23 year old with 200K inheritance. Entrepreneurial ideas? Help

[recentcollegegrad]

Hi everyone....I am 23 and recently graduated college and am working in "corporate america". I am making decent money for my age....(Granted I have only been working for about 2 months)....and have been thinking a lot lately about doing my own thing.

I am not miserable at my job and don't mind what I'm doing (getting good experience on someone else's tab) but like the idea of being my own boss and controllign my own destiny. To that, I have given some large thought as to what I could do with my 200K inheritance I recently received that is largely invested in various high risk stocks.

I see this money as a tool to help with two principal things:

1. Big jump start on my retirement. Stay in Corporate America and max out 401Ks, ROTHs, save regularly, etc, and retire comfortably or early. Use the inheritance for a downpayment on a house and that's about it.

2. Take a big risk and start my own business. Use the money to finance or secure debt to start my own business.

#2 would be risky and I likely wouldn't see the results for years to come. What do you guys think? I guess I am just throwing my ideas out there. I have read online about franchising, which seems less risky than simply starting my own gig. I don't have any brilliant idea but I think my main two goals with my own business would be A) being my own boss and B) making money. I am not trying to rake in 7 figures a year, but like a comfortable six figure income. I've learned to reach that salary in corporate world requires a lot of BS, politics, networking, and possibly getting an expensive MBA that may not even pay off.

What are your thoughts? Is 200K enough to start a franchise fast food restaurant and slowly open more as I make more?
What would the financing involve? Me putting down a decent amount of the 200K and then using the recent to secure loans and living off whatever I save up between now and when I would leave corporate America?

Your insight is appreciated!

[bjl584]

Do you have any idea what you would like to pursue for a business? Do you have any skills that you could put to work in a business of your own? At this time would you be better suited to sit tight until you have a more solid plan? You are 23 and have $200,000. You have a huge advantage over other people you age (financially speaking.) Is anyone managing this money? Do you have the ability to manage it yourself? If you manage it properly, then you could probably retire a millionare by the time you are 40.

[DRILLINDK]

Keep your job, improve your skillset and education.

[snafu]

I suggest making appointments to talk to the three franchisees of places you go to. Make up a list of questions and ask "if they could turn back the clock, would they still buy this particular franchise.

The latest big success in my community is 'Truck Stop.' These are big rigs serving quality fast food foods from these giant, shiny rigs. Most are ethnic based and are licensed to park at designated stops at different times of the day. For example they will be downtown for lunch, in suburbs 5 - 9 PM. different streets on different nights. I'm wondering what business will be like when the weather is ghastly.

[jpg7n16]

Do you have any debt?
What experience do you have owning/operating restaurants?
Which franchise were you considering? What are their minimums to open a franchise?
Why should they franchise with you? What do you have to offer their firm?


About the current investment:
Can you tolerate the high risk stocks?
Have you spoken with anyone about an asset allocation?
Did you inherit them in a brokerage account? or in a retirement account? (retirement account will be taxable when withdrawn)


FYI - Taco Bell requires a $1 million net worth before they'll consider you. So depending on which franchise you're looking at, $200k may not be anywhere close enough to even get your foot in the door.

Taco Bell Franchise Information

[mcfroggin]

Stay in corporate america until you find an idea/opportunity that you can't pass up.

[mcfroggin]

You could also start your own small business from home for minimal start-up capital and start a home office deduction!

[maat55]

You might want to research profitable franchises and find out how much upfront money is involved. Afterwards, I would go to work(part-time) for one of them for a couple of years to get to know the business. This may allow you time to grow your money for an initial investment while growing your knowledge of the bisiness.

[recentcollegegrad]

Thanks for the insight everyone. The money is managed by a money/asset mgt firm in very diversified mutual funds, stocks, etc. Since 2005, I have a net return of 4-4.5%, which I am happy with given the state of the economy and considering the average return of the s&p/dow since 05 (I believe in the red). Hopefully by the time I'm in my 50s and 60s the money will be well into the 7 figures, assuming the economy eventually improves and I don't touch it.

