Passive income has become a buzzword in recent years. The idea sounds perfect — money rolling in while you do nothing. But in reality, it’s no magic pill. Most passive income streams require significant upfront work or investment before the rewards show up.

That’s one reason passive income tends to benefit the ultra-wealthy in the long term. For the average investor, it usually means putting in time, money or both, and waiting years before returns become meaningful.

Take rental property, for example. Renovating or advertising for tenants can take months of effort. Once that’s done, the income might feel relatively hands-off, requiring a few hours of work each month. Still, as with any income source, it’s never guaranteed — despite what the latest TikTok influencer might suggest.

Dividend stocks and investment income

Receiving dividends is one of the best kinds of passive income because it doesn’t require any work once the money is invested.

When you buy a stock, you basically own a share of a company. As such, you might receive a dividend, which is part of a company’s profit that it doles out to shareholders. The more stocks you have, the more dividends you can potentially receive.

Keep in mind, these dividends are typically issued by established companies rather than start-ups, as they often have the ability to re-invest most or all their profits.

However, companies can decrease or halt dividends at any time. That’s why relying on them for a consistent income can be tricky.

Use the tool below, powered by Bankrate, to get connected with a financial professional who can provide personalized guidance based on your unique financial needs and goals:

Real estate and rental income

Real estate is another popular source of passive income. If you have a rental property, the money you receive from your tenants is passive. Unlike most mortgages, rent usually rises over time.

But you don’t have to buy a piece of property to take advantage of passive real estate income. Instead, you can invest in Real Estate Investment Trusts (REITs), which buy shares in several different kinds of properties. For example, REITs are often invested in apartment buildings, as well as commercial and hospitality properties.

Buying a REIT has a fairly low barrier to entry, especially compared with owning a rental property. You can also sell your REIT investment at any point, making it much more liquid than rental property. You can also commit to different types of REITs at once, focusing either on individual mortgages or commercial properties.

Royalties, licensing and intellectual property

If you create an artistic or academic piece of intellectual property, you can receive royalties or licensing fees long after the work is done.

This can be one of the hardest ways to build a passive income stream though, because you need creativity and luck on your side. Writing a hit song or creating a patent-worthy product unfortunately isn’t possible for everyone.

Royalties and licensing fees can dip as your creation becomes less popular or relevant over time. This might be out of your control.

For example, in the 2010s, many bloggers made money from Amazon affiliate links when people clicked on and bought products. However, as Amazon cut affiliate percentages and Google changed their search algorithm, those bloggers saw their incomes eventually drop.

Business ownership and silent partnerships

Owning a business often demands more energy and financial commitment than almost any other type of work — but it can also deliver meaningful rewards. Once the business is running smoothly, you can hire employees to handle day-to-day operations while you continue to earn income.

That said, the early stages are rarely passive. Launching a business requires long hours, careful planning and a willingness to take on risk. Even established businesses need oversight to stay profitable, whether that means adapting to market changes or managing unexpected expenses.

Alternatively, you can invest in a business as a silent partner, sharing in the profits without being involved in operations. This approach typically requires more upfront capital than other passive income strategies, and there’s no guarantee you’ll recoup your investment. As with many passive income ideas, success often comes down to timing, preparation — and a little luck.

Why passive income fuels generational wealth

You’ve probably heard that one key to building wealth is having multiple income streams. Passive income can make this easier than juggling several jobs, but it still requires time and effort to set up. Think of it like saving for retirement — the results don’t appear overnight, and patience is essential.

If you’re starting with limited resources, dividend-paying stocks and REITs are often the most accessible options to begin building passive income.

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Call it boredom, call it opportunity, or even call it inevitable. Not only are U.S. retirees heading back to work in retirement — they're also running the show.

Take Jim O’Connell, a New Orleans-based newly minted charter boat captain for GetMyBoat.com, an Airbnb-like boat rental company that allows entrepreneurial boat owners to rent out or charter their vessels to customers.

"I’d been sailing for many years by the time I retired, and I had wanted to have a way I could supplement the maintenance costs of the boat," he says. "So I decided I would go get my captain's license and do sunset charters on Lake Pontchartrain."

O’Connell, who duly earned his U.S. Coast Guard Captain's license and began hosting sailing charters on his boat, says now he gets to meet people, earn money and enjoy being on the water.

"It’s a great option for many retirees who may own a boat but don't have a reason to go out on the water as much as they'd like," he notes. "By hosting charters, you have the opportunity to use your boat, meet new people and earn money in your retirement."

He's not alone.

According to Teamshares, an employee-owned business services company, 40% of small business owners are Baby Boomers. A separate study found that between 1996 and 2007, U.S. citizens aged between 55 and 64 had a higher rate of entrepreneurial activity than those aged 20 to 34.

So what's giving older entrepreneurs the edge?

Benefits of age and experience

Having a successful career to lean on and learn from gives older business owners a big advantage.

“Our recent report on 'solopreneurship' shows that Americans aged 65-plus make up about 15% of all solopreneurs,” says Andrew Chamberlain, principal economist at Gusto, an online payroll, benefits and HR software platform for small and medium-sized businesses.

Chamberlain says Baby Boomer and Gen X solopreneurs — business owners with no employees — often launch businesses with higher starting salaries than younger founders.

"While solopreneurs in general see revenues grow from about $290,000 in year one to over $500,000 by year five, older founders tend to pay themselves more in the early years compared to Millennials and Gen Z (who often reinvest in growth)," he says.

"These experienced entrepreneurs may launch with stronger networks, existing client relationships, or initial credibility, advantages that often come with age and career history," Chamberlain says.

But the numbers don’t tell the whole story. Those who’ve launched businesses in retirement have real tales to tell, often covering the emotional side of the journey they took — and how they're thriving because of it.

Here are five retirees who started their own businesses and are loving the experience, regardless of their age.

Dawn LaFontaine, owner of Cat In the Box LLC, Ashland, Mass.

Dawn LaFontaine started her pet products business, Cat In the Box, when she was 59 years old.

"My husband had just lost a job he'd held for 15 years, and I'd applied for several jobs I was overqualified for and didn't even get asked back for a second interview," LaFontaine says. "I decided that I was going to have to take control over my own working future, even though I hadn’t been working, if I was going to have one."

LaFontaine says she’s never looked back.

"My products have been featured in the Boston Globe, Parade Magazine and Fox News, among many others, and are in boutique pet stores around the country and in Europe," she notes. "Last year's sales were up 84% and are on track to double this year."

Her advice for retirees thinking about starting a business in retirement is twofold:

"Just start," she says. "Don't wait for the perfect idea to come to you. It's more about execution than product, and you'll probably need to pivot at some point anyway."

She also advises older Americans to stop analyzing and start doing, but with a plan. "Start very small so you don't jeopardize your life savings," she adds. "It's possible to start a business on almost nothing."

Janice Costa, owner of Canine Camp Getaway, East Durham, N.Y.

Janice Costa turned a side gig into something much more profound when the global pandemic forced her into an early retirement.

