What is a young entrepreneur with a little bit of capital to do!?!?

**tbeer22** · 09-25-2007 03:51 PM

If you were 21 years old and had 15 grand, what type of venture would you jump into. I currently have all the money invested in stocks but would like to get into a business I can start from the ground up and grow. I would like to break even within a month or two of starting the business...

any ideas?

**radreality** · 09-25-2007 04:29 PM

realistically you aren't going to break even in a month or two, no matter what you do. Businesses are lucky if they break even within 3 years.

I'm not saying its impossible. Anything is possible, but not everything is realistic.

I would get together with a partner would had $15k to invest also, and do real estate. But that also depends on many other factors such as your employment history, income history, credit score, housing payment history, etc. BUT, you're in Cali, so I'm not sure if that would be enough money there. Plus, you would need to put together a good team around you who knows what they are doing.

As far as business ideas, do what you have a passion about. Do what you like to do. When you use someone else’s idea you will often not have enough strength to make it through the tough times, unless it fits into your plan, passion, and goals in life.

If you don't have any ideas, be patient, and wait until you do. While you're waiting prepare yourself with the knowledge needed to be successful.

______________________________
Robert Falk
Business Developer / Investor
Self Help & Success Forum

**ltressel** · 09-25-2007 09:29 PM

tbeer22

Keep the money in stocks for the time being. Radreality is right-no one can guarantee that you will start breaking even in a month or two.

You can keep your education going on tech trends, real estate, or start ups and may find something down the line. Be patient, you are young and opportunity will knock and you'll be ready monetarily.

LT

**akula** · 09-25-2007 09:54 PM

Originally Posted by tbeer22

If you were 21 years old and had 15 grand, what type of venture would you jump into. I currently have all the money invested in stocks but would like to get into a business I can start from the ground up and grow. I would like to break even within a month or two of starting the business...

any ideas?

well, as a rule of thumb:

1. because you're young, your risk preference might justify holding private equity over public equity (i.e. you can sell your stocks and buy a business)

although...there's nothing inherently special about private equity. it's a bitch of an asset. you may be much better off staying in public equity, taking a margin, going into managed investments, an index fund, or diversifying into derivatives.

2. but, if you are gonna invest in private equity - you're might shoot for a leveraged buyout of an undervalued asset, which is undervalued on the back of inside information or information asymmetry - this means lots of leg work (for the benefit of uncertain results)

3. this means you'll need to form an investment thesis, populate your investment universe and start seeking out business operators who want to sell their ventures

this may possibly be an appropriate option for you....

**mjohns** · 09-26-2007 03:30 AM

Originally Posted by radreality

realistically you aren't going to break even in a month or two, no matter what you do. Businesses are lucky if they break even within 3 years.

Wow Someone who knows absolutly every business in the whole world!

Thats funny I started a magazine publishing company last month and im in profit! And thats in one of the hardest sectors to make a profit in!

Im sick of people giving out BS advice on this forum

**mjohns** · 09-26-2007 03:38 AM

Originally Posted by tbeer22

If you were 21 years old and had 15 grand, what type of venture would you jump into. I currently have all the money invested in stocks but would like to get into a business I can start from the ground up and grow. I would like to break even within a month or two of starting the business...

any ideas?

Ive got a business idea, but i have no financial backing would you consider investing in me if i gave you a good pitch? By the way what currency is the 15 grand becuase if its USD everything is basicly halved when its transfered over to GBP

**akula** · 09-26-2007 04:11 AM

Originally Posted by mjohns

Wow Someone who knows absolutly every business in the whole world!

Thats funny I started a magazine publishing company last month and im in profit! And thats in one of the hardest sectors to make a profit in!

Im sick of people giving out BS advice on this forum

well...rad is pretty spot on.

If you consider small business statistics, there's three points in relation to profitability and breakeven calculations;

1. Failure to account. Have you counted all your expenses? If you haven't withdrawn a salary from the business, or properly compensated for the amount of hours you've spent working on your venture - then you may have miscalculated your break even point. Like, if you've spent 100hr on your venture over the last month, and then put $1000 in your pocket - you did make some money, but that's not really profitable, is it?

2. Salary replacement and opportunity costs. When you're working on your venture, how many other opportunities have you sacrificed (i.e. a job with some one else)? These costs have to be accounted, for and they normally aren't.

3. Return on investment. If you're making a 5% annual net profit, then for the amount of risk you're carrying, you would have made more money investing in public equity markets. In other words, the breakeven calculation also has to take into account your cost of capital.

