Outside of traditional investments, more and more people are investing in small businesses. The returns can be pretty high if done strategically. Not to mention, as compared to other investments, the risks associated are often less. So how do you go about getting started in small business investing…Below are a few tips to help you better understand what is entailed.
First off, you need to decide whether or not you want to invest from a debt or equity standpoint. That is to say, are you looking to buy stock in a company and thus make it an equity investment. Or, are you looking for a lower risk approach—investing in a debt instrument? This would include a bond or a mortgage for example. The company would then have to repay you with interest. Debt instruments tend to be a lot less volatile than the stock market and therefore less of a risk. Understanding which better suits your investment strategy is key.
Some of the Best Businesses to Invest In
It's not just about randomly choosing a company. Rather, you need to do your homework, familiarize yourself with growth markets, and determine which type of business truly does have the potential to generate revenue long term. Based on 2019's trends and numbers, some of the most profitable small business investments are:
- Accounting: They have very little overhead and are in high demand—the perfect combination. By all forecasts, accounting firms are poised to grow substantially in the coming years.
- Legal: Everyone needs a lawyer at some point. And often smaller law firms with a steady client base can be a very sound investment. Plus, law firms do tend to generate a great deal of money.
- Copywriting: Again, a business with virtually no overhead, copywriters can work from home and still have an expansive reach. In demand for everything from websites to eBooks, a good copywriting company has high earning potential.
- Cleaning: Cleaning companies are on the rise. With very little startup costs, a cleaning company can make a fairly good hourly rate.