"I’d been dabbling with the idea and I decided to grow it into a real business rather than either just retiring, or going back into the workforce," she recalls. "Essentially, I went from a hobby to an S-Corp running Canine Camp Getaway, a business that plans vacations for dogs and the people who love them."

After working nearly 27 years in a corporate job for a company that required long hours and changed hands every three to five years, Costa says she was, well, dog-tired.

"When the pandemic pretty much forced me into retirement, I had mixed feelings," she says. "I'd started doing an annual dog vacation years ago, largely because I traveled a lot with my job, and felt it was unfair to leave my dogs behind for vacation when I was gone so much already."

Costa turned that idea into Canine Camp Getaway, feeling people might share her desire to go on vacation without leaving their dogs behind. She was right on the money.

The idea was to create a vacation where people could meet like-minded dog lovers while enjoying dog sports, activities, classes, vet seminars, dog-friendly evening entertainment and dog-focused charitable initiatives.

"I revamped the structure to become an S-Corp, started using QuickBooks, and began advertising in earnest,” she says. “I began doing more with selling [branded] merchandise at my events, and I added a second location, with multiple vacations a year in both New York and Pennsylvania."

Today, Canine Camp Getaway brings together as many as 130 guests per event and, depending on the size of the gathering, it offers anywhere from six to 11 classes every hour of the day during vacations, with courses on agility, nose work, hiking, swimming, dock diving and barn hunting, among others.

"I not only get to work with dogs, which I love, but I get to feed my creative spirit, coming up with new classes, craft ideas and event themes," Costa says.

Michael McCaman, cofounder and chief strategy officer of Orion Therapeutics, Union Bridge, Md.

Michael McCaman worked in the biotech industry for 35 years, always as a team member and team leader, but never a project owner.

"I was doing consulting at the time and met a young man with an idea and a patent application that I felt I knew how to develop and apply to the new gene editing field," he says. "We talked and agreed to make a startup out of it."

The company, Orion Therapeutics, was founded to develop nanoparticles for delivering RNA, like Moderna or Pfizer's COVID vaccines. "The special lipids (fat molecules) used to make those vaccines are painfully expensive to access, so we thought we could be a disruptive force in the growing mRNA delivery field and offer a safer, cheaper lipid option," McCaman says.

McCaman felt his knowledge and network with the industry were sufficient to make a go of it. "I had the luxury of saying I do not need any salary (yet) since I had and still have consulting income," he says. "That made it a pure play of passion and curiosity for me, which is really nice and allows me to stay calm all the time."

Age played a part in the decision, too.

"To attempt something like this as a younger man with a family to raise would have taken a lot more confidence than I had at that time," he explains.

Karen Hastie, founder of the Chamber Perks App, Sudbury, Ontario

Karen Hastie launched her technology startup business at 60, an age when most retirees or people approaching retirement have a different mindset; primarily, they want to slow down. "I realized I didn't feel that way," Hastie says. "I didn't feel 'done' yet, despite being a small business owner for 30 years. I felt I had more to give, both to myself and my community."

As Hastie phrases it, she realized that her age was her strength.

"I wouldn't have to start this business to put food on the table, so I could bring more purpose and passion to it," she says. "Moreover, my wins and failures as an entrepreneur have taught me enough to do this with confidence. I didn't think I was crazy to be levelling up at 60. If anything, I felt ready for an exciting chapter of life."

Hastie’s business, Chamber Perks App, a Canada-based Chambers of Commerce services provider, is thriving. "We’re doing well, both in numbers and in the value it is creating for small businesses, local Chambers of Commerce and communities," she says.

Hastie advises entrepreneurial retirees to steer their own path and ignore the naysayers.

"Don't live your life meeting society's expectations, and this applies especially during retirement," she advises. "While you might feel intimidated by all the new skills out there, remember that your wealth of experience and knowledge is a unique strength that will take you farther than you can imagine."

Drew Parker, creator of The Complete Retirement Planner (TCRP), Seattle, Wash.

Before deciding to retire, Drew Parker knew that he needed a detailed financial plan to ensure the timing was right and that he was financially prepared.

"I couldn't find a planning tool that didn’t rely on misguided assumptions and generic benchmarks, and that didn't require a math degree or 75-page user’s manual," Parker says.

"I also learned that 75% to 80% of households had no written financial plan and had no idea how to create one."

Parker saw that knowledge gap as an opportunity to not only help himself, but others, too.

"Having experience building financial planning tools for a $5 billion company, I created a planning tool for individuals based on the same financial planning principles used by professional advisers."

He created The Complete Retirement Planner (TCRP) for less than $600, as well as starting a corporation, designing an e-commerce website and making TCRP available for everyone online.

Parker describes TCRP as "easy for anyone to use, with plenty of notes and explanations, so calculations can be followed/understood, and all the detail needed for a comprehensive financial plan."

"Sales were slow at first, but word spread and within a year we had customers in every state," he says. "TCRP has grown every year since, with new features being added."

Parker says that retirees shouldn’t hesitate to use their skills and experience to make a difference for others. "It’s a good idea to challenge yourself, and to have some fun," he says. "You can always 'build a better mousetrap' or provide a better service, as long as you are passionate about it."

Will there be roadblocks? Sure, Parker says. "But you can overcome them, as you have in the past."

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A trip is exciting. Not so exciting? The actual planning phase — especially if it's to a location you're not familiar with at all.

Sure, you can do research online and ask your friends for recommendations, but there is a ton of information to sift through out there, and the logistics can be tough to crack. Enter: a travel company.

Not only do tour operators take the sting out of vacation planning, they make it significantly easier once you're there, too. No need to obsess over train time tables or daily itineraries; you can just focus on truly enjoying your trip.

Of course, there is still some work to be done: Choosing the right travel company for you. There are so many options — you just need to pick the one that matches your vision. These choices below don't only come highly rated, they're also well-suited for specific or niche dream trips.

Abercrombie & Kent

• Ideal for: Seeing major sights with a group
• Locales: All continents, with 60 offices in 35 countries
• Founded: 1962

Classics are classic for a reason. Per company lore, Abercrombie & Kent founder Geoffrey Kent was born on safari in Kenya, "his beloved homeland." With six decades of experience, Abercrombie & Kent has a broad footprint in the travel world. Conde Nast Traveller readers ranked it the ninth-best general tour operator in 2024, with a 94.99% satisfaction rating.

If you're looking to travel somewhere new to you and want to journey through different experiences, A&K is a great place to start. They organize tours — including small group journeys, cruises and safaris — as well as private travel and private jet trips.

Choose from pre-made itineraries or let A&K experts create a bespoke schedule just for you. If you're joining a tour, plan to stick with their set dates and book a trip before it fills up.

Just remember it all comes at a price: A 12-day safari in Kenya and Tanzania with a small group (up to 18 people), for instance, goes for $13,495 per person, although the company often offers discounts.

TravelQuest

• Ideal for: Eclipse chasers and awe seekers
• Locales: All continents, following the moon
• Founded: 1996

TravelQuest plans trips around solar eclipses and other sky-related phenomena. If you want to experience the full solar eclipse in 2026, for example, you can join a TravelQuest cruise to Greenland and Iceland, or book a tour of Spain or Iceland.

