While retirement spells the end of the prototypical 40-hour workweek for many Americans, for some it marks the start of a second act in coaching or consulting. Yet many would-be consultants learn that it’s not as simple as hanging up a shingle and waiting for the business to roll in.
Managing a successful transition takes planning, which could mean laying the groundwork a year or more before leaving your full-time job. Heading down this path also means setting your expectations, determining your focus, and putting the right business structures in place, among other things.
“Formulating the plan takes time,” says Clayton Quamme, a certified financial planner with AP Wealth Management in Augusta, Ga., who counsels clients on second-act consulting careers. “It’s a little harder than just looking for another job.”
Here are some ways to jump-start a consulting career in retirement:
Define your objective—and your ideal client: Be sure to think about what matters to you at this stage of life and how you will carve out time to do those things as you try to build your business, says Tracy Timm, a career consultant in Dallas.
Define what you think success for the business will mean. Are you doing this because you need the income to sustain your lifestyle or is it a side-gig to keep busy and bring in a little extra? How much time are you willing to put in and does that include weekends? How will you balance the business with your other retirement goals, such as traveling and spending time with grandchildren?
It’s important to know the answers to these questions because the way you approach the business will be different if you want to work a few hours a week or if your goal is 50 to 60 hours, she says.
It’s also important to create an ideal client profile and stick to it, whether that’s by retainer size, project revenue, area of expertise, or something else, says Morgan Stone, a certified financial planner at Stone Wealth Management in Austin, Texas.
It can be hard to turn away potential revenue opportunities, but there can be pitfalls to taking on clients who aren’t a good fit. It could mean less time for projects you like and a less enjoyable retirement. “If you’re going to build a business at 60, only say yes to projects that are going to be worth your mental and physical energy,” Timm says.
Find your niche: It can take time and effort to home in on what you want to do and find the right clients. This is where networking with contacts you’ve built up over the years can be important; lean on them for suggestions, advice, and referrals, advisors say.
Quamme offers the example of an accountant who, in his late 50s, was ready to retire from his day-to-day job but wanted to do some type of consulting work. He wasn’t interested in doing personal tax returns, but didn’t have a definite game plan. By talking to his financial advisor, an attorney and others in his network, he was able to narrow down his focus to high-level tax planning for businesses.
You might also consider asking your employer to become your first consulting contract, a tactic Stone says has worked well for many of his clients.
As you’re crafting a focus, think beyond your formal training to other areas where you might have an expertise that you want to share with others, Timm says. Say, for instance, you’re a high-powered executive who had no work-life balance for 40 years and now you want to help others in similar situations. “It’s not just your work experience that makes you a credible source for information,” she says.
Set up the necessary framework: How you structure the business can turn on many factors, so it’s good to run this by financial and legal professionals. Should you set up an LLC, an S Corp. , or operate as a sole proprietorship? Are you going to have employees or will you be a one-person operation?
Other important questions include what kinds of insurance you might need based on your business setup and what could be the ramifications if you run into a health issue and can’t complete your tasks. “A health issue as a consultant can really have a massive impact on your income,” Quamme says.
There are also tax considerations. As an independent contractor, you’ll be paying self-employment taxes and you’ll probably end up making quarterly tax estimates. You don’t want to realize six months down the road that you have a big unexpected tax bill because you didn’t prepare properly. Talk to your accountant and financial advisor when you’re thinking of consulting so you are prepared for what needs to be done, Quamme says.
Other ways to lay the groundwork include having your contracts and retainer agreements in place so when you get a client the infrastructure is set up and you’re not trying to make it up on the fly, Stone says. He also recommends clients use business accounting software. “If you aren’t keeping the books right from the beginning, it can become more complicated to go back and fix earlier problems,” he says.
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