Why is every investing enthusiast so obsessed with shares

Shares [AGAIN]. What’s the big deal??

Forget everything that you know about the green and red dots on a screen (yes shares) and think about what business you really would like to be invested in. For most people this is property (because it’s tangible right)? Closely followed by retail, ie everyone has to eat and get dressed. Soon thereafter people think of entertainment and recreational consumption.

No matter the preference of business let me engage you on what it takes to start, run and then eventually sell the business much later on (unless of course you strike gold and want to leave it to your kids with the same passion. [Note I will not be demonising any form of business.]

1.Starting:

Starting a business often entails gaining expertise in the business and/or partnering with like minded people. Nothing too difficult considering we often start a business based on where we live, what we do for work or how far we are willing to stretch ourselves.More importantly is the admin involved in registering your company, creating a bank account, branding, Marketing etc. Then you must stock up and be ready to receive your first customers.

2.Running the business.

Probably the place where I cannot sweet talk you into starting your own business is in running it.

At what point do you leave your job and become “self employed”? What about your first, second or 10th employee? How do you make that employing decision? Then the money that I take to live on. How much is enough? Do I pay myself more or pay for marketing in order to grow sales ?

The biggest advantage to working for yourself is the flexibility that comes with it. You’re free to  work your own hours as much as you are to work into the night without a boss to chastise you for waking up late in the morning. Except of course you have to be up to take deliveries, put up “for sale” signs or have those bank meetings that are better got out the way. There’s reporting back to everyone that provided you with funding on a regular basis, sharing your profits with them and also making sure you run the business well enough that you don’t have to go back to ask for more money.

There’s business insurance, staff medical, staff pensions and various other legislative and precautionary expenditure that comes with owning a business.

Again this article is not to discourage owning your own business but to put out what we consider.

3. Exiting the business.

There are two ways to mainly exit a business. One is to sell it and the other is to liquidate it. The third is undesirable as it equally involves leaving the earth so we’ll stay away from it for a while.

Whether selling or liquidating, you need to get a valuation for all of your assets, liabilities and possibly the value of you brand (selling). An exercise that is best performed by lawyers and professional valuers.

There’s getting a buyer[s], negotiating the right price before taxes and fees as well as overcoming the 60 day legal due diligence period without your business being returned.

If steps 1-3 were done with a surgeon’s precision we’ll soon be taking business advice from you and worshiping your face on the cover of every magazine, newspaper or our television screens.

Shares then?

Well there are people that have excelled through the above process and become so big that they can’t possibly raise enough money from their families or any individual investor. So they present to you the entire process they’ve gone through (like you). They have it verified and give an indication of how much they make in profits, how big their client base is, number of locations they operate etc and ask for more money to keep dominating the real estate, retail, agricultural, mining, transport and various other sectors. From me all they want is my investment, bank account number and ID number and they will pay me annual profits as and when they occur. They’ll email me reports and invite me to annual meetings. They’ll go on roadshows (hopefully passing through my hometown) if I can’t make the meetings and make sure their results are broadcast on TV and the newspapers.

What if I want to sell my investment…

Usually the company is so visible in the public eye that there is a queue of buyers that have already determined a fair price for my stake in the business. No lawyers, valuers etc. The taxman will be handled by my broker and all I have to do is press “SELL” and the money will be in my account within three business days. No due diligences or looking over my shoulder.

So why shares?

I can own a share of my dream business hassle free.