. If you’re working remotely, make sure you have an in-house or on-call tech support person to assist you if you encounter a technical glitch or have a question.
  • Find or start a professional group for people in your line of work. A group provides a forum for human interaction that’s essential for your mental and emotional well-being. In addition, you may need to talk shop with others to vent frustrations with clients and share advice on how to overcome common challenges.

Launching Your Own Business

According to the State of Entrepreneurship 2015 report released by the Kauffman Foundation, which specializes in studying and promoting entrepreneurship, many Baby Boomers (born between 1946 and 1964) who became entrepreneurs during the information technology revolution in the 1980s and 1990s are today’s serial entrepreneurs.

Data shows that these 50- and 60-year-old entrepreneurs have started more and more businesses in the last decade, whereas in the meantime, the rate of business creation among 20- to 30-year-olds has slowed. With life expectancy rising, Boomers continue to be an important economic force for years to come, as the Foundation concludes:

  • Boomers have been, and will continue to be, an entrepreneurial generation.
  • As they work longer and live longer, Boomers also will be entrepreneurs for longer periods of time.
  • The aging of Baby Boomers will create numerous challenges and entrepreneurial opportunities — and Boomers will be the ones who start companies to capitalize on them.
  • The promise of lifetime employment has declined dramatically for people age 35 to 64 over the past 50 years.
  • With older generations living longer, healthier lives, they’re likely to continue starting new businesses and mentoring young entrepreneurs.
  • Transaction costs and the barriers to entry have fallen for entrepreneurs of every age.

If you’re ready to become a member of one of the greatest generations of entrepreneurs in the United States, read on. This section helps you prepare for what’s ahead so you don’t get discouraged by unrealistic expectations. It also covers the fundamentals of getting your business up and running. For additional guidance, check out Starting a Business All-In-One For Dummies (Wiley, 2015).

Managing your expectations

Opening a business takes a lot of time, energy, drive, and commitment, especially in the initial stages. Expect to work long hours away from friends and family unless, of course, you’re launching a family business or partnering with friends. Juggling the whole work-life balance thing when work is your life is tremendously difficult. Work seems to be embedded in every nook and cranny.

As with most endeavors in life, however, substantial investment often leads to substantial rewards — the joy of pursuing your passion; potentially more time with friends and family and more money to enjoy it; enough money to help friends, relatives, and others in need; a chance to make the world a better place; the health benefits of remaining physically and mentally active; and much more. And with years of business and life experience and an expansive professional network, you’re far better equipped than a 20- or 30-something to start a business.

Entrepreneurs typically exhibit confidence, tenacity, and hope. No one questions how challenging starting and running a business can be, but for most, the reward is an inner payout that blows right past the struggles and sacrifice.

Here are some quick tips to get you over the first speed bump:

  • Don’t think that you’re too old to start your own business. The median age of founders is 39 — right at the midpoint of a typical professional career — and 69 percent are 35 or older. Nonprofit entrepreneurs tend to be older on average than their traditional counterparts. The average age for nonprofit founders is around 53, according to a study, “Profiles of Nonprofit Startups and Nonprofit Entrepreneurs,” by David M. Van Slyke, professor of public administration at Syracuse University and Jesse D. Lecy, assistant professor of public policy at Georgia State University.
  • Get comfortable with salesmanship or team up with someone who already is. Sales is a key ingredient for success. Your confidence is only part of the battle; the other part is marketing yourself as you move along from those heady first few months or even years.
  • Brace yourself for greenhorn blues. Moving into a new arena requires psychological preparation. You’re the boss now and probably making a few mistakes. A supportive partner or best friend may be all the shoring up you need, but don’t ignore the possible emotional setbacks you may experience as you work through the transition phase.
  • Make mistakes with grace. Face it: The older you are and further along on your professional success ladder, the harder it is to accept criticism and responsibility for screwing up. Your ego just isn’t as nimble and forgiving as it once was. Accept that trying new things means learning from your mistakes along the way. You’ll be in a healthier, stronger place to move ahead. Doing things poorly is just another step toward doing them well.

