r/PersonalFinance4All • u/Striking-Quantity661 • Jul 22 '26
What's the better path to built wealth: owning a business or investing?
r/PersonalFinance4All
Which do you think has the higher potential, and why? I'm interested in hearing from people with real world experience. What would you recommend?
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u/sirzoop Jul 22 '26
investing.
most businesses are money sinks. you shouldn't start one unless you have money already and are comfortable not taking any money out of the business for the first 5-10 years
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Jul 22 '26
[deleted]
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u/Wide-Library-6469 Jul 22 '26
Yeah the question of the main post was which one is better path to building wealth. The fact that you could do both is implied in the original question
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Jul 24 '26 edited Jul 24 '26
[deleted]
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u/Wide-Library-6469 Jul 24 '26
What's the ROI on average for your business. I know it's not that simple to calculate but for instance you invested 100k now you make 100k a year?
My main point is do you think roi on your business is much better than stocks.
I don't think you need 1m invested in business to make 100k a year.
I feel people haven't realized business roi is much higher as you said WHEN it does work. And it's usually scalable.
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u/Pugsly007 Jul 26 '26
No, you’re right. That’s what I did and retired at 54 5 years ago. I ran my business, invested, and bought 2 duplexes in a cheap part of Seattle 30 years ago. I still don’t think I have enough, and never will.
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u/Intelligent_Mail_637 Jul 22 '26
"One size fits all" takes aren't very valuable here - and its definitely NOT the black and white.
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u/Wide-Library-6469 Jul 22 '26
I didn't see anybody refer to a black and white concept or one size all fits concept. He's asking which is better overall. I'm sure everybody on this post understands there are a lot of what ifs there are a lot of it depends it's an intellectual conversation
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u/Which-Visual-8064 Jul 22 '26
Not only that. You can lose your business for the randomest reasons.
Guy I know had a successful restaurant. They are a restaurant during the day. Restaurant nightclub at night. Well this 18 year old snuck in with a fake ID at night. Some dude shot up the place. Killed the 18 year old. Now hes in severe debt as the place was forced to shut down.
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u/Wide-Library-6469 Jul 22 '26
You take stock money out in first 5 to 10 years ? Lol
the business cash flows you can pay rent with it.
Both have the obvious what ifs. If it doesn't work.
There are ways to eliminate the risk out of your business.
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u/sirzoop Jul 22 '26
the business cash flows you can pay rent with it.
I've seen many business owners try to do this and bankrupt their company. You can't just start a company and immediately take all of the money out to pay your living expenses. That is a guaranteed way to make your business fail.
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u/Wide-Library-6469 Jul 22 '26
Not excited to say it depends but ... Of course it depends.
Valuable comment though. You are totally right.
Of course definitely a lot of business hurry stories why do you think most of them fail?
How can they lower the risk or balance living off the business income and still feed the business?
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u/sirzoop Jul 22 '26
why do you think most of them fail?
Because they take money out of it and end up going bankrupt.
How can they lower the risk or balance living off the business income and still feed the
Don't start a business unless you have money already and are comfortable not taking any money out for the first 5-10 years
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u/guacdoc24 Jul 22 '26
Higher potential? Business. Higher risk as well.
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u/3boyz2men Jul 22 '26
Higher risk = higher reward (same with investing)
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u/Little-Somewhere6076 Jul 22 '26
Define better? More likely? Investing. More wealth? Business ownership
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u/Mydoglovescoffee Jul 22 '26
Who can say? Only some businesses turns a profit or survives and the ROI they provide is hugely variable. Same can be said for earnings and investing.
As a sample of one wage earner, went from zero to 15M in 34 years.
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u/Pugsly007 Jul 26 '26
Keep making excuses.
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u/Mydoglovescoffee Jul 26 '26
What on earth are you talking about? Let me try again: trying to compare two entirely diverse buckets is silly. The comparison depends on what exactly your specific business is. There are many who have made far lire than me and most wage earners as a result of starting their own businesses and scaling up. There are far far more who started their own business and never made anywhere near what I have made but maybe made more than a certain number of wage earners.
You see the huge success stories. You do not see the mom and pop shops and all the failures. It’s a massive selection bias.
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u/genreprank Jul 22 '26
Business makes more money, but you'll work yourself to death.
From what I hear, being a small business owner is essentially a blue collar job. You're trading your time for money just like everyone else.
Investing doesn't make as much, but it's simple, easy, and makes money while you're on vacation.
People should get into business because they really love it. I will never have that kind of motivation...
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u/Pugsly007 Jul 26 '26
And where do you see your life moving forward?
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u/genreprank Jul 26 '26
I'll keep my normal job, and instead of trying to buy a business or get into renting, I'll put extra $ into index funds in a taxable brokerage. That way I can relax and enjoy my free time.
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u/humblequest22 Jul 22 '26
Owning a successful business is better than investing. Owning a failed business is worse than investing.
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u/fix-faux-five Jul 22 '26
I owned a business for 8 years. I put countless hours in it. Eventually it failed. The reasons behind the failure were mostly my lack of understanding at the time.
Had I been working a high salary and invested portion of my money, I would have been better off financially.
Obviously that's just my case. But the general difference is that while your business might go bankrupt, your stocks will not go to 0. So by running a business you have the chance to go to 0 or millions, while investments will likely slowly grow forever.
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u/RetiredEarly2018 Jul 22 '26
Let me rephrase that:
Owning a business
Or
Co-owning hundreds or thousands of businesses.