Kiplinger digital managing editor Alexandra Svokos recalls her remarkable 2010 TravelQuest trip to the Cook Islands to see a solar eclipse — every moment felt like a marvel, even though clouds blocked the view of totality.

Chasing eclipses often leads to destinations you might never have considered, and TravelQuest works hard to ensure that, even with unpredictable weather, you’ll witness something extraordinary and experience something unique. On that 2010 trip, for instance, the group visited such a remote island that TravelQuest had to secure special permission to access. Guests slept in the local schoolhouse because there were no hotels.

The 2026 Spain trip, as another example, doesn't just drop you in Barcelona to see the eclipse, but to rural Castilla, a place pinpointed by the company's astronomers as ideal for viewing the eclipse. A 10-day Spain trip starts at $10,285 per person.

&Beyond

• Ideal for: Spotting the "Big Five" on safari
• Locales: Africa, Antarctica, Asia, South America and Indian Ocean islands
• Founded: 1991

&Beyond organizes travel with an eye for sustainability and conservation. But, while the company pays close attention to its impact on the environment and local communities, it promises travelers will feel pampered by their amenities and services, which include trip plans as well as company-owned lodges and camps.

"They are truly bespoke and offer excellent service," frequent traveler Gracie, who asked to only use her first name, told Kiplinger. "We used them to safari and I felt like a queen!"

One of &Beyond’s hallmarks is its luxury tented accommodations — think hardwood floors and elegant furnishings — set within some of Africa’s most iconic nature reserves and parks. Imagine watching the Great Wildebeest Migration unfold from the comfort of a cushioned patio chair.

Pampering doesn't come without costs. A nine-night Tanzanian safari in the Masai Mara, Serengeti and Ngorongoro Crater will set you back $14,635 per person. Many customers will tell you it's well worth it the investment for an unforgettable experience.

Marathon Tours & Travel

• Ideal for: Runners chasing travel dreams
• Locales: All continents, including an exclusive Antarctica marathon
• Founded: 1979

Not for the meek, Marathon Tours & Travel caters to athletes looking to run races all around the globe in unique destinations like Bhutan, China's Great Wall, Kangaroo Island and the desert around Petra.

Just scrolling through the options might make you wish you were a marathon runner. This company has created races in some of the world’s most remote places, offering incredible, once-in-a-lifetime experiences to add to your bucket list. In the 1990s, they launched the Antarctica Marathon, making it possible for runners to join the "Seven Continents Club" by completing a marathon on each continent.

For experienced runners, the company can help cross milestone races, like Boston, Berlin, New York and Tokyo, off your list with guaranteed entries and logistics covered.

"If you are traveling solo or as a couple and don't mind spending the extra money, MTT is awesome," wrote one Redditor who said they took trips with the company to Berlin and London. "They only book the best hotels, are very organized and very professional. Their meet-ups, tours, breakfasts and dinners have all been good."

Pricing varies based on where you're going and what exactly you want to get out of a trip. The four-night Berlin Marathon Tour, for instance, starts at $2,950 for single occupancy at the JW Marriott, including lodging, a cocktail reception, a pre-race dinner, a post-race celebration and a half-day city sightseeing tour. Guaranteed entry for the race will cost an additional $350.

Kensington Tours

• Ideal for: Travelers who want bespoke luxury
• Locales: Over 100 countries on all continents, including the Arctic and Antartica
• Founded: 2006

Some travelers may have one specific gripe about tour operators: Aren't they just getting the same copy-and-paste vacation experience as thousands of other tourists? That's definitely not the case with Kensington Tours, which prides itself on its custom trips — the website explicitly states that "no two trips are the same."

Instead of a turn-key itinerary, Kensington Tours assigns you a "destination expert" who helps craft your dream vacation (and provides support when you're actually there, too). You'll receive a customized itinerary that you can change whenever want, providing a rare flexibility you won't get with many other operators.

Kensington Tours has options all over the globe, including cruises, luxury villa stays, food tours, culturally immersive experiences, safaris, personal retreats and more. Tell them where you want to go and what you want to do — they'll make it happen.

Of course, this level of support and luxury (emphasis on luxury) doesn't come cheap, although there's a wide range of prices available. On the lower end, a six-day Scandinavia tour focusing on major cities costs upward of $6,842. For a truly lavish option, expect to pay at least $31,494 per person for a 21-day expedition to Antartica and Patagonia.

If you're looking for a truly unique experience, it just might be worth it. Kensington Tours has 4.8 stars on TrustPilot, with one recent user, Lynn Flaherty, raving, "Our recent trip to Vietnam was most excellent! ... We were able to get out and met the locals, enjoy sumptuous food at both delicious restaurants and from street vendors, and had many adventurous excursions. Our in-country guides were excellent."

Country Walkers

• Ideal for: Hikers and outdoor enthusiasts
• Locales: North America, Europe, New Zealand, Peru
• Founded: 1979

If your motivation to travel is the great outdoors, consider Country Walkers, a tour operator that runs group trips and self-guided walks. On all of their tours, you'll do a beautiful hike over several days — soaking in nature with planned stops for cultural experiences along the way.

For example, consider the itinerary for the Country Walkers tour in Greece. Not only will you explore mountains and the beach, but you'll visit the Temple of Delphi, a winery owned by a local and an ancient monastery — all in the company of an experienced guide. It's no wonder Country Walkers has a 4.9 star rating on TravelStride, with reviewers describing it as "a great combination of walking and culture trip with insider access" and "so beautiful, culturally rich, and very well-organized."

Love to make friends and prefer to have a guide always present? Select a group tour, which allows for up to 18 people. You'll still have free time with this choice, so don't worry about a nonstop schedule. This is typically the pricier option, ranging from $3,245 to $7,795.

With self-guided tours for solo travelers, you set the pace and enjoy time by yourself. Instead of a guide, Country Walkers will give you an itinerary, handle booking your lodgings, cover many of your meals, transfer your luggage between stops and supply a representative available to help you 24/7 as you make your way through the journey. Costs for these trips range from $2,045 to $8,445.

With both options, you can pick from a variety of difficulty levels: Some trips are labeled "easy" and as short as two miles a day, while others are more challenging, covering up to 10 miles a day.

Food N' Wine Vacations

• Ideal for: Foodies and wine lovers
• Locales: Italy, Spain, Portugal, Greece, France, Croatia, Slovenia, South America
• Founded: 2003

Ask many people their favorite thing about traveling, and they'll immediately respond, "The food!" Experiencing the local cuisine is one of the best ways to connect with an area's culture, and of course, it's always fun (and delicious) to try new dishes and specialties. Food N' Wine Vacations creates its tours with exactly that in mind.

