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My wife and I recieved a sizable inheritance a few years back when the stock market was in the gutter. Our initial instict was to invest in a diversified portfolio and keep some on hand for emergency. In the last couple of years the market has came back nicely which has me kicking around the idea of starting a business, whether it be buying an existing one or starting with a franchise. I have a lot invested in my education and I make a decent income but I also would like to try being my own boss for a while. I was hoping I could get some feedback from some of the entrepreneurs on here as to what they would do in this situation. I realize that there are drawbacks and benefits to running your own business but have never really gotten advice from folks who are doing it themself. Thanks in advance for your response!
Do any of these terms ring a bell - chart of accounts, sub S, legal liability, self employment tax?
What sort of business were you thinking about and what kind of broad experience do you have in general? Are you a go getter who refuses to fail no matter what? Are your expenses low enough that you can afford to hang on for a year without income supporting yourself and the business? Is there a need for your business, who will be your customers and do they have money? Are you willing to eat and breathe this business 24/7?
These are all questions you have to seriously ask yourself otherwise i'd put the money in high interest bonds and only use the interest from it.
You raised some good points. I grew up doing all sorts of mechanical and construction work and have technical and business education so I have thought about several different types of businesses. I completed an MBA program a few years back and that scared me away from business ownership more than anything. The drive to succeed is definitely there. Putting up with the boss can be a pain now and then but the economy we have seen in the last few years has me sticking with my job. I know business owners around here who were keeping their lights off when the rest of us were going to movies and eating out every weekend. I haven't quite made up my mind of whether the prestige of entrepreneurship would outweigh the security of the 9 to 5.
If this is a burning desire my suggestion would be to think about paying off your house and then investing in the bonds. Starting a fully legal business after work at night and on weekends very cheaply will approximate more closely what life as a business owner fulltime will be like without affecting your finances provided you don't bail it out to any great degree.
I haven't quite made up my mind of whether the prestige of entrepreneurship would outweigh the security of the 9 to 5.
That last statement worries me. I don't think you should be an entrepreneur for reasons of "prestige".
Personally, I'd put the money into a balanced mutual fund that invests in a mix of stocks & bonds. (I know...boring, but these funds have beaten the stock market by a large margin over the last 10-15 years with less volatility).
My favorite balanced funds:
T. Rowe Price Capital Appreciation (PRWCX)
Oakmark Equity & Income (OAKBX)
FPA Crescent (FPACX)
Vanguard Wellington (VWELX)
For a more conservative balanced fund you could try:
Starting your own business is absolutely the way to go. Best potential for profits. Why work for others and make others rich when you can work for yourself and make yourself rich! Think about it.
but you have to be realistic about it. Spend 3-6 months just doing research before you invest anything. Make sure your product/service is genuinely unique or has some advantage over the competition. All you need to do is be slightly better than the next business in town to make it. If you have something, "revolutionary" proceed with caution, chances are there is no market demand for your product (see: Aptera electric car).
Yes, there are advantages/disadvantages but that exists for EVERYTHING, even working. However, if you ask me the benefits far outweigh the disadvantages even compared to working. Here is something to think about: just imagine if mark zuckerberg (founder of facebook) went to work for microsoft, yahoo or myspace. He would have probably never invented facebook or he would have invented facebook as a myspace/microsoft/yahoo product. If he would have done that then those corporations would have owned facebook, not zuckerberg himself. Also remember, all of those mega corporations all started with some dude in his house inventing products.
Only go into a business with eyes wide open and with the realization that a very large percentage of new businesses fail.
This is doubly true because you now have a sizeable inheritance which has grown since the stock market was in the gutter. People with a lot of money and are emotional about their business will keep it open even if it is in the red after a long period of time.
Is the business unique to your area (for example: does the local market like Japanese food, and are there none around you, and do you know a Japanese (or Korean, or SE Asian person ... face it most Americans can't tell the difference)? Then there's an opportunity)?
Is the business based on an invention and is it a product most people would want or need in their lives and can it be made cheaply? If so, consider selling it to other outlets first to see how well it sells.
Do you know how much you will be taxed, and know all the regulations over your business? Are there standards (e.g. IEEE, OSHA, EPA) that you will need to adhere to?
Are you willing to work 18 hours a day or more to start up your business? If not, don't even consider it. Vast majority of successful business owners work dang hard at their business. That would require you to quit your 9 to 5. Steve Jobs once had a shirt that said "Working 120+ hours a week and LOVING IT!" That's no joke.
relatively safe but boring as heck more ofton then not. for a bunch of the most volatile investments they just play nice together.
i may use the porfolio and like it but folks alot smarter then me created that mix. terry coxen and harry brown did a very good job covering all the bases.
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