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How do you define a "viable business"? You don't need to count labor as an expense unless you actually hire someone. Another problem that scares people in business is people tend to create rules of how a business should run. The definition of a business in simple terms: receiving money in exchange for offering a product or service that gives value. Correct me if I am wrong.
If I can invest $100 into something and sell it for $600 and repeat it multiple times, that is a repeated $500 in profit. No hiring any employees (unless I need to). Doesn't matter how much time I spend on it whether it be 10 minutes or 10 hours.
A fair accounting would mean you pay yourself the going rate for your services. If the company still shows a profit after doing so, the business is profitable. I hesitate to call a business that can't cover a reasonable owner's salary profitable, and the IRS requires S-Corps (which iare the first level of entity to separate owner salary from business income) to pay the active owners a reasonable salary.
If I can invest $100 into something and sell it for $600 and repeat it multiple times, that is a repeated $500 in profit. No hiring any employees (unless I need to). Doesn't matter how much time I spend on it whether it be 10 minutes or 10 hours.
The way you are looking at it, yes the lemonade stand ROI is much bigger at the beginning than if you purchased a stock fund, but the profit does not grow. Your profit is limited by the amount of time you can put into the effort, and the profits go away when you get tired of selling lemonade.
In contrast, the stock investment route takes more money, but the underlying businesses grow over time without any labor provided by the shareholder. Someone very young might earn a thousand dollars in a year. By middle age that should be tens of thousands of dollars in an average year. By retirement an average year can be north of $100k. These are not fantasy numbers, but rather what is achievable by just contributing to a 401k or similar account throughout one's career, let's say at least 30 years.
Both of these approaches have their place. The one you choose will depend on your resources and your objectives.
The way you are looking at it, yes the lemonade stand ROI is much bigger at the beginning than if you purchased a stock fund, but the profit does not grow. Your profit is limited by the amount of time you can put into the effort, and the profits go away when you stop providing your own labor to the effort. ...
That's a mistake made by newcomers, be it to business, or equity investment, or tech start-ups. Initially, there's a felicitous burst of gains, be those from a lucky stock-speculation or the example of the lemonade stand. The incumbent looks brilliant, while naysayers look like doltish chumps. But the experience isn't scalable! To go from turning $4 into $90 or whatever, to turning $40 into $900... is nonlinear. It doesn't scale like that. Eventually no new input results in increase in output. The "business" asymptotes to what might be termed a job. That's what happens with self-employed tradesmen. Or it might be worse... further input leads to diminished output, because the goods can't be sold, or there are storage/insurance/etc. costs.
Passive investments are widely panned on this Forum, be it passive investment in index funds or any other venture, where the investor buys-and-holds, doing essentially nothing else, while the labor of others, increases one's capital. Maybe this is viewed as defeatist, or self-limiting? Maybe. But eventually one comes to admit the limits of one's powers, and chooses the passive route.
Initially, there's a felicitous burst of gains, be those from a lucky stock-speculation or the example of the lemonade stand. The incumbent looks brilliant, while naysayers look like doltish chumps. But the experience isn't scalable! To go from turning $4 into $90 or whatever, to turning $40 into $900... is nonlinear.
Yup.
Warren Buffett reportedly used the profits from reselling gum and bottles of Coke to buy 40 acres of farmland as a teenager.
The point being that Buffett used the lemonade stand model to accumulate seed money for investing. We wouldn't know his name if he was still just selling single bottles of Coke door-to-door.
But back to the topic.....do you enjoy life when you are "older"? Do you enjoy all the money you've spent years saving? Is it all worth it? I want to avoid being that 60-year-old guy who is jaded and gets grumpy about the idea of traveling somewhere or splurging on something nice.
I'm pushing 80 and have been par-tayin' like it's 1985 since the late 1960s. So yeah, it can be done.
In my experience, the issues at your age are two:
– Personality, meaning how you will feel and what your attitudes will be decades hence are pretty well already a part of you. People who want to change those traits generally have to work very hard at it, and some who are especially committed to changing themselves go for professional help either to get the job done at all or to speed it along. And,
– Assets, those being what you're going to live on in a manner that is acceptable to you once you're no longer working. I'm a HS grad who retired in 1991 at age 45, and the single biggest reason I was able to do that is the year in which I was born. Point being, some of us win the lottery when it comes to the major economic trends outside our control (think mortgage rates); others, not so much. This is life. Morals of the story:
plan ahead for your later years, and never stop planning ahead (study the subject yourself and/or consult with a financial planner to understand how to do this EFFECTIVELY);
always live well below your means, investing your savings as you go along (this is NOT gambling; it may, rarely, be informed speculation with assets you can afford to walk away from while having learned something useful for the future);
maximize your income to the extent that is practical (you still have to have a life, so unless you're a small business owner punching-out 80-hour work weeks, always ensure you make time to look after your physical well-being and mental health);
pay close and regular attention to what your local and state governments and our national government are doing in the areas of taxation (especially income taxes and property taxes as they affect you during any given time period), and in the areas of policy that will affect you in the years to come (e.g., the annual Federal budget deficit, the current national debt, and what percentage of the annual budget goes for interest payments); how the Federal budget is currently allocated and the sustainability of those allocations; the condition of your state's finances (e.g., some have very underfunded pension obligations, while others have managed their finances quite well); noting along the way how likely it is that you will be among the nation's citizens who will have to help pay for this country's overspending during the past half-century;
get the best medical and dental care that you can afford so that you will be in the best position to enjoy your later years; and, finally,
follow your doctor's (and others') orders and prescriptions for maintaining yourself in the best physical condition possible; as you age, this will help ensure you stay sharp not just physically but also mentally.