Coming up with a business idea

When you’re looking to start a business, opportunities are endless, but you need to pick one idea and make sure it’s the right fit for you and your future customers or clientele. This section explores various approaches to discovering a business idea that’s right for you. As you peruse your options, use the following criteria as test strips to determine whether the business idea has legs:

  • The idea is going to be something you enjoy working on (because you’re going to be doing it a lot).
  • The idea serves a need that’s not being met or solves a problem that’s not being addressed satisfactorily.
  • People want or will want the product or service you’re selling. You can often gauge the marketability of a product by looking at its benefits. If it’s going to solve a huge problem or save the buyer a huge amount of money, they’ll want it. In other cases, you may need to perform market research; for example, without giving away your brilliant idea, talk to as many potential customers as possible to gauge future demand.
  • You can offer the product or service for a price that customers or clients are willing to pay and that produces a sufficient profit to make it worth your efforts. Do your homework to estimate costs for manufacturing the product or making the service available, marketing it, delivering it, covering overhead, and so on. After you deduct the costs, is the profit that remains worth your efforts and the risk you’re taking? Do some additional market research to find out how much prospective customers would be willing to pay for such a product or service.
  • The idea is within your risk tolerance. If it’s not, you’re going to be a nervous wreck until the business turns a significant profit, which may take months or even years.

Now that you have a few benchmarks for judging ideas, you’re ready to start brainstorming ideas to judge. Get your pen and paper handy and read on.

Looking to your current occupation for ideas

One of the easiest, quickest, and least risky business ideas is to keep doing what you were doing as an employee but do it as a contractor. (See the earlier section “Working on Contract” for details.) But that’s not the only option for transitioning from employee to business owner in your own field. You can start a business that serves the needs of your industry in other ways, perhaps by inventing a product or service that solves a common problem your former employer had but never managed to solve. Or perhaps you thought of a way to use the service or product your former employer sells to make money in a different way.

As an expert in some aspect of the industry or field you’re already in, you have the knowledge to innovate in that industry or field, so that’s the first place to look for new business ideas.

Turning a hobby into a profit

Turning a hobby into a business may really pay off, but doing so can take a while. That’s the finding of a recent study that looks at entrepreneurs who start a business based on a personal pursuit. In the study, published in the Journal of Business Venturing, these entrepreneurs lagged behind other founders in the first few years of developing their enterprises. But they caught up after 45 months in terms of pace. In the end, the hobby-to-business founders were more likely than others to produce revenue, achieve a profit, and have a deep commitment to their business.

So look to your hobbies and pastimes for business ideas. Are you musically inclined? Do you like to garden, bake, do crafts, write, take photographs, or play games? Whatever it is you do, you may be able to turn it into a money-making venture. Just try not to ruin your avocation by making it your vocation, to borrow a play on words from Robert Frost.

Cashing in on your natural gifts

Some things can’t be taught. They just come naturally to you. We’re all born with a distinctive set of talents that are as singular as fingerprints. These aren’t skills that we learn along the way or passions discovered over the years. These are inborn gifts. It’s the way your voice sounds, for instance, or your athletic prowess, or your inner mechanical capability.

If you aren’t certain what you have a knack for, ask friends, relatives, and colleagues. They may point out things you simply take for granted. Think about what you’ve been good at since you were a kid. If you’re uncertain, though, several organizations, including the Rockport Institute (www.rockportinstitute.com), provide career-testing programs that can help you assess your natural talents. And AARP’s LifeReimagined.org offers interactive programs that help you identify your interests, values, goals, and purpose.

