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When To Invest Or Operate A Business

Investment and business are similar in that both need you to commit some money in anticipation of future profit or benefit. The key difference, however, is that in business, you are actively involved in management while in investment, your role is more passive because you are not involved in the management.

With the foregoing differences you have to honestly evaluate yourself specially if your desire is to operate a business, because according to statistics, approximately 20% of new businesses fail during the two years being open, 45% during the first five years, and 65% during the ten years.

With the above statistics, operating a business has greater risk of failure than in investing. Therefore, before going into business, you need to objectively (not emotionally) evaluate your chances of succeeding specially, if you are not sure of your ability to manage a business.

You have to be much more cautious if your capital is borrowed using the equity of your house. For when you default your mortgage payments, your creditor – bank or other lender, would take possession of your house through Power of Sale.

Should you decide that business is not good for you and you still want to earn your money more than a bank interest, if you deposit your money in an interest bearing account, you may consider investment. Where business management ability is not required.

Example of investment is buying share of stocks from companies with excellent track records of earning for years. Though you can do it yourself online, you need a stock-broker for professional advice.

By investing your money on those companies with excellent track records of earning, you will be receiving dividend (profit) periodically with no hassles like operating your own business.

Therefore, when you are not gifted with business acumen or ability to operate a business, it’s better for you to invest. However, when you have a business acumen or ability to operate a business, you may operate a business, for generally when a business is properly managed, it would generate higher return/profit than in investment.

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Adam Aspilla operates the Debt Clinic of Canada Inc. for more than 30 years.  He was a former financial planner, a former mortgage broker, and the author of the book, You Can Negotiate All Your Debts.  He also writes another column, “Biblical Perspectives” in this paper. For a free initial, expert, professional and confidential financial consultation on your financial issues like: Debt Consolidation, Credit Counseling, Consumer Proposal, Bankruptcy, securing 1st and 2nd Mortgages and Mediation to resolve Financial Dispute to save time and money going to court, call 905-970-0439 or visit www.debtcliniccanada.ca



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