Advice To Retiree Engineer Emeka Chukwu
Question & Answer Series by Nnaoke Ufere, PhD
Question: My name is Emeka Uchenna Chukwu. I recently retired with full benefit from a local oil & gas company. I collected lumpsum pension. I’m 68 years old. I feel the impulse to get back in business or do something with all the time I have. The palm oil processing business and hotel ownership are booming, and I want to start a new business in one of the two areas. I have strong background in engineering and some managerial experience from my previous career. I plan to invest my retirement savings. Should I do it? What can go wrong?
Answer: Emeka, your question is an important one. Many retirees have asked the same question in different ways. I’ll attempt to answer by drawing from my experience and research, and those of others.
I will start with a caution. The probability that you’ll lose your hard-earned retirement savings and live the rest of your life in poverty is extremely high. My research shows that nine out of ten (90%) businesses started in retirement in Nigeria failed after five years or sooner – certainly a high mortality rate. You may ask, but 10% succeeded and why not me?
Yes, the failure rate is not zero; that’s why people play lotteries. But in retirement you can’t throw dice and bet your nest egg. Luck is not a strategy when your retirement money is in play. At 68, and maybe 70 by the time you build a palm oil processing mill or construct a hotel, you don’t have enough time left to recoup losses if you blow it.
To help you decide, here are common reasons why businesses started in retirement fail.
- A new startup venture entails lots of risk. The risk of failure is very high at 90%. In your late 60s to early 70s, you really don’t have enough runway to land safely if you fail and your retirement nest egg gone on a risky business venture. Retirement is not the time for taking new venture risks with your life savings; it’s time for capital preservation.
- Most retirees go into business they really don’t understand or have prior experience in. They tend to be full of self-confidence based on past career successes. So, they overestimate their abilities while ignoring current realities of the new business environment and its constraints. They suffer what psychologists call anchoring bias. In your case, working in the oil industry doesn’t adequately equip you with knowledge of the palm oil processing or hoteling business and industry. The business drivers, legal requirements, competitive dynamics and economics are different. And the learning curve is steep.
- FOMO (Fear of missing out) effect. My research indicates that retirees tend to fall for fads and scams faster than any other demographic in Nigeria. The fear of missing out on a “winner” opportunity often pushes them into risky ventures, including Ponzi schemes. Don’t go into the palm oil or hotel business just because it’s “booming.” Is it profitable in a sustainable way? Paraphrasing Warren Buffet, I advice you to: invest when everyone is fearful and don’t when everyone is greedy. What is booming today may burst tomorrow. Do your due diligence.
- The idle mind is the devil’s workshop. This aphorism is really true in retirement. Most retirees feel the urge to “do something” to avoid being idle. What to do? Well, start a business! Often this is a recipe for disaster. You don’t start a business for the sake of “doing something.” If you do without a business plan, you’ll lose your shirt. Unfortunately, many retirees do and get burnt.
- Ignore health and physical readiness. Your emotions may itch to start a business but are you healthy and physically ready to engage in the marathon race it demands? If not, then you can’t finish the race. A new business venture is a race for product/service, customers and profit. If you can’t run the business race, others will eat your cake.
- Wrong industry, wrong business, wrong location. Often retirees go into business in an industry that’s foreign to their experience, one they hardly know anything about or have relevant expertise to succeed. These businesses fail faster because of liability of foreignness and over-reliance on third-parties who are willing and able to embezzle your money. This is not time to learn about or experiment in a new industry, business and location with your retirement savings.
- Often, retirees chase the latest over-crowded business trend – palm oil processing, hotel business, rental property, transportation, agribusiness, or tinker with moonshot ideas of fancy — where they have no direct experience or expertise in the dynamics of the business. The outcome is 90% mortality rate, a loser.
- Retirees go all in. They drop their entire retirement savings into a blackhole and have no emergency funds to respond to unforeseen circumstances. Often, retirees tell me they started with small investments. But as the problems multiplied, and they were already waist-deep into the blackhole, they couldn’t get out. So, they poured more and more retirement money into the blackhole. The first rule they disobeyed: if you realize you’re in a hole, stop digging.
- They often go into business based on emotional relationships – with friends, family member, alumni, church member, club member, etc. These are the worst people to be involve with in a business. Too much emotional baggage. Business requires hard rationality, not emotions. The result often is the business venture fails and you end up with a broken relationship – lose-lose outcome.
Success Stories
- From my analysis, the 10 percenters who succeeded are those who started a business as an extension of their last career. This often involved supplying business services or products to the company they worked for before retirement and their established network of relationships, assuming they left in good standing.
- In other successful cases, former government doctors and pharmacists started small-scale clinics or drug stores based on relevant expertise and preexisting relationships in the business.
- Others leveraged their expertise to provide consulting services in specific problem areas within their core competences. None strayed into new industries or businesses outside their experience.
In sum, before you go waist-deep into your new venture using your retirement savings, review the above 9 failure points and the 3 successes. But resist the itchy urge to start something until you’ve completed due diligence. Just don’t forget the high mortality rate of 90% of retiree business ventures, and the sad reality that in your twilight years, once retirement saving is gone, it’s very hard to replace.
