26 Best Small Business Ideas to Start in 2022
Contrary to popular belief, there are actually many ways to start a business that let you focus less on the logistics and upfront costs and more on getting your ideas started. Let’s get you past the first major mental hurdle of “I want to start a business but have no ideas”.
These 26 small business ideas, make a great entry point for beginners, bootstrappers, or anyone with a busy schedule, and let you pick up a side business without having to drop everything else.
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How to Start Investing in Small Businesses
1. Find Deals Worth Pursuing
2. Perform Due Diligence On Market Opportunity and Business Strategy
First, look at the business plan and strategy and assess for yourself the potential risk. You’ll also want to look at the current state of the business, financial projections, market opportunity and industry, and anything else pertinent to the companies before offering financing.
3. Understand How the Business is Funded
Many small business funding avenues are available, including Small Business Administration Loans (SBA Loans), debt and equity investments, venture capitalists, and angel investors. Funding could also be acquired through banks, credit unions, and even business credit cards.
Especially if you’re a potential equity investor, you’ll want to understand other funding options open to you, those the business has already utilized, and the status and results of that funding.
4. Meet with Small Business Owners to Solicit Interest
Some business owners may not be ready or interested in individual investors. Still, for those that are, this meeting is an opportunity to ascertain business goals, financial goals, and the intended use of the funds.
5. Negotiate Terms
When you’ve found entrepreneurs interested in your financing, it’s time to negotiate terms. If you’re an equity investor, you’ll need to agree to a percentage of ownership, percentage of profits, and financing amount.
6. Close Deal
In return, you’ll receive compensation based on the terms of your contract, which may include stock, dividends, a percentage of ownership and profits, capital gains, or another form of payment.
7. Stay Involved
Even when the deal is done, and the returns from your funding begin rolling in, it’s a good idea to stay actively involved in the company. Things can change quickly with a business, and as an investor, it’s essential to keep the pulse of any companies you invest capital in.
How to Invest in a Portfolio of Small Businesses as a Passive Investor
While the process outlined above will be best-practice for most small business investments, there is a way for investors to help small businesses without much active involvement.
When you walk down this main street, you can feel the sense of community that fills the air. People stop by each other’s businesses to chat about their day or lend a helping hand when needed; it feels like everyone is family here. And that’s because they are, whether you realize it or not.
It’s not just one small company that provides jobs for this town; rather, every store owner has created their own niche business, bringing joy and financial stability to those around them. Wouldn’t you want to support such a community and see it flourish?
Opportunity: Invest in small businesses local to you or nationwide. Have an impact investing approach to place money into businesses that drive the majority of employment in America.
Risk: These are small businesses, some of which are in their infancy. They also have exposure to risks related to public policy, such as shelter-in-place orders enacted by many states and localities as a result of the pandemic.
These business ventures act as income generating assets that offer returns between 10-25% per year through revenue-sharing notes, which act as financial agreements to share revenue with investors until reaching a certain return.
Mainvest holds responsibility for protecting investors from businesses that don’t have a strong direction or investment rationale for retail investors. As such, the service only accepts 5% of businesses who sign up for the platform to raise capital to grow their businesses.
You can choose companies based on location, industry, and risk appetite by comparing terms and qualitative data for the 300+ investment opportunities that have launched on the small business investing platform since its founding.
Which Is Better: Equity Investment or Debt Investment?
As with many things in life and business, there is no simple answer to this question. If you had been an early investor in McDonald’s and purchased equity, you’d be rich. If you had bought bonds (a debt investment), you would have earned a decent return on your money. On the other hand, if you buy into a business that fails, your best chance to escape unscathed is to own the debt, not the equity.
All of this is further complicated by an observation that famed value investor Benjamin Graham made in his seminal work, “Security Analysis.” Namely, that equity in a business that is debt-free cannot pose any greater risk than a debt investment in the same firm because the person would be first in line in the capitalization structure in both cases.
The Problem of the Preferred Equity-Debt Hybrid
Sometimes, small business investments straddle the ground between equity investments and debt investments, modeling preferred stock. Far from offering the best of both worlds, preferred stocks (priority stocks, first in line for fixed dividends over common stock) seem to combine the worst features of both equity and debt—namely, the limited upside potential of debt, with the lower capitalization rank of equity.
To find small businesses, you need to look for opportunities in your personal network. You can also network with other investors, check trade publications for news about new startups, and call the local chamber of commerce. Once you find some opportunities, take the time to interview the entrepreneurs and decide which might be a smart investment for you.
Source:
https://www.shopify.com/blog/low-investment-business-ideas
https://youngandtheinvested.com/how-to-invest-in-small-businesses/
https://www.thebalance.com/types-of-investments-in-small-business-357246