Friday, October 16, 2015

Investing in Others' Dreams

I recently have had the opportunity to invest in a small startup restaurant in my home town, the owner being a high school friend/acquaintance from years ago.  He is only looking for a little startup capital - rent and labor in our town is so cheap; the downtown building he wants to lease/purchase will cost something like $700/month and it is in the heart of our town of 20,000 people.  Our downtown used to be more vibrant.  Or, at least, that's how I remember it growing up.  We have an old courthouse in the center of town that gives the town character and a welcoming feel, our Fourth of July parade is packed every year, we have nice clean lakes that are great for boating and fishing, and the downtown area has potential if the right people were involved.  The compassionate, nostalgic part of me wants to give him his money and hope he succeeds.  The logical, business side of me says, "Restaurants fail.  Bad investment" - even if it is a relatively small sum.


I've reviewed his numbers and questioned him on his breakdown of expenses - and, I'll admit, he's done a good job.  The projected income statement is thorough and well thought through with a 5 year growth plan.  He'd be willing to give me a 20% stake in the future profits for a small sum to help get him started.  That's what intrigues me from a business standpoint.  Small town restaurants can do well; there is little competition and it is not difficult to stand out.  Surrounded by farmers makes fresh, organic ingredients accessible and, again, things are cheap.  In a large city, rent is high, competition is fierce, and it is difficult to differentiate yourself from others.  However, more affluent people live within a city than most small towns.  Would the local people go to a place that serves grass fed beef and good craft beer? 

On the other hand, he is excited.  This would be about 80% investment in the person and 20% investment in the business with hopes of getting something out of it.  He's passionate about his plan and, besides a little seed money, he really has nothing to lose.  The experience is there; he's been in the industry ever since he started working and worked his way up starting as a dishwasher.  I respect that.

I hate to see how my town has deteriorated throughout the years with few businesses moving in to replace those whose owner's have retired or moved on.  I wish I could do more to help.  Hope springs eternal and I have always been optimistic (maybe to a fault) that my town can turn things around.  One of my main goals has been to leave this world a better place than when I entered it.  A small investment like this would seem a step, albeit a small one, in the right direction. 

I'm still not sure of what I'll choose to do.  Making an investment based on good intention is a bit out of character for me as I tend to side with logic and reason over benevolence and altruism  There are plenty of better things, financially speaking, to do with that money, but the opportunity yanks at the heartstrings.  While investing in the restaurant may result in a small financial loss, it may very well turn out to be profitable for the soul!

What would you do?  Have you ever invested in a person to help them follow their dreams?  When torn between a possible financial loss and a good deed, what way do you lean?

6 comments:

  1. An interesting decision... we live in a small town, and also see that restaurants can thrive more easily here, even with mediocre food and service, compared to the city. BUT, we have a thriving tourist industry here, and I don't know if that's true in your home town. Let us know what you decide!

    ReplyDelete
  2. That ournextlife. I've recently come across your site and I really like it.

    Anyway, I plan on going for it. I WISH we had more tourist traffic. It's not nonexistent, but it's not regular, either. Our town has a good central location to some attractions, but mostly during summer and fall. I just think the bang for my buck is too good to pass up if it does pan out. If it doesn't . . . well, at least I can feel good about helping someone else go after a dream.

    Thanks for reading!

    ReplyDelete
  3. Hey DP, I've been enjoying reading through your posts. So,now that you've come to a decision will you provide updates? I'd like to hear how things progress. I hope the restaurant flourishes and that it helps to revitalize your town.

    ReplyDelete
  4. Hi Mr. Groovy, thanks for stopping by. I certainly will provide updates; it's moving along right now, but like most things of this nature, it's moving slowly. I'll try to put up a post with an update at some point when it's a little further along.

    -DP

    ReplyDelete
  5. You might know the names of professionals you can trust and you'll have an intimate understanding of what the cost of living is for that area and how to make things more affordable.guarantor loans

    ReplyDelete
  6. On the off chance that you need to tinker with putting resources into land without a business design, at that point that is awesome Camori Investments

    ReplyDelete