Here are a few jobs where you can follow your talent to make money. These jobs may offer flexible hours and can be on a full- or part-time basis:

  • Voice-over actor/artist: If you’ve been blessed with a deep, resonating timbre, or perhaps a smoky, husky purr, it may be time to put it to work. The need for voice talent is rising, thanks to the increase in online multimedia websites and audiobooks. The variety of possible gigs ranges from commercials to podcasts, web videos, audiobooks, documentaries, business and training videos, telephone messages, and applications. Last year, the freelance website Elance (www.elance.com) touted voice acting as one of the fastest-growing fields, with a threefold increase in job postings on the site.
  • Organizer: If you’re great at and enjoy organizing offices, kitchens, bathrooms, garages, sheds, and other spaces, consider creating a business that offers your organizational skills to others. Your skills can come in particularly handy for retirees who are seeking to downsize. You may even offer additional services, such as selling property on eBay and through various other means.
  • Medical equipment maintenance and repair: Were you the kid who always took things apart in the garage for the sheer fun of putting them back together? From wheelchairs to gurneys, if you’ve got the fix-it gene, this is a fast-growing job that plays right into your innate mechanical ability. Employment of medical equipment repairers is projected to grow 31 percent from 2010 to 2020, according to the Bureau of Labor Statistics (BLS), much faster than the average for all occupations. You can start your own business or work for someone else.
  • Calligraphy artist: Harness your power of penmanship. In the digital world, where the electronic signature is becoming status quo, those who can create flowing cursive writing with smooth coordination and fine motor skills are few and far between. You can use your dexterity to create fonts and scripts for company logos, wedding invitations, place cards, and menus, among other word-based undertakings. You probably won’t get rich, but there’s work for someone who practices the antique art of calligraphy.
  • Seamstress and tailor: Sewing like a pro requires a mixture of sharp hand-eye coordination and artistic flair. The job boils down to dexterity and details. And, truth is, for many people, simply threading a needle is maddening. Old-fashioned sewing has become a fading art, even though finding someone who can perform the job with panache has been in steady demand. Nearly half of all seamstresses and tailors are self-employed, according to the BLS.
  • Senior fitness trainer: The nitty-gritty: If you’re a natural athlete, working out is in your blood. That’s why teaching active adult exercise classes might just be your dream job. More fitness clubs and gyms across the country are offering classes catering to the silver-hair set, according to fitness industry experts. Overall, employment of fitness trainers and instructors is expected to grow by 24 percent from 2010 to 2020, faster than the average for all occupations.

Getting help

Although starting a business carries a ring of independence, you have a better chance of succeeding if you reach out for help. Here are some resources you can tap for help in starting a business:

  • AARP’s Life Reimagined (www.lifereimagined.org) has a number of ideas to help plan your next career move to become a business owner.
  • The Association of Small Business Development Centers (www.americassbdc.org), a joint effort of the Small Business Administration (SBA), universities, colleges, and local governments, provides no-cost consulting and low-cost training at about 1,000 locations.
  • The Kauffman Foundation’s FastTrac Boomer Entrepreneur program (www.fasttrac.org/entrepreneurs.aspx), in collaboration with AARP, is piloting specialized ten-week courses in both English and Spanish in select cities. Up to 20 applicants will be accepted in each course.
  • Lawrence N. Field Center for Entrepreneurship at the Zicklin School of Business at Baruch College offers a free, online, open-source entrepreneurship curriculum intended for people over 50. It includes help with developing business plans, obtaining loans, gaining access to business start-up incubators, and meeting mentors to serve as sounding boards. For more information, visit www.blogs.baruch.cuny.edu/fieldcenter/.
  • SCORE (www.score.org) is a nonprofit that provides education to entrepreneurs. At SCORE, working and retired executives and business owners donate their time and expertise free of charge in person or online.
  • Senior Entrepreneurship Works (www.seniorentrepreneurshipworks.org) is a nonprofit organization designed to engage, empower, and connect would-be entrepreneurs over the age of 55.

  • The Small Business Administration (www.sba.gov) has loads of information about starting and managing a business. You’ll find pages that cover nearly every aspect of starting and managing a business, from thinking about starting a business to paying taxes and hiring employees.

    tip The SBA website has a section specifically for entrepreneurs 50 and older at www.sba.gov/content/50-entrepreneurs. Also check out AARP’s small business site, www.aarp.org/startabusiness.