Overall, break even is routinely miscalculated - you can't have a profitable venture if you're not paying your self a salary, or when you're paying your self 10% of the hourly rate that you could get by working somewhere else, or when your business returns you less profit than you would have gotten by giving your money to an investment manager.

**mjohns** · 09-26-2007 04:15 AM

Originally Posted by akula

well...rad is pretty spot on.

If you consider small business statistics, there's three points in relation to profitability and breakeven calculations;

1. Failure to account. Have you counted all your expenses? If you haven't withdrawn a salary from the business, or properly compensated for the amount of hours you've spent working on your venture - then you may have miscalculated your break even point. Like, if you've spent 100hr on your venture over the last month, and then put $1000 in your pocket - you did make some money, but that's not really profitable, is it?

2. Salary replacement and opportunity costs. When you're working on your venture, how many other opportunities have you sacrificed (i.e. a job with some one else)? These costs have to be accounted, for and they normally aren't.

3. Return on investment. If you're making a 5% annual net profit, then for the amount of risk you're carrying, you would have made more money investing in public equity markets. In other words, the breakeven calculation also has to take into account your cost of capital.

Overall, break even is routinely miscalculated - you can't have a profitable venture if you're not paying your self a salary, or when you're paying your self 10% of the hourly rate that you could get by working somewhere else, or when your business returns you less profit than you would have gotten by giving your money to an investment manager.

Well again i have a friend who does my accounts so again....

Stop giving out BS Advice

**Jason1** · 09-26-2007 06:30 AM

Wow Someone who knows absolutly every business in the whole world!

Thats funny I started a magazine publishing company last month and im in profit! And thats in one of the hardest sectors to make a profit in!

Im sick of people giving out BS advice on this forum

What Magazine company? What sector? Who said it was the hardest sector? You? When you call people out on their lack of knowledge, or your opinion of such... either prove them wrong or don't bother, otherwise you are just going to draw attention to yourself. Tooting your own horn and sitting on your high horse only goes so far, before someone knocks you off. Instead try to contribute to the forum instead of attacking other peoples post when they are genuinely trying to give the original poster ideas and advice. Since you are sick of people giving out BS advice, enlighten us with your unmatched knowledge.

Well again I have a friend who does my accounts so again....

Stop giving out BS Advice

Well I guess we all can't be as cool as you and have friends that work for us for free, I'm sure the original poster doesn't either. Just remember to practice what you preach. I eagerly await your response on how to not only break even in a month but how to make profit. My advice would be to copyright it quick, because even the pro's are going to want to get their hands on that bit of insight.

**vinnieg24** · 09-26-2007 08:50 AM

the convo is getting pretty heated...on a lighter note, i personally would keep your 15k in stocks some risky some safe, build up your portfolio, and then when your money grows you will be able to sell your stock and put more money into your own business. you're probably anxious, but that will probably be your best bet...and maybe by that time you will know what you want to do...real estate as stated before is a good way to go..but if its not your thing dont waste your time...good luck

**CEO Space World** · 09-26-2007 09:49 PM

First, congratulations on building up the $15K (if you did it yourself).

That is a very broad question. The one piece of advice that I've given more than any other is to not take advice from someone who hasn't actually done it for a long while at a profit similar to what you are looking for.

Second, do your due diligence on that person and

Third, do steps 1 and 2 on at least 3 people with similar advice before deciding.

For me, real estate was the best wealth builder, forex was the fastest yet riskiest (similar to gambling I thought), starting your own business is a bit less risky with the right team and resources but takes more time unless you do something online.

If you did decide to do something risky, I wouldn't put more than 10% in it and I would have some stop losses put in place.

Hope that helps in general. PM me for more specific information.

**tbeer22** · 09-26-2007 10:34 PM

Originally Posted by akula

well, as a rule of thumb:

1. because you're young, your risk preference might justify holding private equity over public equity (i.e. you can sell your stocks and buy a business)

although...there's nothing inherently special about private equity. it's a bitch of an asset. you may be much better off staying in public equity, taking a margin, going into managed investments, an index fund, or diversifying into derivatives.

2. but, if you are gonna invest in private equity - you're might shoot for a leveraged buyout of an undervalued asset, which is undervalued on the back of inside information or information asymmetry - this means lots of leg work (for the benefit of uncertain results)

3. this means you'll need to form an investment thesis, populate your investment universe and start seeking out business operators who want to sell their ventures

this may possibly be an appropriate option for you....

