i'm buying another small business

I already own three small business in Australia, why am I buying another small business? The hard part is getting a small business idea or starting a small business... but buying the small businesses, done correctly, boosts your investment portfolio.

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To start with small business tips, let's consider the mistakes many startups make. Avoid buying in an industry where you don't have any experience and need to get small business help. Make sure you're well capitalised when buying a small business and you have funds available to invest in the business - instead of drawings from the business straight away. Know your numbers and focus on a small business idea which has recurring revenue and you're paid upfront with suppliers paid later. Conduct detailed due diligence into the startup and always spend time working on the business rather than working within the small business.

Most people, do uni, get a job, buy a house. But a small business should be considered a sound investment asset too (for the right person). Buying a house as your first investment has some negatives vs investing in a small business. The payments on the house are after-tax, you pay stamp duties on the house and interest is not deductible.

I am borrowing against my property investments through a cash out via a trust. The loan is used as a float and the business pay down the loan, which is then used to buy other assets.

To boost your overall investment returns, you need to buy good assets and get leverage. Assets multiplied by leverage gives you a higher return on equity. The higher the return on equity, the faster your investment portfolio grows.

A pro tip: small business gives some unique advantages with leverage, firstly business income isn't capped like a wage, the right small businesses pay a significantly higher dividend than stocks, and you can borrow against business income (unlike a wage).

Think of investing like a bell curve with cash flow and growth on two ends. Small business provides excellent cash flow, and other investments provide outstanding growth. Instead of compromising on one for the other, only focus on assets that are in the top 25% of returns and blend the investment with each individual investment.

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