  • Startup Nation (www.startupnation.com) is packed with practical information from quality sources relevant to starting, managing, and growing a business. In addition, it encourages and enables small-business owners and people seeking to become small-business owners to connect with and learn from one another.

tip Find a mentor. Connect with someone who started a business similar to yours and ask the person to be your mentor. Try finding someone in your existing network who fits the bill. If you can’t find someone you’re already connected with, track down candidates online. Look for an entrepreneur mentor who has the following qualities:

  • Knowledge and confidence in the skills you lack
  • Business acumen and a successful track record in starting and running a business — someone who’s walked the walk and succeeded
  • Ability to be practical, honest, and supportive all at the same time

If you’re planning to launch a major business venture that requires financing possibly through investors, consider assembling an advisory board — a diverse group of three to eight individuals who have a proven track record in various areas of starting and running a business. Diverse means some men, some women; some older and some younger; conservative players and risk takers; creative and practical. They can guide you and may lead you to investors and customers.

To find prospective board members, tap your network of people who have experience with your type of business (and maybe some who don’t) and invite about three to five of them to join your board. Then, conduct either virtual or in-person meetings with them on a periodic basis to discuss two to three issues of key importance. Board members are typically compensated by a certain percentage of equity in the company (0.25 to 2.0 percent is common). But you may find friends and other associates willing to offer their expertise pro bono.

Writing a solid business plan

Writing a business plan before launching your business is essential for two reasons: process and product. The process of writing the plan forces you to consider key factors to achieving success and helps you define your vision. The product (the finished plan) provides a road map of how to get from point A to point B. Although you may need to take some detours along the way to get around roadblocks, having a plan in place keeps you on track. The product is also necessary if you need to apply for a loan or other financing.

There’s no strict model to follow, but in general, a simple plan should be about 20 pages and contain the following sections:

  • An executive summary that explains what your business will do, who the customers will be, why you’re qualified to run it, how you’ll sell your goods and services, and your financial outlook.
  • A detailed description of the business, its location, who your management team is, and what your staffing requirements are. Also include information about your industry and your competition.
  • A market analysis that targets your customers more specifically (demographically), including age, gender, and where they live. The analysis also describes your sales and promotional strategy to reach them.
  • A realistic forecast of start-up outlays — cost of raw materials, equipment, employee salaries, marketing materials, insurance, utilities, and fees for attorneys and accountants — along with projections for gross and net annual profit.

tip Search the web for “business plans.” You may even want to narrow your search for business plans in a specific industry or for a specific type of business, service, or product. You’ll find plenty of examples. Another great resource is Business Plans Kit For Dummies, by Steven D. Peterson and Peter E. Jaret (Wiley, 2016).

Financing your enterprise

For most businesses, securing capital is the biggest obstacle. Research the start-up costs for your business and develop a plan with your financial adviser to ensure that you’ll have the funds you need. Here are some sources of financing to explore:

  • Personal savings: Most start-ups are financed with an entrepreneur’s own money.

  • Loans from banks and credit unions: For many who want to start a business, the local bank is frequently a first stop for financing, but don’t hold your breath; many banks won’t approve loans for start-up businesses. In the off chance that you find a bank that will, you’ll need a clean credit record, an excellent credit score (720 or higher), a solid business plan, and probably a good chunk of your own change invested in the business.

    tip For more about securing a small-business loan, check out BusinessUSA (www.business.usa.gov), the federal government’s site for entrepreneurs seeking small-business loans. An SBA-guaranteed bank loan can lower your down payment and monthly payments. To find a bank offering one of these loans, check the Local Resources section of the SBA’s website as well as the site’s loans and grants search tool.

  • Home equity credit lines or loans: If you’ve built up some equity in your home, a home equity line of credit is a fairly easy route to gain access to cash, and interest is generally manageable. Lenders typically let you borrow 75 to 80 percent of your home’s value, minus the amount of money you still owe on the mortgage. With a line of credit, you borrow money on an as-needed basis up to the amount of the approved loan.

    warning With a home equity line of credit, you’re putting your house up as collateral. If you can’t make the monthly payments or pay the loan in full when it becomes due (typically 10 to 15 years down the line), you risk losing your home.