Visitors on a Food N' Wine Vacations tour do far more than sample incredible meals at restaurants, markets and food stalls — paired, of course, with wines and other local drinks, as the name suggests. Each itinerary weaves in the region’s history, natural beauty and hands-on encounters with local experts, such as chocolate artisans, cheesemakers and vineyard owners. Plus, the company notes, it chooses beautiful "private estates that capture the essence of the region" with a "story or history" for the tour accommodations, so that you're surrounded by local culture from sun up to sun down.

Food N' Wine Vacations keeps it simple, creating the itinerary for your tour so all you have to do is show up. A private guide who's an expert in the region and its cuisine will lead you each day as you experience one of life's greatest pleasures: food.

"Our Taste Of Tuscany wine tour was way beyond our expectations. The Villa was out of a dream with wine flowing and delicious home cooked breakfasts and dinners and two fabulous cooking classes," Local Guide Google reviewer Cheryle Derman wrote. "The guided private tours were exactly what we were hoping for. We have already booked Greece for 2025."

Prices for a tour with Food N' Wine Vacations vary, depending on length and location, starting at $1,850 per person for an experience (not including flights).

Keep in mind that while travel companies do a lot of planning and logistics for you, they may not necessarily include travel insurance.

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Many people look forward to retiring so that they can stop working altogether. But a growing number of Americans are rethinking their approach to retirement and are integrating work into it to some degree.

Fidelity's 2024 State of Retirement Planning report found that since the pandemic took hold, remote and hybrid work have redefined what retirement means to a lot of people. A good 57% of respondents say they plan to continue to work at least part-time in retirement, and 68% look forward to working for pleasure.

Working during retirement can look like many different things. It could mean taking a traditional part-time job, consulting in your former field, or joining the gig economy. But for some people, it could mean starting a business.

Starting a business in retirement can be a fulfilling experience that proves to be lucrative. But it’s important to approach the decision with caution.

Why start a business in retirement?

Many people struggle with retirement because once they leave their jobs for good, they lose their sense of purpose. Others have a difficult time not having a structured routine.

Starting a business helps address both of these concerns. Plus, it can serve as a nice source of backup income for retirees who are short on funds.

The Federal Reserve puts median retirement savings for Americans ages 65 to 74 at just $200,000 as of 2022, the last year for which it has this data. Many retirees manage to save more, as evidenced by the mean retirement plan balance of about $609,000 for that same age group. But for those who could use the money, owning a business could help fill a financial gap.

What are the risks of starting a business in retirement?

While starting a business could be a positive experience in retirement, there are some hiccups you might encounter. For one thing, your business may not take off.

The unfortunate reality is that 18% of small businesses fail within their first year, while 50% fail after five years. If your business doesn’t thrive, not only might it hurt you financially, but it might deal you a major mental blow.

There’s also the risk of ending up with a business that’s too time-consuming. When you own your own company, there can be many tasks to handle. If your goal is to strike a balance that has you working part-time in retirement, you may end up in over your head by taking on the role of business owner.

The financial reality of starting a business in retirement

If you decide to take the leap into starting a business in retirement, make sure to do your research beforehand, and to have an actual financial plan.

Opening a bakery may be something you’ve always dreamed of. But make sure you fully understand the work involved before moving forward, and that you have a well-thought-out business model. Otherwise, you might find yourself slaving away in a commercial space that costs you a small fortune to rent, only to end up starving for customers.

Along these lines, be very careful about the amount of money you sink into a business. You don’t want to dump half of your nest egg into a business that could potentially fail.

Kaveh Vahdat, Founder and President at RiseAngle, has 20 years of experience leading companies to major growth, and his advice is simple: “Never fund a business with money your livelihood depends on.”

Vahdat also says, “Retirement funds should never be used to fund or secure a business, because that money is typically irreplaceable. If the business fails, there is no time or earning runway to recover.”

He suggests focusing on ventures that require little to no startup capital. As an example, if you’re passionate about baking, rather than sign a lease for commercial space, try getting a license to work out of your home and see how that goes.

It’s also important not to count on income from your business right away. FreshBooks reports that on average, it takes businesses two to three years to become profitable. If your goal in starting a business is to generate needed income, you may be setting yourself up for failure. However, if your goal is to keep busy, then it may not be a problem if you don’t turn a profit for a few years.

Take a sabbatical and try out your business idea first

Of course, if you’re really passionate about a given business idea, one thing you may want to do is take a sabbatical ahead of retirement and test it out. If it proves lucrative, you’ll have a thriving venture to dive into once your career comes to an end. And if it flops, you’ll be able to pivot and come up with something new.

Get some perspective before starting a business

Finally, perhaps one of the most essential things to do before starting a business in retirement is to talk to people who have done it before. That way, you can learn from their wins and mistakes, and, just as importantly, have a more realistic idea of what you’re getting into.

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Tips, the extra wages that many customer service workers rely on to make ends meet, aren’t free money. They must be reported to the IRS. This can include cash or noncash payments that the customer voluntarily makes in addition to regular service fees or costs.

Typically considered a gratitude sign for services, tips can be a critical income source for service workers, often earnning minimum wage. Suggested tip percentages now range from 5% to 30%.

However, since tips are subject to taxes, that limits service industry worker earnings.

During the recent presidential election, the idea of exempting tips from federal taxes was proposed on both sides of the aisle and gained popularity among voters. Separately, Some states have also suggested ending tip taxes.

Given all of the confusion, here’s what you need to know about how tips are taxed in 2025.

What are tips?

Tips are optional payments a customer makes to a service provider and may be offered in different ways.

Tips may consist of the following payments:

• A cash tip received directly from a customer
• A monetary amount rendered through an electronic payment
• Non-cash tips, such as a ticket or coupon of monetary value
• Amounts received from other employees through tip pools, tip splitting, or other tip-sharing agreements

Are tips taxable?

Have you received at least $20 in tips for any calendar month of the year?

Then, yes, any tip amount at or above $20 is subject to federal income taxes because they are considered wages (aka: taxable income). Additionally, all cash tips received by an employee throughout the year are subject to Social Security and Medicare taxes and must be reported to your employer.

What counts as a cash tip? Cash tips include amounts received directly by customers and may include electronically charged tips (via credit or debit charges), literal cash, or amounts received by other employees under a tip-sharing arrangement. Workers must report cash tips to their employer.

What about non-cash tips? Tips delivered in another method that aren’t cash, but that have monetary value are considered noncash tips. These may include tickets to an event, coupons, and other goods of value that a customer may give an employee. Workers aren’t required to report noncash tips to their employer, however, they are still subject to federal income taxes.

What to do if you receive tips

If you receive tips, the IRS recommends you keep a daily record of all tips received.

As mentioned, tips are split into two categories: cash and non-cash tips. While non-cash tips don’t have to be reported to your employer, they still have to be reported as income on your tax return.

Cash tips must be reported to your employer by the 10th month following the month the tips were received.

While the IRS doesn’t require a particular form to report these earnings, when reporting cash tips to your employer the statement must include:

• Employee signature
• Employee’s name, address, and Social Security number
• Employer’s name and address (establishment name if different)
• The month or period the report covers
• Total tips received during the month or period

You can also use an IRS form that requires you to report the information mentioned, such as a Form 4070, Employee’s Report of Tips to Employer (available only via Publication 1244).

