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Thread: Strategy to get involved with business and business investment

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    Strategy to get involved with business and business investment

    Hi all

    I am a young, recently qualified Chartered Accountant and dabble in online equity and derivative trading as a hobbie. I therefore consider myself reasonably finacially literate. Unfortuanately my career choice has not exposed me to the practical side of starting a small business or buying into an existing business.

    My situation is as follows:

    - I am 26 years old and have no commitments in terms of wife, kids or debt and therefore can afford to take a few risks.
    - I am currently between jobs and have the opportunity of taking up a decent paying salaried position either locally or abroad.
    - I am very keen to start earning income streams other than the salary that I am currently able to earn with the goal of these alternate incomes being able to completely support me in the future (ie passive income).
    - At the moment I do not have a lot of cash or any major assets to use as collateral etc.
    - I don't have any novel business ideas.

    My question is as follows:

    - What is generally considered to be the "easiest" way of entering the business world and how would I go about this?
    Do I try to buy a residential property (either by myself or with partners) with the view of leasing it and from there try and acquire further properties?
    Do I try the same thing as above except with commercial properties?
    Do I try and buy into a franchised business (by myself or with partners)?
    Do I look to meet people with clever ideas and invest with them and if yes where do I meet these people?
    Do I look to buy a substantial chunk of private equity in an existing business and if yes where does one find opportinities to buy private equity?
    Do I scratch my head and try to come up with some brilliant novel business idea and present this to the bank?

    I do not have much money or assets so I would also like to know if it would be best to initially do the above in a partnership with friends or other business people? If so is there anywhere where I might meet or chat with people who have similar goals as me as well as meet with people who have done it all before and could advise me?

    Thanks very much for your help

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    Diamond Member Blurock's Avatar
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    @Quickben, why do you want to get into business? Is it because you think that you can make a quick buck? Is it because you see successful business people and think that you could emulate them?

    Business is hard. For every successful business person there must be 100 failures. Do not get into business for the wrong reasons. Business is not about earning a passive income and lying on the beach. Business is not about the money. Business is all about hard work and disappointment and achievement.

    Business (and entrepreneurship) is about having a passion for what you are doing and believing in yourself. If you can do what you like and satisfy the customer better than the next guy, you may just have a business. If you do everything right, the money will come by itself, but do not start off with the money.

    Take time to find your own niche. Once you've found something, make sure that that is what you want to do. I have seen so many businesses fail because the owner sees it as a job and gets imprisoned and caught up in a business which he hates. Rather hate your boss and fantasise about your dream business than to hate your business and fantasise about the job you had.
    Excellence is not a skill; its an attitude...

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    adrianh (08-May-14), Chatmaster (16-Jan-13), Dave A (02-Jan-13), desA (10-May-14), flaker (01-Jan-13), roryf (16-Jan-13)

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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by Quickben View Post
    - I am very keen to start earning income streams other than the salary that I am currently able to earn with the goal of these alternate incomes being able to completely support me in the future (ie passive income).
    This, I'm sure, is the dream of the vast majority of entrepreneurs starting out in business. Unfortunately very few realise that dream.

    Quote Originally Posted by Quickben View Post
    - At the moment I do not have a lot of cash or any major assets to use as collateral etc.
    A very common first hurdle to overcome.

    If you can command a decent salary, there's a lot to say for taking it, living well within your means, and look at building a property portfolio as your exit plan. Or a share portfolio as an investor (rather than a speculator).

    Building a business off a low capital base is hard work, and pretty risky. If you're forced to it, or you can see a great opportunity that fits, by all means go for it. But I wouldn't recommend chasing being a business owner just for the sake of being a business owner. There are other ways to build that residual income situation.

    Ultimately it just takes two components - spend less than you earn (discipline) and invest that extra money wisely (smarts).
    The trouble with opportunity is it normally comes dressed up as work.

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    Diamond Member Blurock's Avatar
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    Quote Originally Posted by Dave A View Post
    Building a business off a low capital base is hard work, and pretty risky.
    Very true Dave. Most businesses fail or never get off the ground due to lack of funding. Cash flow is the most crucial component of business. It is like fuel for a car. Without cash flow you can not buy stock, pay the rent or pay yourself.
    Excellence is not a skill; its an attitude...

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    Quote Originally Posted by Blurock View Post
    Very true Dave. Most businesses fail or never get off the ground due to lack of funding. Cash flow is the most crucial component of business. It is like fuel for a car. Without cash flow you can not buy stock, pay the rent or pay yourself.
    So true. What about finding a decent investor or investors? That may be one way to overcome this.

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    Diamond Member Blurock's Avatar
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    Finding the right investor is very hard.
    1. people will not part with their money unless you can prove to them that your idea will work.
    2. Once in, the investor will want a return on their investment. The business may however, still need the funds to grow. The danger is paying out dividends too soon and leaving the business cash strapped.
    3. Getting a busybody investor who sits on your shoulder and query everything that you do, may be far worse than having your mother in law as a back seat driver!

    The ideal is to get an existing entrepreneur who believes in your business idea and is prepared to take risk and wait for his money. Someone who is experienced and can also add value to the business in terms of expertise and contacts. Such a person may also extend credit in hard times when banks would have foreclosed.
    Excellence is not a skill; its an attitude...

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    Diamond Member Justloadit's Avatar
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    The other experience I have had with investors, is that they want a significant chunk of the business as part of their investment, with out being involved in the business. So over night you may get a new partner who owns 80 to 90% of your company, for the funds that he invests, after all he wants to make sure that his financial investment is safe and not squandered. This places you in a predicament, you are the slave with the responsibility of making it work, and lose the IP, and you will play second fiddle until you can buy the investor out, which becomes more and more difficult, as the value of the product/company increases with success, and your portion will never be big enough to buy out the investor.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar and LED lighting solutions - www.microsolve.co.za

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    Diamond Member Blurock's Avatar
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    Quote Originally Posted by Justloadit View Post
    The other experience I have had with investors, is that they want a significant chunk of the business as part of their investment, with out being involved in the business. So over night you may get a new partner who owns 80 to 90% of your company, for the funds that he invests, after all he wants to make sure that his financial investment is safe and not squandered. This places you in a predicament, you are the slave with the responsibility of making it work, and lose the IP, and you will play second fiddle until you can buy the investor out, which becomes more and more difficult, as the value of the product/company increases with success, and your portion will never be big enough to buy out the investor.
    This is exactly the problem that I have with the Business Partners model. Once the business grows, the 30% investment grows as well. I have seen small businesses that will always be a slave to BP and will continue to pay monthly royalties and fees for as long as they exist. The alternative is to find a loan/investor for the million(s) that is now required to buy out the initial stake of a few R100k.

    Don't get me wrong, Business Partners is doing good work, but be very careful and consider all the options before you enter into an equity deal with them, or any other entity.
    Excellence is not a skill; its an attitude...

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    Platinum Member desA's Avatar
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    Would a Joint Venture model perhaps be useful here?
    In search of South African Technology Nuggets(R), for sale & trading in South East Asia.

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    Diamond Member Justloadit's Avatar
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    Joint venture has it own problems. The IP is shared by both, the distribution chain is also known by both, and when ever a split takes place, the IP and distribution knowledge chain can not be erased. Then the legal battle begins.
    Victor - Knowledge is a blessing or a curse, your current circumstances make you decide!
    Solar and LED lighting solutions - www.microsolve.co.za

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