As for a start up, I don't know exactly what I would want to do but have just given thought to the idea. I realize I am lucky and have an advantage over others because should I want to start my own thing, I have funds which would help me a lot. I think my plan is to get some experience and see how I like my job for the next 5 years, save some money and keep my 'ears peeled' for entreprenuerial ideas in the meantime.

[97guns]

opening any kind of business involves risk, more so in the economy. you could easily see that 200K vanish before your eyes or see it double up in a year. look into real estate as a cash generator much less risk, renting out real estate is a business.

[DKAS]

If you're happy with your job, why not get an advance degree in the field. I don't have direct experience going through an MBA program but from what I hear, it can be a great source of networking (probably depends on the school). You might be able to team up with others in the program on a great idea and go from there. And if nothing else, extra education wouldn't hurt either.

[rj.phila]

A few bullet points from a small biz owner:

1-IF it works, indy biz will work primarily due to this fact: sweat equity. Jumping fields to start a biz just so you can be your own boss is riskier than starting a biz in a field you work in already.

2-expect to work looooong hours. "throwing away your 20's" is quite feasible. If you love what you are doing, you won't care, cause you'll love every minute of it. If NOT, I'd be surprised it will pan out well. Take the lowest rung on the ladder of your biz; if you aren't willing to do that job at any point, bad news.

[Scanner]

Small business owner here too. I am on the precipice of being "bought out" by corporate America - I may go work for "Da' Man" here shortly, and happily do so (made thru Interview 2 pretty well).

My only advice is this:

There is probably only one more expensive place to "Find Yourself" than College (although lately, with their exhorbinant fees and tuition, that may rise to first place) and that's starting a business.

It's okay you don't know if you are going to like it, be good at it, etc. . .but I guess what I fear is (and you too) is that if you want something that could drain that $200,000 more quickly than a a 5 inch hole in a bucket, it's a small business. When you are a business, let me tell you - Everyone, I mean EVERYONE, has their hand out and wants your money. Landlords, utilities, vendors, employees expect to be taken care of.

Ever wonder why you see so many commercials aimed at small businesses, romanticizing it? Because company's like BoA, AMEX, so many I can't think of, just lick their chops at small businesses. It's not that they really want to help you or care if you suceed.

You will apply a big suctioning force on that 200K.

Now. . .am I telling you not to do it? No. . .I am not. . .in fact, you are SOOOO young. . .why not take that money and set aside $20,000 (10% seems reasonable) and invest the rest for retirement? You could even, as you are working, keep adding to the 20K figure, if you feel you need a bit more for start-up.

Yeah, it may not buy you a franchise, but I think I would only recommend a franchise perhaps for a second business. Start something more simple, like an office cleaning business or something (just as an example of something simple), and see if you like the "small business culture." Sell it for something (even if $500 or something) to get the idea of that you "built a small business and sold it" to put on your resume.

(that is the purpose of any small business - to eventually be sold)

Good luck.

[red92s]

A food franchise usually requires a pretty healthy chunk of change. That's why so many are owned by former professional athletes: they have the capital, the name, and the connections to make it happen.

Honestly, the position you are in is extremely enviable. Personally, I'd sit tight with the money for a bit. Even half of that money applied towards a future home could make life significantly less stressful. Living with no mortgage (or a very small one) is a luxury most people will never see.

[Frugal]

IN my opinion (and I don't know all the details of your situation), I would definitely keep a stable, good job and not throw it away. It could be really hard to replace in times like these, with unemployment at record highs! Not a lot of people have a good, well-paying, stable job. Businesses are great, but risky to start when one is young. Plus, our friends tried to open a store recently, and I think they had trouble getting the loan. Business loans are a little tougher to come by right now, with the economy still in the tank.