Tax Tip: Don’t include service charges as tips.

Service charges imposed on a customer’s bill are not considered tips. If you’re staying at a hotel, typical service charges may include cleaning fees, early booking fees, or security fees.

How to report tips on an individual income tax return

If tax time is upon you and you have unreported tips to your employer, you must complete an IRS Form 4137, Social Security Tax on Unreported Tip Income. Make sure to report any unreported tip income as additional wages on your Form 1040, Individual Income Tax Return, or 1040-SR, if you are an older adult.

What types of tips should I report on those forms? You should report non-cash tips earned throughout the year as well as any unreported cash tips to your employer.

At the same time, it’s your employer’s responsibility to include tip wages you’ve previously reported for the calendar tax year on your Form W-2. Some employers make sure to gather tip reports from their employees every month to avoid losing track of any extra wages earned by tax time.

Will tips become tax-free?

Some service industries such as hotel workers, waiters and waitresses, and bartenders largely depend on tips to make ends meet because their employers pay the minimum wage.

For instance, in Florida, the statewide minimum wage is $13.00 per hour in 2024. However, the minimum hourly wage for tipped employees is much lower – at just $9.98. For tipped workers, every penny counts to make a living wage.

Though the Sunshine State plans to raise the minimum wage annually through 2028, at their highest, tipped workers will have a starting wage of $13.98 in four years.

As reported by Kiplinger, during the 2024 presidential campaign, both Democratic nominee Vice President Kamala Harris and now-President Donald Trump proposed ending taxes on tips.

In summary:

• While some policymakers favor ending taxes on tips as it’ll allow employees to pocket more money, some critics argue that the exemption would result in a revenue shortfall of $150 billion to $250 billion over the next decade.
• Others theorize that the tipping debate will underscore another crucial topic: raising the minimum wage.

For the time being, taxes are still subject to tax at the federal level and in many states. However, stay informed in the upcoming months. It remains to be seen if Trump will revisit his promise to end taxes on tips during his new tenure.

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Long dreamed of becoming your own boss? Now may be a good time to take the plunge. Today’s tech advances make everything from marketing to invoicing more manageable than ever.

The Small Business Administration and other entrepreneur-focused groups provide a plethora of free resources to support your growth. And with interest rates on loans ticking down, borrowing cash to fund your vision is getting cheaper.

Whether you’re thinking about freelancing, consulting or opening your own restaurant, many of the initial moves you should make as you start a business are similar. By getting an understanding of what’s needed, you can preserve your financial security, avoid unnecessary headaches and set yourself up for success.

Here are the key steps to go from idea to execution.

Validate your concept

Make sure there’s a demand for your product or service.

“Know the difference between an idea the market wants or needs and an idea that is a personal passion or a hobby,” says Kira Chereé Cobb, founder of Entrepreneur Business Basics, an organization that helps entrepreneurs launch and grow their businesses.

Carolyn Katz, a mentor at SCORE, a nonprofit organization that provides free advice and resources for entrepreneurs, is a proponent of “customer discovery,” which means having open-ended conversations with potential customers.

“Instead of asking, ‘Would you like red socks or blue socks?’ or ‘Would you pay $10 or $12?,’ you ask, ‘How do you feel about your socks?’ ” she says.

Online tools such as Google Forms and SurveyMonkey are helpful for getting feedback. However, Katz recommends in-person discussions when possible. If you’re thinking about opening a food truck, for instance, hang around existing food trucks and chat with customers there.

During your research, don’t rely on friends and family for validation. Focus on those who don’t have a vested interest in your success, not people who will say, “Honey, that’s a great idea,” Katz says.

While you are investigating the viability of your concept, be sure to analyze competitors and track industry trends. One useful approach is a SWOT assessment, which helps you examine the strengths, weaknesses, opportunities and threats related to your idea.

Gavin Escolar, founder of The Chaga Company, used a SWOT analysis soon after discovering the antioxidant and anti-inflammation benefits of Chaga mushrooms during an extended trip to Alaska. Inspired by the health benefits he experienced, Escolar remained in Alaska, selling Chaga-infused foods and beverages in Juneau.

After realizing the harsh Alaskan winter weather wasn’t for him, he decided to return to San Francisco. Using the SWOT framework to evaluate the mushroom-selling potential there, he discovered a promising market. The analysis panned out, and he has been successfully running the company from there since 2018.

He sells his products at farmers markets, fungus fairs, pop-ups and corporate events, as well as online.

Review your personal finances

Even with the best idea, it can take months to make money. “Businesses that are profitable out of the gate are the rare exception,” says Katz, who has a background in banking and venture capital.

With that in mind, it’s critical to build a solid financial cushion — preferably enough to support you for a year — before you launch. At the same time, make sure your personal credit is strong, because you may need to borrow.

“Whether it’s an Office Depot store card or a business Mastercard,” loan issuers will initially rely on an entrepreneur’s personal credit record when reviewing credit applications, says Cobb, who is also an affiliate representative with the Kauffman Foundation’s FastTrac entrepreneurship education program.

Also, review the benefits your employer provides to determine what you’ll need to replace. Start by examining your pay stub or Form W-2 to get a general understanding of your income. Then, add in employer-sponsored benefits such as health care contributions and insurance discounts that you’ll pay if you’re not eligible to join a parent or partner’s plan. In addition, while employers pay a portion of your payroll tax contributions for Social Security and Medicare, self-employed workers must pay the entire 15.3% tax. (However, you can deduct half of self-employment taxes on your tax return.)

Without access to an employer-sponsored 401(k), you’ll also need to set up your own retirement plan, such as a Simplified Employee Pension (SEP) IRA or solo 401(k), to be able to save money pretax. If your employer provides a matching contribution to your workplace plan, you’ll also lose that when you leave.

Keep in mind, too, that while you are employed, you’re typically paid when you’re out for sick days, federal holidays and that annual beach vacation. When you’re running your own business, you won’t get those perks.

Cobb recommends thinking through some scenarios to fully comprehend how your finances will fare if your business doesn’t succeed. Consider testing your concept as a side hustle or part-time work before leaving your job.

Create your business plan

Think of your plan as a blueprint for what you want to achieve. It will outline how you’d like to structure, operate and expand your business. A solid plan helps you stay focused and gives potential partners, lenders and investors a clear view of your vision and business model.

Every plan is unique — there’s no exact formula — but most include an executive summary and mission statement, company description, details on products and services, market analysis, organization structure, operations plan, financial plan, and marketing strategy.

With so many elements, creating a business plan can feel daunting. But help is available. The Small Business Administration and SCORE have detailed templates that guide you through each step.

You can find the SBA template at www.sba.gov/business-guide/plan-your-business/write-your-business-plan; SCORE’s template is available at www.score.org/resource/template/business-plan-template-a-startup-business.

You can also get personalized assistance from advisers at SBA district offices, Small Business Development Centers (SBDCs) and SCORE. (For more on these resources, see the box on the facing page.)

