Thursday, November 25, 2010

Owning a private business is not for me

Prompted by this post on Seven Million in Seven Years and Adrian's response to my comment on stocks and real estate being my preferred investment choices for retirement, here are my reasons for not wanting to own or manage a private business post retirement:

1. I don't have the skill set for it. I have spent my entire working career in the professional services industry (apart from a brief stint in the finance industry). I have zero experience in running a business. It would be stupid to place my retirement at risk by investing in something that is outside my skill set. At best I could look to investing in a business with minimal capital requirements;

2. It's too risky. Most private businesses need a reasonable amount of capital. Most private businesses fail. A private business is not liquid. A private business is not a diversified investment. Cutting your losses usually means shutting the business down before the creditors do and writing off most, if not all, of your investment. I've seen enough failures and the hardships they have created not to want to risk taking myself and my family down that road;

3. It's hard work. Most private businesses require a lot of work. A lot of hard work. Signing up for a lot of hard work is not part of my retirement plan. There is a very long list of things to do once I say goodbye to my professional life. Working as hard as ever on an uncertain proposition which may or may not place my retirement plans in jeopardy strikes me as a very strange form of retirement.

I used the word "most" a lot in this post. Sure there are businesses which (i) don't require much capital (ii) do succeed and (iii) don't require a lot of hard work. If I find or think of such a business I'll be tempted to give it a go - but I'll be keeping it to myself. Given my lack of experience in business ownership and management, I simply don't think it's for me. If I wanted to continue working my butt off I could just continue doing what I'm doing now - I'm very well paid and am not placing (much) of my own capital at risk.

Real estate and stocks may not have the same upside as owning your own business, but they are less risky and less time consuming. That works for me.

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