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Good business easily trumps property investment: Clement

Photo courtesy of Alan Cleaver on Flickr

Photo courtesy of Alan Cleaver on Flickr

The New Zealand Herald’s Diana Clement encourages Kiwis to consider opening their own business rather than investing in property if they want a spectacular return on investment.

A good business will give you 25-50% return on investment per year if it’s successful, which, in Clement’s words, “blows property investment out of the water, according to those who have been successful.”

There are 460,000 small businesses in New Zealand, according to the Ministry of Business, Innovation & Employment (MBIE) and every year thousands of Kiwis start more businesses. Not all will succeed, of course, but Kiwis who start a business often wish they’d done it years ago, Clement says.

Returns vary hugely, with a basic home-services franchise costing $30,000 and returning a similar amount to a franchisee each year, says David Newport of Switch Business. A $500,000 independent business is likely to return $150,000 to $250,000 to the owner who works in the business full-time with one or two employees. A $1 million business could return $350,000 to $500,000 a year. That 35-50% return, he points out, makes the 9-10% that some property investors struggle to make appear meagre.

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