Figure out the funding

There are numerous avenues to consider for financing your business, including self-funding (also known as bootstrapping), small-business loans or microloans, venture capital, grants, lines of credit, crowdfunding, hitting up family and friends, or a combination of these funding sources.

The SBA has a range of loan programs, but it doesn’t lend directly. Instead, it works with institutions willing to extend credit to start-ups because the SBA guarantees a portion of the loan.

Whether it’s an SBA-backed loan or a crowdfunding campaign, remember that what worked for a friend’s or colleague’s venture doesn’t mean it’s the right approach for you. The best kind of funding is very specific to the company and the situation, Katz says.

The Chaga Company’s Escolar got a $3,000 loan from his mother to launch his business in San Francisco, and he agreed to pay interest if he didn’t reimburse her within six months. He was able to pay her back in full before that condition kicked in.

Entrepreneur Arnyce Foster-Hernandez, who recently opened Featuring, a café that sells coffee, tea, pastries, natural fruit juices, and other items in the Harlem area of New York City, initially looked into securing a loan but says the process was time-consuming and disheartening. Instead, she self-funded, using $70,000 of her and her husband’s savings to open the café, and now relies on a business line of credit as needed.

In September, the Federal Reserve cut interest rates for the first time in more than four years, giving small businesses that rely on SBA loans a financial boost. Some 80% of SBA loans are tied to the prime rate, which means about 200,000 small businesses were set to see reduced loan payments starting in early October, according to the White House. While rates on SBA loans are negotiated between the borrower and the lender, the SBA caps rates based on the size of the loan. Currently, the caps range from 11% to 14.5%.

Despite falling rates, some lenders may remain cautious as they balance new loan requests with challenges such as outstanding loans from businesses that survived the COVID-19 pandemic but are now struggling financially, says Katz. Those institutions are trying to make new loans work while cleaning up old loans, which can leave them overstretched and more hesitant to lend.

A well-prepared business plan with detailed financial projections can strengthen your application. To explore your loan options, you can use the SBA’s Lender Match tool at https://lending.sba.gov/lender-match, which connects businesses with nearly 1,000 SBA-approved lenders. Those not matched to lenders are connected to a network of free advisers who can help prepare them for future approval.

Organize your business finances

To avoid legal and financial complications — and simplify record-keeping — separate your personal and business finances. That means using a dedicated bank account and credit card for your business.

You’ll also need a system to track income and expenses, such as QuickBooks or FreshBooks software, or even a well-organized spreadsheet. Cobb recommends working with a bookkeeper early, as an experienced professional can provide invaluable guidance on areas such as paying yourself, tracking profit and loss, and categorizing expenses correctly. “Instead of waiting until you have a lot of money, start with one in the first six months,” she says. “They can help you set up your finances the right way from the very beginning.”

An accountant is another expert to work with as soon as possible. A CPA can explain which expenses are deductible and help you take advantage of tax breaks. An accountant can also guide you through calculating estimated quarterly tax payments, so you’re not caught off-guard at tax time or penalized for underpayment.

“You have to be really cognizant of taxes,” says Aditi Dussault, associate administrator for the SBA’s Office of Entrepreneurial Development. “I know people who start as sole proprietors, don’t pay their taxes quarterly, and then are shocked at how much money they owe the government when they actually file.”

To find an accountant or bookkeeper, ask for recommendations from trusted sources, such as a financial adviser, your bank, or local small-business organizations. Check with peers, mentors, or members of your networking groups for suggestions, too.

Select a business name

Choosing a name for your business can be just as meaningful as naming your child — yet it comes with much more legwork. It’s fine if there are three other Emmas in your kid’s fifth-grade class. But in business, you want a unique moniker.

After brainstorming your name shortlist, run each contender through your state’s business-name directory, which is often found on the website for your state’s secretary of state, to see whether it is already taken. Also, search the U.S. Patent and Trademark Office website at www.uspto.gov to see whether anyone else has claimed the trademark.

Plug the name into Google and other search engines to see what pops up. If you plan to launch a website, see whether a domain name is available to match your preferred name. If the name you want is available, you can buy it through a domain registration company, such as GoDaddy.com. Check popular social media sites to see whether your business name is available as a username. If it is, nab it.

Decide on a business structure

Your business’s structure can affect everything from taxes to liability, so it’s essential to go about this with care and, often, some expert advice. Many entrepreneurs start as sole proprietors, but that could make you personally liable for the debts and obligations of the business, Dussault says. Operating as a limited liability company (LLC), such as a single-member LLC, can better protect your personal assets.

You can file for an LLC by completing the necessary documents on your own, using an online do-it-yourself service such as LegalZoom, or you can seek the assistance of a lawyer, accountant, or member of your local SBDC. Other structures include partnerships, S Corporations, and C Corporations. Ownership rules, liability, taxes, and filing requirements for each can vary by state.

Also, on the paperwork front, you’ll need to get the proper insurance, licenses, and permits for your business.

Build a support network

Most new business owners don’t realize how lonely working for yourself can be. “Friends and family don’t want to hear how you spent the last four days trying to figure out your point-of-sale system,” Katz says. “And you can’t really talk about the frustration of running the business to your staff or customers. So you need a support system.”

Mentors, peers, and coaches can provide needed counsel and emotional support. Although putting yourself out there can be awkward and intimidating, building a business network is crucial for success, as it can help you find potential partnerships, land new customers and develop ideas for business growth.

There are plenty of ways to build your network, from attending chamber of commerce mixers to joining LinkedIn groups in your industry. You’ll need to proactively connect with others in person, via e-mail, and on social media. “Get comfortable with being uncomfortable,” Cobb says.

There’s also a wide range of specialized support groups, Dussault notes, such as communities for women, veterans, LGBTQ people, and Asian American entrepreneurs. “You can get very specific” to find a community that suits you and your needs, she says.

While connecting with new mentors and advisers can be invaluable, networking with fellow entrepreneurs can help you to find resources, such as competent, affordable legal and bookkeeping services.

“So many people feel as if they have to do it on their own in order to be a real entrepreneur. And that is not true,” Dussault says. “You want to protect your secret sauce and not give out that recipe, but trading notes on advisers and other resources can help accelerate your growth.”

Promote your brand

Thanks to relatively easy-to-use design platforms such as Canva, DIY web platforms such as Wix and Squarespace, and the ability of artificial intelligence to create everything from logos to social media posts, there is an abundance of marketing resources for today’s entrepreneurs. The trick is to focus on what works best for you and your goals.

“You need to have a strategy that’s organic to you and that works with your business and with your style,” says Katz.

When Escolar decided to launch his Chaga mushroom company in San Francisco, he sought out his target audience, which led him to the local Mycological Society of San Francisco Fungus Fair. His products sold out, validating his idea.

“I’ve been a small business ever since,” he says.

In addition to those in-person sales, Escolar has a website that offers everything from Chaga-infused chocolate to tea. He’s also active on Facebook and Instagram.

Although not every owner needs to be on social media, some sort of digital presence is crucial. You don’t have to be a digital marketing guru or spend thousands of dollars to get your message out there, says café owner Foster-Hernandez.

