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Investing? Consider Doing It with Small Business

When I think of small businesses, my imagination always seems to generate an idyllic scene of a small town with a central park surrounded by small storefronts with their OPEN flags hanging and sale signs sitting on the sidewalk. In my mind, it’s always a sunny day with a gentle breeze that smells of flowers. Locals frequent the stores that help create the fabric of the community where they live.

The fact is that small businesses are mighty and make a big impact within their communities — and across the country. For every $100 spent at an independent store, $68 is returned to the community through various means such as taxes and expenses, according to BankRate.com. That is such a significant impact! What’s more surprising is that the U.S. hosts 32.5 million small businesses, which accounts for 99.9% of all companies. While you may be used to hearing about and seeing the logos of well-known national brands, it’s important to recognize how impactful your consumer choices are and what it means for the communities you know and love.

Invest by Shopping at Small Businesses

Shopping at small businesses makes a significant impact both nationally and locally. This may look like choosing to visit an independent flower shop for your Mother’s Day flowers, sampling authentic, local cuisine instead of dining at a restaurant chain, or visiting a local craft fair to buy holiday gifts.

Another interesting fact from BankRate.com: 72% of Americans are willing to spend $20 more for an item because of the belief that it’s more important to support independent businesses than it is to get a better deal with a larger company. Please pause to consider how powerful that is because those purchases lead to a thriving and vital local economy.

Invest by Starting Your Own Business

When considering starting your own small business, it’s important to remember that act is also an investment. Not only is starting a small business an investment of your money, but it is also an investment of your time and energy. Like many investments, it can take time before you see a return in the form of profit and cash flow. And there is always the potential for any investment to lose money and be worth less than what it initially cost — even a business venture.

However, the flip side of the coin is that the business grows and expands, meaning the time, money and energy you invested in the business paid off with profit, cash flow and more financial security. Just like traditional investments, the more money you invest and the more time it has in the market to weather any storms, the better off it will usually be.

Invest in Small Businesses

Two ways small businesses attract funding are through equity investing, such as buying stocks, and equity crowdsourcing, often used by startups seeking capital to get off the ground or to expand.

As with any investment, there is the potential for high returns if the business does well and is successful. However, it’s important to remember that there is always the risk of losing your investment, especially if the business fails. A failure may look like not getting paid or being the last to be paid in the event of bankruptcy. Investing in a business may also mean being involved in creating and implementing business strategies along with being paid consistent dividends.

Before choosing to invest in a small business through equity investment or equity crowdsourcing, it’s critical you do your research, understand the market for the business, understand the business itself, and determine how involved you would like to be. As reported by BankRate.com, anyone 18 and older can invest up to $2,500 or 5% of their annual income over the course of 12 months if their yearly salary or net worth is less than $124,000. This means there are many people who can take advantage of this type of investment and begin their small business investing journey.

Investing is a crucial part of financial wellness, and it doesn’t always mean buying stocks. There are numerous ways individuals can invest — not only in their financial future, but in the financial future of their communities through investing in small businesses.

Sources:

https://www.bankrate.com/investing/how-to-invest-in-small-businesses/#:~:text=Despite%20these%20benefits%2C%20many%20small,success%20of%20the%20American%20economy.

https://advocacy.sba.gov/2023/03/07/frequently-asked-questions-about-small-business-2023/#:~:text=From%201995%20to%202021%2C%20small,percent%20of%20private%20sector%20payroll.