Akula I'm not quite sure if I understand this posting... So by investing in Private Equity you are referring to taking full or partial ownership in a private business right? I'm not sure if I was heading in the right direction with that but I have been looking at businessmart.com and bizbuysell.com for the past 5 months to see if there were any internet businesses that I may be able to turn around.

Could you respond to my response, in addtition to explaining a little more what you meant in your 2nd point. Thanks for your help.

**akula** · 09-26-2007 11:14 PM

Originally Posted by tbeer22

Akula I'm not quite sure if I understand this posting... So by investing in Private Equity you are referring to taking full or partial ownership in a private business right? I'm not sure if I was heading in the right direction with that but I have been looking at businessmart.com and bizbuysell.com for the past 5 months to see if there were any internet businesses that I may be able to turn around.

Could you respond to my response, in addtition to explaining a little more what you meant in your 2nd point. Thanks for your help.

yeah, that's exactly what I mean by "long on private equity" - it means holding securities in a private company which is operating some sort of a business. there's public equity (stocks/derivatives/debt on the securities exchange) and there's private equity (stocks/derivatives/debt in unlisted companies, traded OTC). which one is better, in terms of long run ROI?

instinctively, the founders will side with private equity, because an interest in private equity implies that you've either started your own business, bought a business, or bought a share of your mate's business. however, the truth is, private equity rarely outperforms public equity on risk adjusted basis

private equity is a bitch of an asset: if you own it, you must actively manage it, it's illiquid (you can't sell it on etrade.com) and it's expensive to buy (lawyers, accountants etc). with this in mind, there are only two conditions under which I'd recommend anyone to buy private equity (i.e. starting or buying a business): inside information and information asymmetry. if these conditions do not exist, it will be wrong for you to spend your money on private equity in lieu of public equity

What is inside information and information asymmetry? Ok, these are clearly defined terms. When you buy private equity (i.e. a business), it's going to have a price attached to it. This price reflects information - such as how profitable the business is, the aggressiveness of the competition, the age and motivations of the vendor, and the buoyancy of the economy as a whole. It is impossible for you to justify the purchase of this business, if you are pricing the business based solely on this publicly/mutually available information - because the price you paying will correctly reflect the value of the business.

However, when buying private equity, your objective is not to pay what the business is "really worth", but to pay less what the business is "really worth". So basically...that's why when you buy a business, you have to do based on the availability of inside information (such as confidential agreements you might have with a new distributor, or investor). This kind of information allows you to buy a business at a bargain price, and make a profit from doing so - and if you don't have this information - you'll be the sucker who pays retail :-)

I dunno...is this making sense...do we need examples?

**tbeer22** · 09-26-2007 11:32 PM

and I find the undervalued asset by digging through financial records such as balance sheets, cash flow statements and so forth; but this is kind of hard to do when private companies aren't required to disclose their financials....

**akula** · 09-27-2007 12:17 AM

Originally Posted by tbeer22

and I find the undervalued asset by digging through financial records such as balance sheets, cash flow statements and so forth; but this is kind of hard to do when private companies aren't required to disclose their financials....

well yeah, great point...it's all about knowing the difference between price and value

if you're looking to buy a private company, you'll be given financial statements so you can determine what the value of the company is. then, once you've determined what the value is, you will need to pay a price for the company. The trick is to pay a price which is lower than the company's value, and this won't happen if you don't have inside information.

example: You wanna make some money. You go to the patent database and find an inventor named Michael O'Connor who has been granted a patent for a new kind of electronic pen. Michael has incorporated a company, whose sole asset is the patent. You think the market for electronic pens is hot, and so you're interested in buying Michael's company.

You contact Michael and he gives you the financial statements. You look at the statements which show a net value for the company (assets less liabilities) of 10k. Should you pay 10k for the business? The answer is no because the price and the value of the business are the same - which means that you won't make a profit.

However, if you had inside information which Michael was not aware of, such a licensing agreement that you have with your uncle's computer manufacturing business, who will pay you 100k a year for the use of such a technology, then the story is different.

Under these circumstances the value of the company is not 10k, like it says in the financial statements, but much more, and the difference in value happens because of inside information which is not reflected on the balance sheet, the P&L or the cashflow statement. In this situation, you'd know that Michael's startup is valued at up to $1m, and so a 10k price would be a bargain. So you buy 100% of the equity for 10k, license the tech to your uncle, wait 12 months, and now your 100% of equity is worth 10k+100k. You've made a 1000% annual return on your 10k investment.

Make sense?