“You can Google ‘How do I market my business on social media?’ and you will find all of these free resources that will guide you step by step,” she says.

Foster-Hernandez set up free business accounts on Instagram, Facebook, and TikTok. In addition, she took advantage of free business tools, such as listing her business on Google Maps and Apple Maps so that her café comes up during a search. She’s learning about Google ads and experimenting with boosting social media content through paid promotions.

“A lot of marketing is fairly simple if you just have patience with yourself,” she says.

Adapt and grow

From the moment your business idea first comes to you until your very last day running your business, you’ll need to continually pivot to respond to market trends, customer desires, new opportunities, and your own professional and personal goals. You’ll likely outgrow certain clients, need to make staff changes, and revise and revamp your marketing. It’s all part of the entrepreneurial journey.

“It’s okay to pivot,” says Cobb. “You might need to change a client, shift your service offerings or realize what you initially wanted to do isn’t what you want now.”

It’s much better to find the courage to change course than to stick with a concept that no longer works.

“A lot of businesses hold on to this first dream, but then they go down with the ship because the idea may have been good at the moment, but it’s not what the market wants in another five years,” she says, citing the collapse of video rental store Blockbuster after digital competitors entered the market.

Dussault echoes this advice, saying it’s often best to cut your losses early rather than hang on. Sticking with a failing idea just because you’ve invested a lot of money and time in it can ultimately cost you more in the long run.

“You’re going to make mistakes, and you’ll never be fully prepared for every type of failure,” Dussault says. “Having self-compassion is really important. Forgive yourself and move on.”

Celebrate your successes

Being an entrepreneur is often one of the toughest career paths you can take. Late nights and early mornings are common. On any given day, you can juggle the roles of administrative assistant, sales executive, marketing manager, and CEO.

With so much at stake, it’s crucial to recognize and honor all the wins. “As business owners, we celebrate the major things, like landing a big contract. But we often forget to appreciate the small accomplishments, like filing your taxes on time,” says Escolar.

“Running a small business is a marathon. If you celebrate yourself, it will help you and, ultimately, your business as well, since you are a reflection of your business."

Don't go it alone

There’s a wealth of free and low-cost resources for budding small-business owners. Here are a few to get you started.

Small Business Administration (www.sba.gov). The SBA provides a wide range of support, from financial assistance to marketing and sales strategies. Go to www.sba.gov/local-assistance and enter your zip code to find support in your area. Each state has SBA district offices that can assist with planning, starting and expanding a small business. For more info, contact the SBA Answer Desk at 800-827-5722 or answerdesk@sba.gov.

SCORE (www.score.org). Since its founding in 1964, SCORE has assisted millions of entrepreneurs. Originally known as the Service Corps of Retired Executives, it provides one-on-one mentoring, along with workshops and other resources through its network of 10,000 volunteers.

Small Business Development Centers (www.sba.gov/sbdc). SBDCs offer counseling, training, technical assistance and more. There are more than 900 locations across the U.S. — often at colleges and universities.

Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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Mobile business is awfully trendy these days, but the road to success can be pretty bumpy. Gas prices. Government regulations. Inclement weather. If you're going to run a business on wheels, you have to prepare for potholes, literal and otherwise.

To help you map a smoother route, we interviewed eight entrepreneurs who run their businesses from the drivers' seats of trucks, buses, vans and, yes, 16-person bicycles. These aren't your neighborhood ice-cream vendors. Jared Rosenthal sells paternity tests from a revamped RV in New York City. Chris Lower, owner of Big Truck Tacos in Oklahoma City, claims to pull in $3 million a year between his mobile taqueria and sit-down restaurant of the same name. While their businesses and business models vary widely, many of their challenges are the same.

Check out these eight mobile businesses, from boxing trucks to bicycle pubs, and see what advice their owners offer to other aspiring freewheelers.

Name: Who's Your Daddy?

Location: New York City

Start-up costs: About $10,000

Annual revenue: N/A, but it claims to turn a profit

Monthly gas bill: $2,000

On the road since: 2012

You might say risk is in Jared Rosenthal's DNA. The Bronx-based entrepreneur was the CEO of a $50-million company before he left to start his DNA- and drug-testing lab, Health Street. Soon he had an unconventional idea: What if he took the lab to the streets?

Who's Your Daddy? is a mobile DNA- and drug-testing lab housed in a retrofitted RV. From the inside of his office-slash-testing-site, Rosenthal can take patient samples, file paperwork and send the samples to a remote lab – for $79 to $599 a pop. Setting up the truck wasn't easy, and Rosenthal struggled to get a loan. But now, he enjoys a steady business at hospitals, jails, job fairs and accident sites across the tri-state area. "We see every possible situation you can imagine," Rosenthal says with a laugh. "I did a 90-year-old man's DNA test once. Rich, poor, every ethnicity and culture – we get everybody."

Operating costs are steep. In addition to paying for gas for the RV and its generator, Rosenthal shells out for frequent maintenance, weekly washings, $400 a month for insurance, employee salaries, and one or two parking tickets each day. In order to save money, he ends up doing a lot of menial tasks, such as driving and fixing the truck himself. "You have to tolerate the roller coaster," he cautions. "It's not always up, up, up -- it's up and down."

Name: The Boxing Bus

Location: Raleigh, N.C.

Start-up costs: $5,950

Annual revenue: $40,000

Monthly gas bill: $200

On the road since: 2005

Rick Harper ran a chain of successful gyms for two years before noticing a trend: While business at his boxing clubs and boot camps was pretty brisk, some customers wanted him to come to them. So he bought an old bookmobile for $1,000, installed a new sound system and some gym equipment, and took to the streets of Raleigh, N.C.

Most of Harper's business comes from regularly scheduled home visits, though about one-fifth of his clients are companies that hire the bus for employee use. Harper says it has been a challenge to convince some customers of the value of mobile fitness stations. His bigger struggle, however, is fluctuating gas prices. Adjusted for inflation, a gallon of gasoline cost $2.69, on average, in 2005, the year The Boxing Bus first hit the road. Since then, prices have risen more than 36%, to $3.68 a gallon.

Despite that needling concern, Harper says he turns a tidy profit. His advice to entrepreneurs: "Go for it," even if your business sounds a little far-fetched. "Do not let anyone destroy your dreams."

Name: Sterlings Mobile

Location: San Diego

Start-up costs: $150,000

Annual revenue: Too soon to tell, but $7,000 in most recent month

Monthly gas bill: $400

On the road since: 2012

Kush Kapila's switch from product manager to mobile-salon CEO was inspired by – what else? -- a bad haircut. Kapila figured he could improve on the hassle of scheduling an appointment at a salon, while also appealing to the busy professional set that made gourmet food trucks popular. Two years later, after hefty investments from Kapila's family, friends and business contacts, a silver Airbus equipped with its own generator, water tanks and three barber's chairs hit the streets of San Diego.

