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5 Reasons to Buy a Business as an Investment
Buying a business in any industry can be a good investment if you’re willing to work a bit for both stability and financial return. Some people think they can buy a business and let others run it, creating a passive income for themselves. While this isn’t an impossible dream, it’s likely that you’ll need to be involved in the day-to-day — or at least week-to-week — operation of the company before you make plans to travel on the profits while someone else is left with the work. Here are five reasons, including developing a passive income, for investing in business ownership.
1. You Create Opportunities for Yourself and Others
When you buy a business, you don’t just put your money in a portfolio and hope for a return. You create opportunities for yourself as well as those around you. Buy a business and you automatically have employment; you might even employ friends, family or former co-workers, allowing your investment to have positive benefits for a variety of people. It’s worth noting, though, that you should think carefully before buying a business simply to employ your family — while that can work out, it’s often setting yourself up for struggles.
However you decide to manage human resources for your new company, this much is true: If you want, you can become an employee, ensuring your financial return starts immediately in the form of wages and other benefits.
2. A Business Lets You Invest in More than Money
For many people, the investment isn’t completely about money. Individuals who buy businesses might be looking to invest in a brand, an idea, an industry or a community. Owning your own business lets you leave a legacy behind through loyal customers, employees and a brand that could earn money for heirs years into the future.
3. You Decide Where the Profits Go
As investments go, buying a business is risky. In some ways, it’s much riskier than investing in annuities, stocks or even futures. With that risk, though, comes freedom. When you invest in stocks or other marketplace assets, you can’t decide what happens to all of the profits associated with the investment. That investment is in another company or organisation; if that entity turns a profit, it then decides how much of that profit is shared with stockholders. If you own a business, you get to decide where profits go, and as long as you go about it legally, they can even end up in your pocket.
4. Selling the Business Later May Be Rewarding
Many entrepreneurs buy companies with the intent of “flipping” them, which means putting in some time, work and resources to increase the business's value before selling it for a profit. Again, there is some risk associated with this practice: The market could turn quickly, and what seemed like a lucrative business becomes worthless. Experienced investors know what signs to look for, though, and tend to make investments in companies that are likely to weather ups and downs. For example, with the ever-expanding New Zealand tourism industry, accommodation businesses are in demand and make a great investment for the right buyer.
5. Passive Income Is Possible With Proper Planning
As previously mentioned, with some hard work, a lot of planning and at least a little luck, passive income is possible for business owners. To make this a reality, you have to find a viable, strong business opportunity, create processes that are easy to emulate and maintain, and find leadership you can trust to handle the company for you. If you wouldn’t trust a person with your wallet for a month, then you probably shouldn’t trust them with your company.
Buying a business certainly isn’t the right investment for everyone. But entrepreneurs looking to work hard and get a decent return in the form of financial gain, recognition and branding, ownership perks or community involvement may find it's the right deal for them.
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