FINANCIAL TOOL
Investing in Influence
Anyone can invest in the stock market, diversify, and probably average something like 7%-10% over the decades.
If they’re highly skilled, or have a highly skilled wealth manager, maybe that number is 11%-15%.
But I think of investing as much more than the stock market.
The fact is, if you’re looking to eventually branch off into entrepreneurship, the foundational thing you can start doing now is to invest in influence.
That means building an audience that cares about what you have to say.
Maybe you’re interested in starting up your own restaurant, perhaps starting with a food truck. Maybe you’re not ready to quit your day job for this yet, but what you can do today is begin building an audience who’s eager and ready to buy.
Getting that early momentum means:
- Faster accumulation of reviews and other feedback
- More recommendations to friends
- Time to make adjustments and work through the kinks while enjoying the income
If the idea is a good one, and you can adjust and hone your strengths, that early momentum should hold.
But audience building takes time to do organically. That’s the beautiful thing about starting early, before you quit your day job.
Instead of investing $1,000/month in the stock market, what if someone invested $500 in the stock market and $500 in building an audience? Over 12 months, that’s $6k invested in building early momentum for the business.
Could you have 3,000+ people interested in your business before it ever gets started? You certainly could if you made the investment.
Entrepreneurship, if successful, stands a far likelier chance at outperforming what someone could earn on the stock market over the long-run.
Imagine someone spends $100,000 in the first year for the food truck, marketing, operating expenses, etc., and they earn:
- Year 1: $30k
- Year 2: $50k
- Year 3: $80k
- Year 4-20: $120k
Let’s also adjust years 4-20 for 2% annual estimated inflation and sell the business in year 21 for 35x monthly profit.
Here’s the approximate internal rate of return: 64%
Now maybe this is a bit optimistic. Not everyone is going to meet with such fast early success. But even if the return were only half that — say 30% IRR — would that still be more exciting than what could be made in the stock market?
So here’s the question. Are you interested in averaging 7%-10% on the stock market with $100,000? Or are you interested in something closer to 64% return on investment?
Now this isn’t exactly apples to apples. The stock market requires no effort on your part to run the business. Starting your own business definitely would. But gaining that control allows you to take the next step in hiring others, delegating, and scaling.
It’s not easy. But it’s a radically different potential in terms of investment return. And it’s an adventure that can easily become worthwhile simply because it’s meaningful and purposeful, making the world a better place.