Small Business or Shares?

[The Y-man]

I have been interested to note the recent discussions on shares and also several threads on small business (sign of the times?)

I would be interested to know how people percieve risk/rewards in the 2 areas - as after all, they are both about "business".

If you are about to mortgage the the family home or whatever, and borrow $50k - would you be more interested to spend it say (purely as an example) on a retail business (perhaps a cafe in a shopping centre?), or the shares of a company that owns the large shopping centre (eg Westfield).


For me, I perceive higher risk in the small business. For the given amount of capital, I would suspect that the small business would require:

1. more time and effort on my part (as in working!)
2. careful management and strategy
3. dealing with competition / maintaining business unique "selling point"
4. dealing with litigation

Using the same money to buy shares in something like Westfield (this is NOT a recommendations - just an illustration!!), I would effectively have part ownerships of the very shopping centre the small business I considered above might operate in. It would mean:

1. I benefit from the rent collected from the retail outlets (and the rather draconian lease conditions placed on them by the centre)
2. The centres are managed for me (I pay for it though ) - very little time input required
3. (potentially) Large capital reserves for "bad times" and also to fight any legal issues
4. Liquidity - I can sell out of may share of owning the business any time (between 10am and 4pm on a weekday)


On the downside of course, I would:

1. have little/no say in how the company is run - eg how the income is spent
2. have no say in the management and growth strategies

I am one of those people who are willing to live with those downsides, than to face the risks I perceive exists in owning my own business. I probably miss out on some big gains and personal satisfaction, but that's ok

Cheers,

The Y-man

 

[willair]

If you are about to mortgage the the family home or whatever, and borrow $50k -
I am one of those people who are willing to live with those downsides, than to face the risks I perceive exists in owning my own business. I probably miss out on some big gains and personal satisfaction, but that's ok

Y-man,i know a good book i read now and again it's called the E Myth
by Michael Gerber,on page 54 a few lines down..
You come face to face with the unavoidable truth.
You don't own a business- you own a job.
good luck willair..

 

[Kenster]

Business or Shares?

I think the answer boils down to what an individual is passionate about, because without a passion, nothing will last. This is a type of passion that will humps a person all the way through hard times, down turn, set back, obstacles, pessimism and all sort of negativity that may get into the way while he is learning, practising and growing, from a novice to a master. This passion will allow him to recognise no faillure, only opportunity to narrow down for a working success.

 

[GreatPig]

I would say investing in shares is less risky and less time-consuming than running a small business, but operating a share trading business could be just as risky and time-consuming. It would likely depend somewhat on what sort of business it was.

The potential gains of a small business of the right type though are likely higher, if you can get that far. Being bought out or floating the company can give huge rewards. But while it might be every entrepreneur's dream to start a small business in their garage and get it bought out for a few hundred mil some years later , I think the vast majority would more likely go broke during that time.

GP