Q: I just inherited $100,000. Should
I use this money to start a business or should I invest it? I'm
looking for the best return on my money.
A: Well, as Harry Truman's
two-handed economist might have said, "On the one hand, you
could start a business, but on the other hand..." So while I
aspire to give you a direct answer, there's more to this
question than meets the eye or, shall we say, pocketbook.
First, it takes more than money to start a successful
business—a lot more. Starting a business takes drive,
commitment and an insatiable desire to work like you've never
worked before. When you're stuck in a job you don't like or
when you read about how Bill Gates started Microsoft in his garage,
it may seem like anyone can follow the yellow brick road to
success. And while many entrepreneurs do make a go of their
own business, undertaking this challenge shouldn't be done
lightly.
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There are lots of ways to start a business. You may have an area
of expertise in which you could be a consultant, and that takes
less money to start up than a retail or food establishment, for
example. Purchasing a franchise can cut time and a number of
potential mistakes from your learning curve, but these can be
expensive and hard to come by (see our Franchise 500 listing for the
top-rated franchises).
One of the best things you can do for yourself is to get a copy
of Start Your Own Business (Entrepreneur Media Inc.). In it
you'll find everything you need to know to make your start-up a
success. After reading it, you'll have a much better idea about
whether or not you should start a business.
On the other hand, if you're feeling tired just thinking
about all the work involved in starting your own business,
investing money in the financial markets can be a lot less time
consuming, provided you're smart enough not to fancy yourself a
professional day trader. Here are some questions to ask yourself
before you make any investments:
- What are my goals for this money? Consider both short-term
(buying a new car or taking a vacation) and long-term (saving for a
child's education or your retirement) goals.
- Do I want or need income from this money now, or can I put it
aside to let it grow?
- How much risk can I withstand and still sleep comfortably at
night?
- What investment experience do I have? Will I need professional
help or am I prepared to make financial decisions on my own?
These are just a few questions that should get you thinking. For
more information, consider my book, Financial Fitness in 45
Days: The Complete Guide to Shaping Up Your Personal Finances
(Entrepreneur Press). In it you'll find everything you need to
know to get started on the road to financial success.
Finally, whatever you decide, don't quit your day job just
yet. While $100,000 is a lot of money, it's not quite a kiss to
build a dream on.
Lorayne Fiorillo is a financial advisor and senior vice
president at a major brokerage firm. She spent six years as the
on-air financial commentator for EyeWitness News and 11
years as a market commentator for National Public Radio. She is the
author of the new book, Financial Fitness in 45 Days: The
Complete Guide to Shaping Up Your Personal Finances
(Entrepreneur). She specializes in retirement and business
planning for small businesses.
The opinions expressed in this column are
those of the author, not of Entrepreneur.com. All answers are
intended to be general in nature, without regard to specific
geographical areas or circumstances, and should only be relied upon
after consulting an appropriate expert, such as an attorney or
accountant.