Many people dream of becoming entrepreneurs and starting their own business. Whether it’s to follow your passion with a simple side hustle, to be able to quit your day job and become your own boss, or because it offers better financial opportunities than your current career, there are many reasons to start your own business.
If you don’t have some specific skill or product that you are ready to go to market with but are interested in starting a business, I’m going to tell you something I doubt anyone else will: The first business you start should be an investment club.
Here me out on this one. I’m not just saying this because we started an investment club, and have slowly started expanding it into a bigger business. Yes, that has been our journey, but there are logical reasons why it is a path others should follow as well.
The funds, knowledge, and team that you will grow running an investment club can help you later on when you are ready with a specific idea to start a business.
Funding a New Business Can Be Expensive
I’ll start this off by contradicting myself and state that starting a business is easier and cheaper than ever before. The internet has completely democratized the entire process.
Need legal documents? Google how to do it yourself.
Selling something? No need to acquire an expensive storefront, sell direct to consumers via a website for a fraction of the cost.
Ready to market your service? Skip the newspaper ads or expensive television commercials, and start with highly targeted social media ads.
That being said, it still takes money. All of the above, and many other items not mentioned can add up quickly. Plus, if your business does involve owning or renting real estate, prepare to open up your checkbook.
Alternatively, you may not want to start a traditional business from the ground up, but instead buy into an established business. This approach affords you many of the benefits of having your own business, but limits some of the risk associated with starting from scratch.
No matter what phase in the business life cycle your company is, you’ll inevitably need additional funding to start, grow, or stay afloat. If you don’t have the personal funds to cover these expenditures, you’ll either need to seek out equity investors, giving up ownership in your company, or take on debt in the form of a loan. There are pros & cons to each, but both are significantly more expensive than injecting your own capital.
Which brings us back around to the original point of why the first business you start should be an investment club. By investing the regular contributions of the team and growing capital, you will be financially poised to buy or self fund a business when the opportunity presents itself.
Researching Stocks and Public Companies Teaches You About Business
Piling on to the first point, you won’t just be idly waiting around while you save up enough money to make a move. The very act of researching stocks, companies, and industries to potentially invest in will teach you a lot.
Whether it’s learning about a growing market, identifying innovative technologies, or researching stellar management, there is a lot to be gained from combing through annual reports, quarterly earnings calls, and letters to shareholders.
While that knowledge won’t necessarily translate into your own business success, history is still a great teacher.
At the very least, you may be able to brainstorm what business sector you may want to pursue, and what type of business model could work for you. And you’ll gain exposure to the many financial metrics that measure performance across companies.
Running an Investment Club = Running a Business
It’s not just the research on investments you’ll be doing that will prove fruitful to a future business venture; you will actually already be running your own business by managing an investment club.
It definitely won’t be of the complexity of most businesses, but you will need to develop a certain understanding of company formation and legal structure, accounting, taxes, and financial reporting to run your club.
Much of this will be very specific to investment clubs, but learning how to select a company structure (partnership, LLC, S Corp, etc.) and how to file your business’ taxes will be good practice for your future projects.
Need a Team? You got a Team!
Unless you are planning on going the soloprenuer route, you will likely want a founding team to help form and run your business. Well, if you have successfully been able to coral a group to be in your investment club, you may have just found your team.
People may agree to be in your club for various personal reasons, but they very likely share an interest in making money, learning about successful companies, and working on a side project. That’s half the battle right there.
Saving up a large pool of money while learning about business all while running your own business with a team of people you trust with investing your money; That’s an investment club in a nutshell.
Although it is certainly a non-traditional route to entrepreneurship or building a business empire, it may just be right for you. Assemble your team, determine your strategy, set up your new investment company, and start investing!