Investing your money in a business, or in multiple businesses, means you are taking a position of ownership, and responsibility. You will be responsible for knowing how the business is doing, how much you should expect to earn and when (could be years away), tax laws, ownership risk, and maybe management of the business itself.
As a stockbroker I was always amazed at how few people took ownership seriously, and it was their money they had invested. People have a tendency to wish for an end result but they rarely manage the process to get there. A good policy for you, whether you invest in stocks, bonds, partnerships, or directly, would be to care about your ownership position and what it means to be there. Take your position so seriously that you feel the need to understand the business, its opportunities and risks, and maintain a real expectation of return over a reasonable period of time.
As you seek opportunity you may be interested in pursuing a business you recently became excited about. The excitement is what causes inventors to invent, innovators to innovate, and gamblers to gamble. Be careful which way you go. When you have an interest in a particular business it may be of value to compare the merits of ownership to other businesses. For instance, you may want to compare your opportunity to the rewards of owning a food franchise, a dry cleaning business, or a dress shop. Just be sure you understand where your business fits in the food chain of the economy, stand back and take a hard look while considering if it really has a good chance of performing at the level you wish. Remember, we are talking about business ownership and not innovation which is completely different.
Now you have your work cut out for you. You will need to consider the following:
- How much to invest. Should you do it all or will there be other investors?
- How long will it take to make money? A month, year, 3 years, or maybe 5?
- You will need many resources, even for an established business. Legal, taxes, management, suppliers, customers, advertising…
- You must plan for success, otherwise why own a business? You need a real plan, not just a list of goals.
- It is important to plan for failure too. When should you cut your losses? How will you know if the business is a failure? Can you move on without too much emotion and regret? Field Marshal Rommel was an expert at this.
- Set Waypoints for success. Waypoints are smaller goals you expect to meet along the way to your primary goals. i.e. a start date is a waypoint to being in business.
I mentioned that Innovation is different from ownership, and it is. Innovators may or may not be business owners. Innovators have ideas of how to make a business, new or established, run better. Steve Jobs was no inventor, was not a good business owner at times and was fired from Apple for poor performance, but his innovations propelled the company forward just enough ahead of the pack to make Apple successful. If you are an innovator then you have an idea to bring to the productivity of the world. In doing so you may need to engage the help of a business owner/leader to help you execute an effective plan. I will discuss this in a separate article.