That's part of what life has taught me. There's much more, of course, but asking the questions you're asking and discovering the answers to them that best fit you and your circumstances are what will ensure you enjoy a life you find satisfying, both now and in the future. I would say "Good luck.", but I doubt you're going to need it.
I never learned any lessons (my parents would tell you differently). I was raised with the mantra "save money". But where did the money go? What does money do? How does it grow? What is the goal of saving? "save your money" is the thing my parents always told me. The other piece of advice I was told was "invest in mutual and government bonds". I never had a conversation of "Any job you get....take a small chunk of it and put it somewhere where it will grow. here, look at what I did with my money. you can start here and let it compound." The conversations I received was "go to school and get a degree."
I became very passionate about business because it excited me. I liked the idea of solving problems and you don't have to wait 30 years to make a lot of money. You make a lot of money as soon as you figured out how to make sales and grow. It's the "make sales and grow" part that has always been the challenge for me.
Now I'm at the point where yes, I'm still passionate about business but I'm at the age where I'm like....what if I just put in a small amount of money into an account? I've never really done it before. it's something I *should* have done 10 years ago but I'm having a little mid 30s self-reflection moment.
It sounds like you have the traditional scapegoat - nobody taught me. In the meantime you are living paycheck to paycheck with a fizzy biz idea. Time for a sit down?
I'm getting older and have money, but I'm not having as much fun as I would like. That's because my husband, age 83, is in poor health. He has poor vision, mobility problems due to arthritis, balance issues and incontinence. I've noticed some cognitive decline, but he doesn't seem to have dementia, fortunately.
After we both retired I assumed we would travel, but even before his health started to decline my husband decided he just doesn't feel like going anywhere. He is perfectly happy to stay home all day, sit in his recliner, watch TV or nap. The only traveling we've done in the last 25 years is to attend family events, usually memorial gatherings, and to one school reunion. I am 75, in good health, and I would like to travel and do more fun things. I do see friends for lunch or brief outings when I can, but he becomes anxious and complains if I am not with him all the time. He's terrified that something will happen to me and he'll be left all alone, because he knows he can't survive without me.
You see, we have no children and my husband has no immediate family or close friends, just me. So he is completely dependent on me for everything. He needs help doing many daily activities such as dressing and undressing and getting in and out of the car. I take care of all the bills, the taxes, the cooking, the shopping and most of the cleaning (he helps a little with laundry and dishes). I also make his medical appointments for him and am with him when he sees doctors so I know firsthand what's going on with his health.
In spite of all this, I would say that I do enjoy having money. We have always lived below our means, so although we're not rich, we're very comfortable. I like being able to buy what I need without having to worry about cost. I also like knowing that if my husband or I should ever need long-term care, we have the means to pay for it, and that after he's gone I'll be all right financially. That peace of mind is worth a lot to me, and it has made all those years of working and saving worthwhile.
It sounds like you have the traditional scapegoat - nobody taught me. In the meantime you are living paycheck to paycheck with a fizzy biz idea. Time for a sit down?
I'm just lazy. The "fizzy" biz idea I have has already been executed by another guy and the guy who executed has made a lot of sales. I'm create a different variation of that same idea. I need to quit being lazy and start hustling more. Easier said than done though.
In the meantime, I'm exploring other ways to invest the small amount of money I am willing to put into investments.
That's a mistake made by newcomers, be it to business, or equity investment, or tech start-ups. Initially, there's a felicitous burst of gains, be those from a lucky stock-speculation or the example of the lemonade stand. The incumbent looks brilliant, while naysayers look like doltish chumps. But the experience isn't scalable! To go from turning $4 into $90 or whatever, to turning $40 into $900... is nonlinear. It doesn't scale like that. Eventually no new input results in increase in output. The "business" asymptotes to what might be termed a job. That's what happens with self-employed tradesmen. Or it might be worse... further input leads to diminished output, because the goods can't be sold, or there are storage/insurance/etc. costs.
Passive investments are widely panned on this Forum, be it passive investment in index funds or any other venture, where the investor buys-and-holds, doing essentially nothing else, while the labor of others, increases one's capital. Maybe this is viewed as defeatist, or self-limiting? Maybe. But eventually one comes to admit the limits of one's powers, and chooses the passive route.
Not sure what you mean.
I'm not an experienced business person but if you can create profit on a good product or service and replicate that product or service easily, I don't see the problem. Sure, you can innovate and create different variations of the product and service and grow and expand and make more profit.
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