  • Friends and relatives: Members of your inner circle may be willing to lend you cash interest-free or at a low rate. Put everything in writing to avoid misunderstandings that may arise over the loan’s terms, including repayment dates.
  • Equity investors: Equity investors may back you in exchange for equity or partial ownership. The SBA’s Small Business Investment Company program (www.sba.gov/category/lender-navigation/sba-loan-programs/sbic-program-0) can offer leads. These investors typically fall into two groups:
    • Angel investors are high-net-worth individuals who generally invest $25,000 to $100,000 and may consider investing in a good idea. Visit AngelList (www.angel.co) to get in touch with an angel investor.

    • Venture capitalists are also high-net-worth individuals, but they’re more likely to invest more, require much more than just a good idea, and perform much more due diligence. In many cases, they band together to form a venture capital firm to pool their investments.

      Both types are typically swamped by requests, extremely careful with their money, and prefer growth-oriented sectors, such as technology and bioscience.

  • Crowdfunding websites: A relative newcomer in start-up financing is crowdfunding, virtual fundraising campaigns intended to typically raise relatively small amounts of money from donors who are not repaid. For details, visit crowdfunding sites, including Kickstarter (www.kickstarter.com), Gofundme (www.gofundme.com), and Indiegogo (www.indiegogo.com).
  • Crowdlending websites: Crowdlending is a variation on the crowdfunding theme, but in this case, people expect to get their money back. Crowdlending sites include Fundingcircle.com (www.fundingcircle.com), Onevest (www.onevest.com), Accion (www.accion.org), and Kiva Zip (zip.kiva.org). Many crowdlending sites specialize in making no- or low-interest microloans (up to $25,000) to impoverished individuals who want to start businesses. The SBA also issues microloans up to $50,000. In general, interest rates range from 8 to 13 percent.
  • Economic development programs: You’ll need to do some legwork for this type of financing, but it could be well worth your time. Getting your firm certified as a woman-owned business, for example, can help you qualify for money that’s only available to companies with that designation. Certification can also help you land government and big-business clients. For example, Michelin North America, based in Greenville, South Carolina, has provided $1 million in low-interest financing — loans range from $10,000 to $100,000 — to certain businesses, including women-owned firms, in parts of South Carolina.
  • State and local economic development agencies: Some states and municipalities provide funding for economic development that’s available for starting specific businesses in certain locations. Check the SBA’s online directory and contact the office in your area to see whether any money is available and find out restrictions on its use.
  • Grant programs: The SBA operates a network of nearly 100 Women’s Business Centers around the country. They provide state, local, and private grant information to women eager to start for-profit or nonprofit businesses. Grants.gov (www.grants.gov) lists information on more than 1,000 federal grant programs. BusinessUSA (www.business.usa.gov) is another great resource to find out about federal government financing for businesses.

warning Here are a couple of financing sources to steer clear of:

  • Credit cards: Avoid using personal plastic at all costs. Most cards carry high double-digit interest rates, which is an outlandish price to pay for starting a business.

  • Retirement savings: Don’t put your future financial security at risk. Not only will you owe income taxes by taking money out, but you’ll also lose the tax-deferred compounding and, if you’re younger than 59½, you’ll owe Internal Revenue Service withdrawal penalties. Please don’t do that. No business is worth it. Furthermore, if the business fails, and your nest egg goes with it, the loss comes at a point in your life when it will be tough to rebuild that retirement fund.

    A recent twist is rollovers as business start-ups (ROBS), which raise the risks a bit higher, according to some experts. With this approach, business owners use their retirement funds, such as 401(k) assets, to finance or expand a business without incurring taxes or penalties. The account is rolled over into a new retirement fund. And that new retirement fund, in effect, becomes a shareholder in the start-up. It’s legitimate, according to the Internal Revenue Service, but it’s complicated. And if not set up perfectly, it could result in penalties and a big tax bill.

Here are seven tips for people who are keen to launch businesses and who need to attract money to their start-up (with input from Jeanne Sullivan, a noted venture capitalist):

  • Hone your story. You need one or two lines that sum up your product or service. The key is to be able to get that company story out of your mouth in a clear, succinct, short pitch. You’ll also want to include a clear example of how a customer would use your product or service.
  • Know your market. To get a solid grip on the potential size of your customer base, ask yourself: How big is it? Is it crowded? What niche are you trying to serve?

