Starting Your Own Business

He was tired of his commute. She was tired of her routine. So Thomas and Connie Betts took the next logical step for a fiftysomething couple with a white-collar background. They bought an alpaca ranch.

Four years later, Cascade Alpacas of Oregon, in Hood River, is thriving. The Bettses breed and board huacaya alpacas, prized for their soft, fine wool, and they do a brisk business at Foothills Yarn & Fiber, a barnlike shop on the property. "It worked out better than we envisioned," says Connie, 54, a former software instructor. "We made money sooner than we thought we would."

Starting a business after 50 is not some wool-gatherer's fantasy: About one-sixth of 50-plus workers are in business for themselves, and one-third of them made the move after they passed the half-century mark. "It's the boomer business boom," says Jeff Williams, of Bizstarters, a consulting firm for 50-plus entrepreneurs.

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In fact, baby-boomers have good reason to go solo, says Raymond Joabar, of OPEN, the small-business unit of American Express. "They are a lot more financially stable than someone who's 20 or 30, and they have knowledge and passion for what they do or what they would like to do." A layoff, forced early retirement, or the threat of either, is another incentive. Still, going from salary slave to self-made mogul takes careful planning.

Do your homework

Before you spend one penny on your brilliant idea, figure out who needs your product or service, how you expect to sell it and who you'll compete against. Market research (or the lack of it) can make or break a start-up, says Williams. "Everything flows from that." To begin, go to the library and study the demographics of your community, or stop by Score, a nonprofit organization that offers free counseling and training for entrepreneurs.

Chicagoan Ken Proskie took his legwork further. A 54-year-old specialist in occupational safety, Proskie knew plenty about his profession but little about consulting, his chosen career path after he was laid off. He took classes in small-business management, including Williams's course in marketing, sales, taxes and other basics. "I was up and running within 13 weeks," he reports. His business, Compass Health & Safety, advises companies on occupational risks.

Write a business plan

Idea fully formed? Write it down. A well-prepared outline not only helps you envision the development of your business but also guides lenders and investors. "People have a dream, but they can't explain what they want," says Bob Shephard, of the Orlando, Fla., chapter of Score. "If you have a business plan, you can say, 'Here it is -- let's talk about it.'"

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That doesn't mean write a novel. You should include your company name, a mission statement, an overview of your business, your target market, your financial projections and a two-page summary. Deliver your pitch quickly but with enthusiasm, says Shephard. Dry won't fly. It has to come alive.

Find financing

Like many boomers, both Proskie and the Bettses had accumulated enough assets to provide seed money. The Bettses took $100,000 from the sale of their suburban Portland home and sold their sailboat. Proskie, whose house was paid off, tapped savings.

But boomers often have other ways to raise cash, says John Challenger, of Challenger, Gray and Christmas, which studies employment trends. "Someone who's 50 has a wide network and the ability to tap into that network because of relationships built over time," he says. Ties with friends, colleagues and, later, local banks are your best bets to raise more working capital, according to the Small Business Administration (www.sba.gov/smallbusinessplanner).

As for cash flow, says Shephard, "Don't expect to get a return in your pocket for six months or longer." You'll need money on hand or readily available, such as a line of credit, to supplement your savings for a year or longer. That's scary, but cutting corners could jeopardize your enterprise, he says. "One of the biggest reasons for business failure is underfinancing," he adds.

Buy health insurance

At 50-plus, you know you can't go without health insurance. "The lucky folks have a spouse with that benefit," says Sherrill St. Germain, a financial planner in Hollis, N.H. If you're not one of them and you have to shop on the open market, you can keep premiums down by getting a policy with a high deductible -- about $1,000 for an individual and $2,000 for a family -- before benefits kick in. You can deduct the premiums if you're ineligible for your spouse's employer-paid coverage and the deduction doesn't exceed income from your business.

An alternative is to set up a health savings account. In concert with qualifying high-deductible insurance, you squirrel away money for doctor bills and deduct the contributions. The earnings grow tax-free, and distributions escape income tax if you use the money for medical expenses. Otherwise, you pay income tax plus a 10% penalty. The penalty disappears at age 65. Banks, insurance companies and mutual funds offer HSAs.

Plan for retirement

Memo to workaholics: "You're going to want to retire someday, even from the perfect job," says St. Germain. The good news is that small-business owners can contribute much more to retirement accounts than salaried employees can, and 50-plus owners get to throw in catch-up amounts. Both the SEP IRA and the solo 401(k) let you contribute up to $50,000 in 2007 if you are 50 or older.