Ted Appleton remembers that at some time in his early 40s, the lunch-time conversation among his work colleagues switched from business, money, cars and kids to the wonders of retirement and the freedom, joys and opportunities it promises. And why not?

It's pleasant to engage in wistful, misty-eyed conversation describing deserved days of endless leisure with boundless resources. Who would not participate in such dreams?

As it turned out, reality for Ted was somewhat less magical. At 52, Ted was offered a "package" by his employer, a medium-sized steel fabricating company for whom he had worked for 24 years. While the company insisted that the package was only an offer, Red recognized the unspoken condition: "This is an offer you can't refuse". He accepted knowing that there was insufficient money in the package to buy him that idyllic world imagined by his colleagues during those lunch-time fantasies.

Apart from the money, Ted was aware of two other important realities: he needed some structure in his life, and he had more energy to commit than the gold course and garden would demand.

After considerable soul searching, discussions with the family and detailed research, Ted decided to become an entrepreneur. He was going to fulfil a life-long desire to own and run a hobby-craft store. That's a gutsy thing to do.

Although they didn't know each other, a neighbour of Ted's, Seema Batshi, arrived at the same self-employment choice but got there following a different route. At 49, Seema had enjoyed a successful career as a nurse with a community agency. To the best of her knowledge her job was not in any danger, but she was tiring of the routine, office politics and endless planning meetings that were part of her job. More important, Seema recognized that she was responsible for the joy and challenge in her life and at the moment, her job offered little of either. She decided to join the growing movement and start a home-based business.

Seema knew that hospitals release patients much more quickly than they used to, and that these people still need help. The result is that more and more families are providing home care to needy loved ones. Seema planned to run courses out of her home to provide information and training to family caregivers. She hoped to obtain financial support from government agencies, insurance companies and from client fees.

Ted and Seema are only two of the many, many Canadians who have taken the plunge into self-employment. Last year more than 90,000 new businesses were registered in Canada. This is a convincing argument that more and more people are looking for alternatives to the traditional job market in order to earn a living.

Ted and Seema had very clear reasons for their decisions, but there are other reasons that motivate people to make the same choice. Some choose self-employment because the job market is closed to them for a variety of reasons, some have a passion to turn a hobby into a business, and some choose independence simply because of the challenge. Whatever the reason, self-employment means taking personal responsibility for one's business life, a responsibility that has both positive and negative consequences.

On the upside, small businesses are flexible and can respond to opportunities quickly. Many bigger companies now buy services from small, home-based providers rather than hire staff. At least two of the major banks offer financial assistance with lines-of-credit, granted without a detailed business plan or collateral required for more formal loan agreements. It's encouraging also that most entrepreneurs claim more personal satisfaction than traditional jobs provide.

From a financial point of view, self-employment has many inherent risks. On average, the self-employed make less money than those in traditional jobs, and many would argue that they also work harder. New businesses rarely allow the owner to take a "salary" for at least six months and operate under the constant pressure of cash-flow problems. Inexperience leads to costly mistakes, and it's easy to become consumed by a new business.

Ted and his wife had a little less than $150,000 in severance allowances and savings accounts. He was entitled to a reduced pension when he reached 60 years of age, but had no income until then. They decided that they would commit half those resources to an investment plan to use the other half to begin the business. If the business prospered, fine; if not, they had some reserves to buy time to consider other options.

Seema, on the other hand, left her job willingly and thus had no compensation. She had saved about $15,000 in her own name and she was prepared to use that to begin her business. Unlike Ted, Seem's spouse was working and provided an important cushion. Also, Seem's start-up costs were considerably less than Ted's, an important factor. Both recognized that the greatest single asset they had was the unequivocal support of their respective spouse.

With help from a small business counsellor, both Ted and Seema came to understand the importance of planning. Both prepared what they called "feasibility studies" which required research. Their advisers suggested they answer the following questions.

• Does my idea fit with a current trend or opportunity?
• Will my business blend with who I am, my interests, my personality, my experience and my contacts?
• Is there a proven need for my product or service, and can it deliver what it promises, every time?
• What are the benefits and weaknesses of my product or service?
• Who will be my customers, and are there enough of them?
• Will my success be influenced by outside conditions such as inflation, technology, new laws, social attitudes or new government?
• Who else is in this business and is there room for me?
• How will I network, sell and promote my business?
• How much will I charge, and will it be enough?
• Can I articulate clearly why I will succeed?

Ted understood early in his research that he did not have the background or expertise to run a business by himself. He loved hobby models and games but knew very little about the business side of them. To learn, he tried to get a job in an established hobby-craft store but couldn't, so he offered his service free to a store in a near-by town.

The owner accepted the offer and actually began to pay Ted after a few weeks when he recognized that Ted was the most willing and enthusiastic employee he had ever had. Ted regarded that brief period of working without pay as "going back to school".

Seema knew her stuff. She merely transferred her skills and experience to a new setting. She formalized that information and presented it in an organized and learner-friendly way. She enlisted the help of her former colleagues to identify possible clients. Seema also consulted with physicians and with government services.

Not surprisingly, money often becomes a central focus for new businesses. It is the yardstick by which success is measured, and it plays a major role in the decisions necessary to conduct business.

For Ted, doing something he had always wanted was almost payment enough. True, he had to make a living, but focusing on getting and keeping his customers, rather than simply making a sale, Ted built up a strong repeat business that provided opportunity to share his enthusiasm. He understood that self-employment is a journey, not a destination.

Seema provided important services that had been delivered in different ways before the recent economic crunch. She felt great satisfaction in helping people. After all, it was that feeling that got her involved in nursing to begin with.

Ted and Seema recognize now that although extremely rewarding, self-employment has some drawbacks. Ted in particular is tempted to spend too much time "at the shop". He must remind himself frequently to keep a balance between work and family. Seema has a good head for figures but doesn't like to take the time to keep the books. Financial records are a vital part of any business, not only because the government requires them, but also because forecasts, records and journals are like report cards; they measure progress and provide warning signals of danger ahead. She chose to "outsource" her bookkeeping to spend more time marketing. Both recognize the need to build planning time into their schedule to keep their personal and business goals on track.

Beginning a new business after a career is a challenging experience. However, the good sense, realistic judgements and varied contacts that come with the years are helpful indeed. Experience tends to make people a bit more cautious, and that is a wise quality for the self-employed.

Ted and Seema agree that entrepreneurship is exciting; more important, it has been the right choice for them.

Don Cassidy and Deborah Dennison are directors of EduService, a training and advisory company to entrepreneurs and small businesses.

This article was commissioned by Bank of Montreal