Unlike many freewheeling businesses, Sterlings Mobile isn't mobile all the time. The company partners with big corporations and office parks, then drops the Airbus off for a day or two each month. While that cuts down on gas, it creates other problems. Kapila says it's hard to market a business that only appears in customers' neighborhoods every once in a while. For that, he leans on the Internet: Facebook, Twitter, a sleek Web site and a handy scheduling app that includes calendar invites and e-mail reminders for busy professionals.

It's a little early to evaluate how well those techniques, and Sterlings Mobile, are doing. But according to Kapila, revenue has grown by about 30% in the salon's first five months – and he's grown a bit, as well. "There is a solution to every problem," he says. "Each problem you solve becomes a barrier, making it harder for someone else to do what you are doing."

Name: Big Truck Tacos

Location: Oklahoma City

Start-up costs: $115,000

Annual revenue: $600,000 (trucks only)

Monthly gas bill: $200 per truck

On the road since: 2009

If you want to own a food truck, you've got to go the distance. Chris Lower drove all the way from Oklahoma City to Los Angeles to pick up his first vehicle, a $15,000 truck he bought sight-unseen on eBay. Lower already had a long history in the brick-and-mortar restaurant business, owning several successful OKC restaurants before going mobile. In fact, Big Truck Tacos still maintains a sit-down presence, which may serve as a lesson for aspiring food truckers -- Lower says 80% of his revenue still comes from his conventional restaurant space.

So why even bother with trucks? It helps that, in Oklahoma, at least, the market isn't particularly crowded. Big Truck's novelty (and of course, its tacos) have propelled it to local and national fame, with more than 25,000 Facebook followers and a splashy appearance on the Food Network. Plus, Lower adds, the trucks provide flexibility that a fixed restaurant never could.

That doesn't mean it's been entirely smooth driving, of course. "Most locales don't really know how to deal with the new phenomenon of food trucks," Lower says. "A small town near us asked us to apply for zoning, just like a new restaurant building would. Crazy!" For Lower, though, it's been worth the ride(s). "I have opened and operated two of the best restaurants in the Oklahoma City metro area," he says. "But nothing as funky as the taco business."

Name: The Flower Truck

Location: Los Angeles

Start-up costs: $15,000

Annual revenue: N/A (declined to divulge)

Monthly gas bill: $300

On the road since: 2011

Retail space in trendy Santa Monica can run as much as $15 per square foot, but in her mobile flower shop, Jenifer Kaplan never has to worry about rent. The Flower Truck, a converted ice cream truck that Kaplan found on Craigslist, picks up flowers at a wholesale market every morning and cruises around Venice, Santa Monica and Beverly Hills, selling bouquets to passers-by.

Kaplan started the business with a $15,000 investment and a little decorating help from her friends. After finding the truck, she spent two months repairing and retrofitting it before hitting the road on Valentine's Day 2011. Though Kaplan is coy about her revenue, the truck has enjoyed an abundance of local press and a packed summer schedule. It makes frequent appearances at street fairs and farmers' markets, as well as at private events, such as weddings and business functions. The best part of running a mobile business, Kaplan says, is that "you can go to the customers rather than waiting for them to come to you."

But it's not all roses for The Flower Truck. Kaplan says it's difficult to find a good, profitable route. And for a mobile business, April showers often result in fewer flower sales. But Kaplan says her love for her work gets her through it. "Choose something you have a passion for," she advises other entrepreneurs. "Even when sales are slow, you'll still have a good time."

Name: Diggers' Mirth

Location: Burlington, Vt.

Start-up costs: $4,700

Annual revenue: $5,000

Monthly gas bill: N/A

On the road since: 2009

Organic produce is usually left to upmarket grocery chains and bourgeois farmers' markets. But the people behind Diggers' Mirth, a collective farm in Burlington, Vt., thought a truck could change that. "We'd seen people sell their vegetables off of trucks in other countries," says Hilary Martin, one of the co-owners of the farm. "I think we reach a wider cross section of our community by heading into the streets."

Because of its civic mission, the Diggers' Mirth truck focuses less on business objectives -- and turns less profit -- than many mobile businesses do. The truck operates only 11 weeks out of the year, selling at two farmers’ markets, wholesaling to local stores and restaurants, and wheeling through low-income neighborhoods in Burlington's Old North End. In those neighborhoods, the truck sells its crop at wholesale prices, and it always gives away watermelon slices.

Still, Diggers' Mirth has a pretty smart thing going on. Overhead is low – gas, licensing and debit fees are the truck's only expenses – and the farm generates revenue when the truck does not. "Keep it simple," Martin says, "and make sure you're having a good time."

Name: AZ Mobile Tanning

Location: Phoenix

Start-up costs: $20,000

Annual revenue: Less than $75,000

Monthly gas bill: Varies month to month

On the road since: 2011

Alison Carpenter didn't have much start-up capital for her mobile spray-tan salon, but she did have a great idea – and a resourceful, do-it-yourself attitude. She and her husband gutted and redecorated a 13-person shuttle bus themselves, tearing out seats, laying laminate flooring, and installing cabinets and countertops by hand. Three months and $20,000 later, the business was up and on the road.

The drive hasn't exactly been easy: Carpenter says she struggles in a down economy, when many consumers cut back on luxuries such as tanning. She also can't predict expenses, such as gas, from day to day because the "tan van's" daily mileage varies based on where she drives for private parties, home visits and other events. Despite the vehicle's measly ten miles per gallon – and the unsteady price of gas -- Carpenter is glad she went mobile. "I wanted the flexibility to go out into the community and find the business, instead of hoping and praying they would find me," she says.

Has that strategy paid off? Not quite as much as she hoped, Carpenter says. But she's convinced that with a little more time and hard work, the van will turn a bigger profit. "In my mind, tenacity equals success," she says. Those aren't the only factors in her business formula. Carpenter also recommends exhaustive research, including interviewing other mobile business owners, before hitting the road yourself.

Name: PedalPub

Location: Minneapolis-St. Paul, Minn.

Start-up costs: $55,000

Annual revenue: $1 million

Monthly gas bill: None

On the road since: 2007

By day, Eric Olson is a business professor at Normandale College. By night, he's a home-brew enthusiast and half the team behind PedalPub, a bicycle bar that runs – you guessed it – on wheels.

Olson first saw the zany 16-person bikes when a fellow home-brewer sent a picture back from Europe. Olson liked it so much that he and friend Al Boyce contacted the Amsterdam-based bike company and ordered one of their own for stateside use. Initially, Olson organized scenic tours and pub crawls around the Twin Cities, but as word got around, so did his business. PedalPub now has 12 bikes and 19 licensees, all managed from Olson's home office. Each of those bikes turns a healthy profit, he says: 240 tours per season, $350 per tour.

Like the business professor he is, however, Olson warns other entrepreneurs not to expect a profit too quickly. "Plan that your business won't make money for the first three years," he says. "Figure out how you'll pay your personal expenses." He also advises against taking out a loan if you can save some start-up capital yourself, and he recommends turning to business organizations such as SCORE for help and mentoring. All that hassle is worth it, though: "My work pays off for me," Olson says. "Not for someone else."

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