5 Reasons you invest into small businesses?
Hey I’m Ben from Motivation2Invest our mission is to help motivate you to invest for your financial freedom, whether that means escaping the 9-5 drudgery or just improving your life.
I’m here to help you by providing you with valuable investing tips & strategies.
We’ve all heard the phrase “elephants don’t gallop” and while stock market investing can offer great returns, investing into smaller businesses can offer more lucrative rewards!
So in this video I’m going to outline 5 reasons you should look for a small business to invest in TODAY!
—————-Intro animation.
1. More Control
Investing into a small business can offer you a lot more control of the business & thus your investment & subsequent destiny!!
For example, If I invested £20,000 into Google or Facebook they would not even notice & my investment would be just a drop in the ocean!!
Even multi millionaire pound investors are unlikely to get a chance to influence any of the companies policy.
Whereas, investing £20,000 into a smaller business could give you 20%, 50% or even majority ownership over the business..
This will allow you to exercise control over the operations, hire management teams, change up staff and turn the business around if possible.
2. Increased Return
Investing into a small business can give you a massive increase in investment return as you are the firs choice for any profit allocations & dividend payments.
For example, If you invested £10k into a small business which earn’t £100k per year profit. As a 10% owner you would see a return on your investment in 1 year, double in 2 and triple in 3.
3. Special Relationship
If you have developed a special relationship with the small business through the bad times & the good then you will be likely offered more stock options & your passive dividend payments will be very regular & consistent.
It’s also a lot more fun to be part of a young enterprise & help it grow!
4. Close the beating heart
Should the business run into any problems or financial troubles you will be the first to know, so you can anticipate & react.
This contrasted massively will larger stock market companies in which you will just see the bad news on the daily paper!!
Finding out late you’ve lost thousands in capital!
5. Tax Efficient
Investing in a small business is tax efficient as you can take salary & tax efficient dividend payments. In addition, to claiming back sums via the company expenses!
So investing into a small business seems like a great idea!
Great returns, consistent passive income, more control & it’s a lot for FUN!!
However it does have it’s challenges.
3 downsides to investing in small businesses?
1. More Risky
Approximately 20% of small businesses fail in there first year & a further 50% fail in there 5th year!
Thus it’s best to look for businesses with a long track record of trading well before you invest & ensure your investment is going in the right places to help the company grow.
You also need to be doing business with trustworthy people & have legal contracts in place to ensure there is no underhand dealings.
2. More Work?
Small businesses can be more work & potentially even more stress! Even as a passive investor you will need to be aware if there are problems with the business.
For example, if you have invested into a small business such as a restaurant with just 2 staff, the waitress & chef. If the chef is ill or injured you will need to find a replacement asap!!
Or you may even have to put the chefs hat on yourself!
This requires you to be extremely flexible & fast acting should an issue occur.
If you don’t solve the issues you could lose thousands in revenue & also lose the trust of customers which have pre booked at your venue.
Whereas a passive stock market investment into a company like Amazon would never have them calling me because a manager is ill or has left.
You just need to keep an eye on the forecasted profits & share value.
(For more on this check out my previous video on Free Stock Marketing investing using the Warren buffet method.
3. Hard to find the opportunities
The most difficult challenge is It’s not easy to find high quality small business investing opportunities. There are many crowd funding & angel investing sites which make it easy to invest in extremely risky start up businesses.
However, to find reliable & established small businesses which just need a cash injection is not easy!
Shares in these businesses are not liquid like the stock market, so you can’t easily buy & sell the shares.
However, you know what the say the best opportunities are captured by the few! If gold was everywhere it would be worthless!
In my next video I’m going to detail how to find small business investing opportunities!
Check out my other videos on FREE TRADE investing apps & a beginners guide to stock market investing.
If you found this video inspiring & informative, feel free to like, comment & definitely subscribe!
See you next time!
DISCLAIMER: We are not financial advisors. Our videos are for educational purposes only and merely cite our own personal opinions. In order to make the best financial decision that suits your own needs, you must conduct your own research and seek the advice of a licensed financial advisor if necessary. Know that all investments involve some form of risk and there is no guarantee that you will be successful in making, saving, or investing money; nor is there any guarantee that you won’t experience any loss when investing. Always remember to make smart decisions and do your own research!
