Investing in Your 20s and 30s: Small-Business Returns

By Eric Tyson

When they think of the “American dream,” one image that comes to the minds of many folks is owning their own business and possibly making it big by doing so. You have numerous choices for tapping into the rewards of the small-business world.

If you have the drive and determination, you can start your own small business. Or perhaps you have what it takes to buy an existing small business. If you obtain the necessary capital and skills to assess opportunities and risk, you can invest in someone else’s small business. None of these avenues is easy. In fact, all these routes require drive, determination, and some skills and money.

By starting a small business and retaining a major ownership stake, you can earn very high effective returns. Unlike with the stock market, for which plenty of historic rate-of-return data exists, no specific data exists on the returns that small-time investors have had from investing in small private companies. (Successful venture capital firms, which invest in small businesses with large potential, earn generous returns for the general partners.)

While the financial rewards can be attractive, there are other rewards from investing in small businesses. For example, you might enjoy designing and running businesses that provide useful and valued services, or you also might enjoy having flexible work hours and not feeling like you’re punching a time clock to satisfy a boss.