Small Business as an Investment

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There are many reasons to start a small business.  They may include being passionate about the work, a desire to work for yourself, or a need to give something back to society.  Successful business owners also want to retire using the money they generate from their business.  In my case, this became the focus of my investment strategy.  It wasn’t always, but this last “great recession” changed my mind.

Throughout my life, I thought and was told that starting a new business was risky.  You could lose everything, they said.  So, like most of us, I invested in many of the most common vehicles for both wealth accumulation and tax-deferred retirement growth.  But, I still had a passion for small business and invested heavily by starting several businesses myself.  The result of 20+ years of investing like this might surprise some. In the traditional investment vehicles, I have lost about 30%.  My small businesses have resulted in gains over 1000%.  For me, it’s a no-brainer decision.  Small business makes money.

Set aside the fact that experience makes it easier to understand how to make money in a small business.  The real reason I prefer to invest there is control.  In a small business, I get to make the decisions and control my own destiny.  In the traditional vehicles, I write a check and hope that someone else does the right things.  For me, they never do. 

My ride to work every morning this year has been filled with commentary about the losses on Wall Street.  Losses that are real dollars in the retirement planning of many of us.  I see my accounts deteriorate and feel helpless.  That is a feeling that usually doesn’t exist in my life, at least not in small business.  In small business I have immediate gratification, or I have an explanation for the results.  I am not held hostage as the Giants of Industry wage war against each other.  I am in control, and with control comes a feeling of liberation.

Today, I read an article that could change the way Wall Street operates.  It was an idea started by Jack Welch, and now being repeated by a brand new group of CEO’s.  The idea is to eliminate the “dumbest business idea in the world,” maximizing shareholder value.  The argument is that maximizing shareholder value is too short sighted and does not account for our impact on society, our employees, or our customers.  It only focuses on quarterly profit results, where large investors bet on the published expectations of companies.  A bet that the average investor doesn’t fully understand.  In my book, a lack of clarity creates a cloud of uncertainty.  When it comes to my retirement funds, I want some certainty. 

I didn’t always hold this opinion, but as the latest fall in the market is well underway, it reaffirms my belief in small business.  A belief that is founded in the concepts of business and the small business owner’s ability to affect the outcome.  It is an investment I understand and now have a history of success. 

Besides the money, I get to work in a business that I’m passionate about, that allows me to be the “boss” and give something back to society.  It is a win-win-win-win.  My new philosophy about creating a retirement account I can be satisfied with is: I trust me to be the best steward of my investment.  Small business just happens to give me the best chance at success.