  • Be able to reel off your business’s current finances and financial needs. It’s basic math — adding, subtracting, and percentages. Investors want to see that you’re accounting for all the costs and not just dreaming of the profits.

    tip Brush up on the lingo. You need to be able to answer questions such as these: What are the capital needs of the business over time? What are the gross margins? What’s your break-even time frame?

  • Prepare for show and tell. If you’re selling a product, make sure you have a prototype and get it in the hands of early pilot customers. Then you’ll have something real to discuss with an investor.
  • Have a strategy for hiring your team. Outline the key people you need over the next 18 months and recruit them — knowing that they may work for you now for equity or part time until you get some funding.
  • Surround yourself with an advisory board — a brain trust. Your advisers can be formidable references for you with investors. (See the earlier section “Getting help” for more about assembling an advisory board.)
  • Prepare to work harder than you ever have. Most small-business owners work more than 60 hours a week, according to a new survey by small business loan provider Kabbage. Prepare for the inevitable setbacks.

remember If all this sounds overwhelming, don’t let that get you down. In all likelihood, you’ll wish you’d only done it sooner.

Becoming a Social Entrepreneur

A social entrepreneur is a person who creates a business venture with the goal of making the world a better place. With more and more people over 50 seeking meaningful employment and facing a job market that makes it tough for workers over 50 to get hired, social entrepreneurship is becoming an attractive option for the 50-plus crowd.

This section explains the ins and outs of getting started and making it as a social entrepreneur. But first, before you head down the path of making a living by doing good deeds, answer these five questions:

remember Although its primary goal is to do good rather than make a boatload of money, a social entrepreneurship is still a business. Follow the guidance in the earlier section “Launching Your Own Business” to establish a firm foundation for your venture to give yourself the best chance of achieving your goal.

Making a nonprofit start-up to-do list

To start off on the right foot, take the following steps:

  1. Research the field you’re entering and develop a detailed plan for getting from point A to point B.
  2. Obtain first-, second-, and third-hand knowledge of how nonprofits operate.
    • First-hand: Work with other nonprofits if you haven’t done so already. Volunteer so you know what you’re getting into and the challenges involved.
    • Second-hand: Talk with people who’ve started nonprofits to glean their perspectives and experience.
    • Third-hand: Read up on nonprofits and take workshops on how to get started.

  3. Complete the IRS paperwork to establish a nonprofit entity.

    IRS publication 557 (www.irs.gov/pub/irs-pdf/p557.pdf) contains information on all the organizational categories and instructions on qualifying for and applying for 501(c) status.

  4. Secure the funding to launch your nonprofit and sustain it for the foreseeable future.

    See the earlier section “Financing your enterprise” for details, but ignore the parts about using your own money and borrowing against your personal assets. Don’t put any of your personal assets at risk.

Here’s some additional advice:

  • Don’t underestimate the burnout factor. Starting this kind of venture typically demands long hours with low or no pay (for some time), and the final responsibility for your project’s success falls to you and you alone. And don’t hold your breath for all the backslapping for a job well done. It may be years before your organization’s work is acknowledged, if it ever is.
  • Be aware of your time commitment. As founder, you may play a huge and active role in the early days, but eventually you’ll need to have a plan in place to step off the stage. Making room for a new generation of leaders to take the reins is never easy, but it’s critical to sustaining an organization over time.
  • Be careful not to lose your own identity in that of the nonprofit. With all the time, energy, and passion that go into starting and nourishing a nonprofit, drawing the line between yourself and the organization can be harder than you think. This kind of work is personal and takes passion.

