Editor’s note: This article was first published in September 2010; its example of a 3.5% return on a risky operation versus a fixed-term deposit paying more reflects Spanish deposit rates in 2010.
I’ve received quite a few emails asking why I mix business and investing on the same blog. I understand that people who want to get started in business and entrepreneurship may find everything to do with investing a bit “boring”. Believe me when I tell you that understanding how to invest our money is no longer optional these days: it’s an obligation.
On this blog I’ve tried to cover every point that can help a person succeed in business. I’ve written about business ideas, trying to make the coverage as complete as possible, while steering clear of part-time businesses or ventures just for earning some extra money. My aim is that, once someone takes the plunge, one small step at a time, they end up convinced that a small business isn’t so different from a big company.
I’ve also written about the entrepreneurial mindset, because I’m one of those people who believe success is in the mind. In any area of life, whether business, love, work, sport or anything else, if you step onto the field half-hearted or already beaten, you know the result won’t be good.
We also cover financial education, which, I repeat, is just as essential as understanding the types of investment. I hope no one takes offense at the old saying “A fool and his money are soon parted.” I’ve sometimes seen companies achieve incredible success and hear about reinvesting capital, which is necessary to grow a company properly. But as the word itself says, re-investment means you should know what return you’ll get before you make it, because sometimes a 3.5% return on a risky operation looks amazing to us when a fixed-term deposit offers a better return with less risk. That’s why it’s so important to get seasoned in investing and finance.
To start with, when you decide to set up your own business, you are investing in a business that just happens to be yours.
There are true entrepreneurs who trained in business management and administration. Today they could be considered great businesspeople even though they’ve never started a company of their own. They’ve simply made investing their business.
Conversely, there are investors who one day thought they could do better than many of the companies whose shares they were buying, and went on to start their own company. Investing led them to become entrepreneurs.
As Warren Buffett often says: “I am a better investor because I am a businessman, and a better businessman because I am an investor.”
If you take a look at today’s rich and millionaires, you’ll see that they’re all businesspeople and investors, since each one leads to the other.
If these explanations still don’t convince you, just think about this: when entrepreneurs decide to launch their business idea, their main problem is a lack of funding. If that happens when the entrepreneur is 20, fair enough, but if it happens at 32… they simply need outside financing because they’ve gone 32 years without a financial plan, financial education or the character of a saver and investor.
So I understand that investing doesn’t appeal to some entrepreneurs, just as some people can’t be bothered to shower every day. The thing is, like it or not, we have to shower every day and we have to learn about investing. That way, if one day you start a business and it’s a resounding success that brings in a lot of capital, you’ll know how to get more out of that capital and, with a little financial education, you’ll stop taxes from taking part of the money your own work generated.
In short, and to answer the question: we cover business and investing because we can’t imagine one without the other. The two go hand in hand.
Featured image: Steve Buissinne, CC0 1.0, via Wikimedia Commons.