[Scanner]

I have to say YoungGuns idea of investment property isn't a bad idea all around. . .she's got collateral. . .she could finance at record lows. . .run the properties as a business (because he's right - it is) and could always cash out (albeit with some risk at lower market prices) if she wanted. She doesn't even (and I wouldn't recommend) have to put up the $200,000 - just deploy them in income producing investments that can be offered as collateral. She could put down 20% on a 75K condo and finance the rest let's just say.

Rent it out, turn a profit almost immediately because money is cheap and then be smoking cuban cigars with Scanner in the investment forum.

Better than opening up a "store" (not that she even mentioned that as a possibility) and letting your money be flushed away in expenses every month, hoping for customers.

[rj.phila]

ok, i've got the ultimate idea for you.

buy a multi-unit property, ideally a triplex. live in one unit, rent the other two, keep your job. you'll get experience "running a business", generate income IF you do it right(its not a no brainer), and keep your corporate job.

you've left out a few big things: A) what do you WANT to do with your life. B) own or rent.

[97guns]

Originally Posted by Scanner

I have to say YoungGuns idea of investment property isn't a bad idea all around. . .she's got collateral. . .she could finance at record lows. . .run the properties as a business (because he's right - it is) and could always cash out (albeit with some risk at lower market prices) if she wanted. She doesn't even (and I wouldn't recommend) have to put up the $200,000 - just deploy them in income producing investments that can be offered as collateral. She could put down 20% on a 75K condo and finance the rest let's just say.

Rent it out, turn a profit almost immediately because money is cheap and then be smoking cuban cigars with Scanner in the investment forum.

Better than opening up a "store" (not that she even mentioned that as a possibility) and letting your money be flushed away in expenses every month, hoping for customers.

im pretty sure i know what im talking about here, its the path i took to retirement 2 years ago at 39. i found myself with 250K in accumulated cash and decided to go into the landlord business. best move i ever made, im actually getting paid right now as i type.

[alphadore]

My suggestion is to put your money in a savings account and dont touch it for at least five years. You can also consider government bonds.

As per putting up your own business, I understand how great the idea sounds. I am an entrepreneur as well and there is nothing wrong with being entrepreneur. But, I believe there is still so much for you to learn before you can spend that 200k on a start up business. Making a start up work is a real pain. When you are your own boss, you actually work harder than working in a corporate. Entrepreneurship is 24/7. You think about your business at all times. You wake up with it and go to bed with it. When things are not looking bright, you are stressed like you have never been. There is also a flip side to it, when things are working out you are very happy and perhaps spare some extra time for your hobbies.

I am not an American, but there is an American politician that makes me laugh whenever I hear him speaking. He once talked about the "known unknowns" and "unknown unknowns" about invading Iraq. I believe there are many unknown unknowns for you. I suggest you just work for a couple of more years.

[alphadore]

Originally Posted by Scanner

I have to say YoungGuns idea of investment property isn't a bad idea all around. . .she's got collateral. . .she could finance at record lows. . .run the properties as a business (because he's right - it is) and could always cash out (albeit with some risk at lower market prices) if she wanted. She doesn't even (and I wouldn't recommend) have to put up the $200,000 - just deploy them in income producing investments that can be offered as collateral. She could put down 20% on a 75K condo and finance the rest let's just say.

Rent it out, turn a profit almost immediately because money is cheap and then be smoking cuban cigars with Scanner in the investment forum.

Better than opening up a "store" (not that she even mentioned that as a possibility) and letting your money be flushed away in expenses every month, hoping for customers.

Well, what happens when the price of the property falls dramatically? What guarantee do we have that U.S. is not going into another recession? There is no such thing as hitting the bottom. You never know where the bottom is. You finance a property then in two years, it is worth half the price you bought it for. You wont get the same rent from your tenants to cover your loan. I dont see this is the time for her to take risks. She can easily invest in a government bond that matures in 5 years and then decide what she wants to do with the capital. No rush.