Getting help: Organizations that support social entrepreneurs

When you’re starting a nonprofit, you’re not alone. Many people have traveled the path, and almost everyone wants you to succeed. After all, you’re striving to make the world a better place. One of the first steps is to get schooled in how to become a social entrepreneur and how to start a nonprofit. Here are several resources to check out:

  • The Bridgespan group (www.bridgespan.org) offers information and guidance along with support and networking opportunities to help you get started.
  • The Chronicle of Philanthropy (www.philanthropy.com) provides information and advice for leaders of philanthropic enterprises. You can also use this site to recruit people who want to work for a nonprofit.
  • CommonGood Careers (www.commongoodcareers.org) recruits for nonprofit careers at management level.
  • Encore.org (www.encore.org) is a go-to site for anyone interested in a career with social meaning and purpose; it includes a list of nonprofit job opportunities.
  • GuideStar (www.guidestar.org) is a leading source on nonprofit organizations.
  • Idealist (www.idealist.org) provides leads to more than 10,000 job opportunities nationwide in the nonprofit sector. This is a great place to go to recruit volunteers and interns.
  • Independent Sector (www.independentsector.org) has research and resources of more than 600 charities, foundations, corporations, and individuals.
  • The National Council of Nonprofits (www.councilofnonprofits.org) is a network of state and regional nonprofit associations serving more than 20,000 organizations.

Exploring Franchising Opportunities

Many who are eyeing a second career fancy the idea of running their own business. Yet the risk and work involved in starting a business from scratch can be daunting. One way to ease into entrepreneurship is to purchase a franchise. Many franchises provide a full range of services, including site selection, training, product supply, marketing plans, and even assistance in obtaining financing.

But franchising can be a tricky and expensive road. An initial investment ranges from tens of thousands of dollars up to $500,000. And it’s not unusual to hear franchisees gripe about ongoing royalty and advertising fees. For example, to own a Subway franchise store costs an estimated $116,000 to $263,000 in the United States. On top of that, however, franchisees pay fees of 12.5 percent of gross sales (minus sales tax) every week to corporate headquarters: Eight percent is for franchise royalties, and 4.5 percent goes to advertising. That’s a lot of bread.

This section sheds light on franchising opportunities and offers advice on how to get started and what to watch out for.

Don’t rush in

warning One of the biggest mistakes franchisees make is to hurry into business without doing enough research and soul-searching to determine whether franchising is right for them or whether a certain franchise is really a good match. Don’t let the fear of missing out on a golden opportunity drive you to make a rash decision.

Take your time to evaluate your options and research franchises you may be interested in buying, including talking to other franchise owners, particularly owners of the same franchises you’re interested in. Find out what they like and dislike about the franchise. For more about reality-testing a franchise opportunity, see the later section “Do your due diligence.”

Do a self-assessment

Buying a franchise is a huge time and money commitment. You’re putting tens or even hundreds of thousands of your own dollars on the line and will be working 60 or more hours every week to make your franchise a success. Before making that commitment, answer the following questions:

  • Is this concept, product, or service something I’m passionate about? The answer had better be yes, because passion provides the drive to help you overcome the inevitable setbacks and frustrations.
  • Am I prepared to work hard? Although the franchisor provides you with a ready-made business, its success is entirely up to you. You need to show up and work hard to satisfy your customers and attend to all the details of running a business. The franchisor won’t do that for you.
  • Am I customer-focused? To succeed, you need to be honest, fair, personable, service-oriented, and customer-focused. If you’re not, you’re more likely to drive away customers than attract them.
  • Am I optimistic and confident? Optimism and confidence are contagious and convey to customers and clients your belief in the products and services you’re selling.
  • Do I have the skills to run a business? Franchisors are looking for people with transferable business skills, such as sales, marketing, management, communication, customer service, and an ability to balance the books.
  • Am I a quick learner? The learning curve is steep. You need to be able to read and follow instructions and “catch on” to the way the franchise wants the business run.
  • Am I willing to follow orders? As explained next, franchisors make the rules, and franchisees follow them. If you’re not comfortable with that, you may be better off starting your own business.

For more on navigating the world of franchising opportunities, check out Franchise Management For Dummies, by Michael Seid and Joyce Mazero (Wiley, 2017).