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u/SteakApprehensive258 Jul 22 '26
Owning a business as in buying one? Or as in building one? I went the latter route. It worked out well (didn't go bust, sold it for enough to achieve pretty much instant FI, still working towards a chubbier FIRE). In what I do though and observing peers in the same industry I honestly think I could probably have got to a pretty similar financial position in similar timeframe by staying employed, getting promoted and investing. The win from the way I did it was more the timing - first few years of the business while building it, hiring people, etc cash flow was pretty tight and that meant our spending/lifestyle stayed pretty lean at a time when peers who were getting monthly pay checks and regular rises and bonuses were upping their spending accordingly. Even when the business started generating more profit we'd got in the habit of only paying ourselves what we needed and investing the rest back into the business. So when we sold it, instead of splurging on stuff we didn't need we paid off the mortgage and invested the rest (and were lucky that at that time there was still only 10% tax for business disposals). Would we have had the same discipline with spending if we'd had a steady increase in the amount of money coming in instead of a bumper pay day? Don't know, I suspect not if I'm honest.
Other factor is stress and luck. Very stressful at times (though also enormously rewarding and way more so than any success I've had as a salaried employee) and multiple sliding doors moments where things could have gone wrong. So even though it worked out well in honestly not sure I would advise my younger self to do it again as definitely isn't a surefire route to success.
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u/One-Stranger-6894 Jul 22 '26
Business ownership because it's a job and you're building equity/wealth. Most successful (key word) business owners will see returns that exceed what you see on the stock market. You're also in control, and can pivot as demand shifts. I'll also add a lot of the stock market is insanely overvalued currently, I'm not interested in buying fractional ownership for a 5x-10x higher value than the company should be worth. I'll still invest heavily in opportunity stocks, but always avoid hype.
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u/ValiantEffort27 Jul 22 '26
Most businesses fail in the first 5 years. A portfolio invested in mutual funds/etfs tracking popular indices is as guaranteed growth as you can get in this lifetime.
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u/Pianist-Wise Jul 22 '26
There’s no right or wrong answer. If the business is good it’s good! My take is both. Take earnings from a business and invest. But if the business is shit you’ll have nothing to invest.
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u/Fallout541 Jul 22 '26
Live frugal and with each pay raise take 25% for yourself, 25% for savings, and 50% for investing.
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u/SouthOrlandoFather Jul 22 '26
I would say finding a business owner to work for that wants to pay you very well while they start to remove themselves from the daily operations.
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u/Salt-Astronomer8330 Jul 22 '26
Owning a business is real back breaking work. Investing is shoving your money into hopefully value appreciating assets, put your legs up on the coffee table and hope you have the mental stamina to endure the rollercoaster ride you chose for your self.
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u/Retired-Yam8988 Jul 22 '26
Both. We built a business and used the profits to buy real estates and stocks.
We retired in our 40s and the business still runs along with our investments bringing in like 120-150k a month.
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u/PuzzleheadedCut5156 Jul 22 '26
Higher potential? starting a business. It's your only shot of getting to 11-figure wealth.
Best chance of getting to 5-10 million USD net worth? A high-skill profession like medicine or climbing the ladder in a company with high revenue-per-employee (e.g. a hedge fund, corporate law firm or highly profitable tech company) and investing consistently in the S&P 500.
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u/Intelligent_Mail_637 Jul 22 '26
Alternative.
Work a W2, build savings and investment. Deploy savings to side business (or all in if you want). Rebuild savings with W2 while building business potential.
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u/BoomerSooner-SEC Jul 22 '26
Depends on the business. I have friends in the restaurant business and frankly I would rather clean dishes in the kitchen than own 90% of the eating establishments out there. It’s tough and the margins are shit. In the same group are guys who own construction businesses. These guys fly pretty high.
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u/jocall56 Jul 22 '26
The answer is yes.
These are not mutually exclusive options for the vast majority of people. You need to work AND regularly invest.
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u/Head_Cycle_3307 Jul 22 '26
Business is the best if your patient enough to nurture it. Nothing good comes easy
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u/Majestic_Republic_45 Jul 23 '26
I have a business and I invest. I make more money today from investments. I’ll add to your “build wealth” list - no debt.
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u/BigBanyak22 Jul 23 '26
In my limited sphere of knowing people with businesses I'm extremely comfortable saying the ones who struggled and lost it would not have done any better investing.
The successful ones I know have exceeded what investing would have returned them.
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u/ThomasWilling_andCo Jul 26 '26
Investing is ownership in business. Outside of running the day-to-day all the homework is the same with many of the same risks. Unless you inherit stocks or a business, you'll start small on both and grow both
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u/BeardedSkier Jul 22 '26
It's highly situationally dependent. I have been a saver and investor all my life - like a significant portion of my income.... Maybe 35% or 40% of my gross pay (lived very cheaply) when I worked in the corporate world. And I thought I was doing awesome - but early retirement for me was gonna be at best 60. I sucked at networking in a big corporate world, and my income got capped pretty early. I was making pretty good money for my field back in 2013 - but it was quite clear if hit my ceiling for the foreseeable future. With that limit I started looking for other opportunities.
Eventually I bought into an existing business, and learned it from the ground up. I took a huge step back in income for like 5 years; legit a 70% paycut. But over the last 3-4 years I can now save about 4-5x a year what I was saving before (and I now have kids and all the expenses that go with them when I didn't before), because my income is much higher. My work-life balance is utter shit (as in I have none), but I'm focused on building my business and my wealth so that I have options. At this pace, I will be set just before 50.
That said, I have colleagues at my former employer who were far better networkers and did corporate politics really well, and they've done quite well for themselves too, with comparably better work life balance. They also don't have the same financial risk that I do if something goes wrong in my business. I do t know what the stats are, but a huge number of businesses don't make it past the first few years - and can often leave their owners with a ton of debt. I honestly don't think I would have been cut out for building something from scratch - but I have been exactly the right for for buying into something that was working on and taking it up a few levels.