When Life Gives You Lemons … Part II

In the last post, you did not actually make your lemons into lemonade. You took your ingredients and other materials (your assets) and you leveraged them for a more passive stream of income.

What if you decide to actually get out there and make lemonade? Now you are an investor in your own company AND you are working in the business for yourself. You open and close the stand whenever you decide. You are responsible for continuing to source your ingredients, making sure you have the other materials you need, and you get to take all of the profits beyond that for yourself! You have a higher wage now than you might otherwise have if you had simply been working for another lemonade stand.

You can decide what to do from there.

I remember reading books as a kid … Choose Your Own Adventure books. They were so fun. I would usually choose one but then also read the other outcomes as well to see if I was still happy with my choice or if I should have gone another way.

As an entrepreneur, there are limitless options. Unfortunately, there are no outcomes to read and determine if you made the best choice. You have to know your market, know your business, know what your goals are, know your competitors, and have the ability to get the work done when you do not necessarily feel like it (or face having no earnings).

This is one option.

You can also hire workers. Find other people to get up and make the lemonade, sell the lemonade. Perhaps your stand needs some repairing due to a thunderstorm or some vandals in the neighborhood who decided to graffiti your sign. These are some of the risks of being the owner of your own business. So, while you get to enjoy the ultimate payout, you need to continue investing into your business.

Most of us would prefer to not go this way. We would prefer to be able to show up, make and/or sell the lemonade, make our pennies for the day, then get our ice cream or candy and be done with work. Which is also great!

The tricky part here is what to do with those pennies we are earning. What is the best way to make sure that when we are no longer able or willing to show up that we have enough set aside to be able to live our lives?

This is where I find most of us. Most of us spend years and years finding ways to earn a living and improving our hourly or yearly rate of pay. We go from stand to stand, leveraging the expertise we have gained, offering to leverage this for ongoing pay without the duties of ownership [of course, this is much trickier in our current economy, but again, I am simplifying in order to attain some level of comprehension of the concepts of finance].

Another option is to put your pennies into buying a part of another lemonade stand. Perhaps one that is already up and running. However, that stand wants to expand into the next block over, but they need capital to do this.

You will recall that we previously discussed one of your options as being selling to or sharing with another stand your currently held assets (your lemons, sugar, etc …), where you can then derive passive income (you get paid and do not need to work everyday). This is the same concept, except your asset is your pennies. Perhaps you know how great the lemonade is at the stand across the street, and rather than trying to compete or own so much of a portion of the stand that you need to worry about windstorms and vandals, you make arrangements to buy into the stand just enough to participate in their growth and have a minimal amount of ownership. You may or may not receive regular income from the stand in an arrangement such as this, but at a later date you might decide to sell your ownership portion of the stand. That amount might be a lot more than your original investment, it might be a lot less, but hopefully, your pennies will later be whole dollars or tens of whole dollars.

This is essentially what participation in the stock market means.

The risks here are, of course, many. You may never receive your pennies back for a multitude of reasons. Perhaps there is a severe lemon or sugar shortage. Perhaps the water in your hometown becomes polluted and unable to be consumed. Perhaps the stand owners just take your money and stop working altogether. Perhaps they move away and you have no ability to contact them, or even if you do, perhaps they will not continue doing business in the new location. Perhaps they just start making really gross lemonade and they lose all of their customers. Perhaps a new lemonade stand is started up and takes most or all of the customers because it is better in some way …

You can imagine all of the possibilities.

This is understandably why so many of us have so many concerns about investing in the stock market. It is also why finding an advisor to work with is important. Not because an advisor can — or even should —necessarily tell you which companies to invest in, but because that advisor can support you in understanding the risks associated with particular investments. An advisor can direct you in getting to know different ways to invest in lemonade stands and cookie stands and in ways to allocate your pennies to offset those risks.

Ultimately, by participating in the stock market, you are investing your money into companies (lemonade/cookie stands) with the expectation being that you will later have much more than if you placed your money into a bank or under your mattress. Of course, it is not quite as transparent or simple as our examples being used, but this is what it boils down to.

Next, we are going to discuss borrowing and lending as another way to invest. Not by going into debt yourself, but by being the lender (of sorts).

Until next time,

~Jacqui O.✨