Accept that you don’t call the shots

Franchising is a cookie-cutter approach to expanding a business. It’s important to realize that, regardless of the sales pitch, you’re not really your own boss. You must follow the formula. There’s little wiggle room for innovation. Franchises depend on the by-the-book execution of a business plan. For the most part, you have to be willing to do what you’re told. And if you don’t, you could lose your right to own the franchise.

Franchise guidelines may cover site selection, marketing materials, signage, employee uniforms, bookkeeping procedures, sales area, which vendors you use, and more. If you’re independent and like to call the shots, franchising may not be your thing.

Do your due diligence

When researching franchise opportunities and narrowing the field, perform your due diligence to select a franchise that’s likely to succeed and meet your goals. To perform your due diligence, take the following steps:

  1. Gauge demand for the franchisor’s products or services.

    Is there a need in your community that’s not being met or a problem that’s not being addressed that the franchise is uniquely positioned to meet or solve?

  2. Assess potential competitors.

    Are other businesses addressing the same need or problem successfully within your community or online? What makes the franchise you’re considering that much better that potential customers would choose it over what’s already available? If the franchise has competitors and isn’t significantly better than them, cross it off your list.

  3. Evaluate brand recognition.

    Does the franchise have a strong brand presence and a good reputation in your community for delivering quality products and services? Do people talk about a desire to have that particular brand available locally?

  4. Search the web for complaints about the franchise.

    Visit the franchise’s website and find it on Facebook, LinkedIn, and Twitter, and read what others (customers and franchisees) post about it. Search the web for the company’s name followed by “complaints” or “rip-off” to find out what customers and perhaps former employees and franchisees have to say about the franchise. Check also with the Better Business Bureau or local consumer protection agency for any complaints that have been filed.

  5. Find out how long the franchise has been in the franchising biz.

    A long track record proves that the franchise is doing something right.

  6. Find out how supportive the franchise is.

    Support often comes in the form of training and advertising. In addition, some franchises may offer financing to get up and running. If you get the feeling that the franchisor is more interested in its own wealth at the expense of franchisee success, cross it off your list.

  7. Obtain and read the franchisor’s disclosure agreement.

    It provides contact information for previous purchasers in your region, audited financial statements, a breakdown of start-up and ongoing costs, and an outline of your responsibilities and the franchisor’s obligations. Pay close attention to the pages in the document showing franchisee turnover. Names and phone numbers of former and current franchisees in your area should be listed.

    tip Check whether the franchise you’re exploring has the SBA’s stamp of approval (www.sba.gov/content/franchise-registry-approved-brands). SBA-approved franchises are ones whose disclosure agreements have been reviewed and accepted by the SBA.

  8. Contact current and former franchise owners.

    Ask them what they like and dislike about the franchise and what they think could be done better. Contacting former franchisees may take some legwork, but the key is to find out why they’re no longer in business.

    Interview franchisees in person. Chances are that they’ll be more forthcoming in a face-to-face meeting. Be aware that some may have signed confidentiality agreements that prevent them from talking to you.

    tip Consult an accountant or attorney with experience in franchising to help you gauge the entire franchise package, including costs, projected profits, tax implications, and your ability to sell the franchise later, if desired.

Be sure you have enough money

How much can you afford to lose? Do you have a financial cushion or another source of income to cover your living expenses for a year or more? If not, pump the brakes. Create a budget and figure out how much you will need to live on while your start-up gains traction.

Although some franchises break even quickly, most take 12 months or longer before a newcomer can draw a salary. The initial fee for a franchise is clearly stated in the disclosure documents, but newcomers often underestimate operating costs.

Consider getting a loan

Many franchisees take out a loan to cover initial investment and start-up costs. You may want to try a bank where you’ve been a longtime customer or one that’s familiar with the franchise field.

tip Applying for a preapproved franchise loan is often easier and quicker. To find the green-lighted list, go to the Franchise Registry (www.franchiseregistry.com) or to FRANdata.com (www.frandata.com). You can search by name if you have a certain franchise in mind or by industry. Plan on a down payment of 20 to 30 percent of the loan amount.

Check out additional resources

For more information and guidance on buying and running a franchise, check out these resources: