What is the best way to invest $10,000?
May 16, 2013 4:37 PM   Subscribe

My best friend has $10,000 to invest and she wants to open up a business selling shoes for people with wide feet that are greater than the sizes that are usually available in stores (one of her friends has this as a great need) or an online store that sells adult toys. Are any of these worthy endeavors for me and her to pursue? If not, what is the best way to make money with a $10,000 investment?
posted by antgly to Work & Money (19 answers total) 5 users marked this as a favorite
First result on searching for "cost for opening a store" yields this link which indicated a startup cost of $31,000 in 2011.
posted by aroberge at 4:43 PM on May 16, 2013

Do either you or your friend have any experience in retail or in owning a small business?
posted by scody at 4:45 PM on May 16, 2013 [5 favorites]

Put it in an index fund, and keep saving. When you can start that shoe store with 10% of your savings, then branch out. In the mean time, learn about what it takes to effectively run a shoe store. Learn enough that when you propose it to other people, you can make a good enough argument for that store that they'll be willing to match your investment in it.

If you're going to do retail on your own, it wouldn't hurt to work retail for a big chain and work your way up to a managerial position before you branch out on your own.

And for all that's holy, don't try to break into the online adult toy store business. That market is very well served already. Adam & Eve has been established there for 4 decades now. Good Vibrations has had some serious struggles trying to stay there. Toys from Babeland is there too. It's hard to imagine that you have any pitch that could be better than what these entrenched businesses are already doing.
posted by straw at 4:45 PM on May 16, 2013 [2 favorites]

Where is she going to get these extra-wide shoes? Selling to a niche market is very hard--there's just not many customers--she's better off selling shoes to everyone, and special ordering for extra-wide footed customers.
posted by Ideefixe at 4:47 PM on May 16, 2013

Here's DealExtreme.com's www.intimategadgets.com site -- I can get a sex toy for a few dollars, shipping included; huge selection. $10k is likely not going to build a boutique retailer that people will seek out for better toys. Shoe shopping is also pretty well established on the internet at this point. I don't think there's a way to parlay $10k into a new business doing things loads of businesses already do and do well.
posted by kmennie at 4:49 PM on May 16, 2013 [2 favorites]

If you want a guaranteed way to make money, starting your own business is a bad idea. Most new businesses fail. It can also very stressful and time-consuming.

However, if you are willing to work hard and learn a lot and try something else if your first venture fails, then spending $10,000 to start your own business may be a fine investment in yourself: even if you don't succeed financially, you'll have an understanding of business and industry that's hard to get any other way. So in part you can consider it "tuition" to a very rigorous education. It might be worth it just for that, depending on what you will do with that education when you've got it.
posted by mbrubeck at 4:59 PM on May 16, 2013 [2 favorites]

how much risk are you willing to take? do you have any other assets? a house, an emergency fund?
posted by cupcake1337 at 5:10 PM on May 16, 2013

You friend would benefit by contacting a group like SCORE, seeking out a Small Business Development Center for advice or asking local universities if they do class projects examining business models. These types of organizations help new entrepreneurs develop solid business models and understand the costs and risks associated with their dreams -- and often this help is available for free.

Assuming your friend is not in Oregon, and thus won't be directly competing with this business, I bet the folks at Jay's Wide Shoes might be willing to talk to her about the prospects that specific niche faces.

As a wide-footed lady, I'd be thrilled if a store like this opened in my neck of the woods. But shoe stores that succeed at targeting people with specialized needs really sink or swim based on the quality of their service and the knowledge of their employees, so please keep this in mind.
posted by croutonsupafreak at 5:19 PM on May 16, 2013 [2 favorites]

I know crap about money, but I just saw a statement about a 100,000 account that made $1,500 in ONE MONTH from being in an index fund. Follow the INDEX people's advice.
posted by Marie Mon Dieu at 6:11 PM on May 16, 2013 [1 favorite]

I know crap about money, but I just saw a statement about a 100,000 account that made $1,500 in ONE MONTH from being in an index fund. Follow the INDEX people's advice.

The stock market has been doing very well recently. It does not always do well. It is possible to lose money by investing in the stock market, and index funds are not generally good vehicles for short-term investing.

Historically, they have been very good long-term investments.
posted by mr_roboto at 7:14 PM on May 16, 2013 [1 favorite]

If $10,000 is a lot of money to you, you should put it in a savings account as a liquid emergency fund. People who think about "starting a business" on a scale that would support even one person would not consider $10k a significant sum. Think about it. People are willing to invest a couple of hundred grand in a college degree to be able to earn a middle class living in the future. If there was any predictable way to get the same result, or anything close to it, for a $10k investment, no one would bother going to school past the 9th grade. Some small number of people may parlay a penny ante investment into a livable income, but it's unlikely to be you trying to compete out of your league (you can buy any width shoe you want online, easily, for example).

But if 10k is more than you are used to having at one time the first and most prudent use is as an emergency fund, which is step one in any financial planning exercise. Step 2 is to use it toward some form of education, perhaps in management.

You can barely get a strong commercial website built for 10k, and that's before you need to buy inventory or pay workers or taxes.

Now if it's play money, go wild. Sell extra wide sex toys.
posted by spitbull at 7:33 PM on May 16, 2013 [3 favorites]

I'd highly recommend your friend read the $100 Startup by Chris Guillebeau if she's interested in learning about starting a business, whether she has $10,000 to spend or not.
posted by juliebug at 8:02 PM on May 16, 2013 [3 favorites]

or an online store that sells adult toys

I have friends who have done this as a side gig, and reckon it's great. One of them is a graphic designer, and the other in IT, so the web-site side is covered. The logistics are apparently not too difficult. Does your friend have skills like these?
posted by pompomtom at 10:15 PM on May 16, 2013

It's extremely easy to lose lots of money starting a business, even if you have a lot of experience. Just look at how many restaurants open and close every year. If you don't have a lot of capital and experience, what you should do is test the waters in a low risk way first. For example, if you have some products that you think people might like, try to sell them first on eBay, Amazon, Etsy, or whatever, and see how the response is. Take one small step at a time, otherwise you will be at high risk of losing your shirt. Be realistic and don't deceive yourself into thinking you are smarter or luckier than all those other people whose businesses failed. You may be smarter or luckier, but go one step at a time to be sure you are.
posted by Dansaman at 10:18 PM on May 16, 2013

A professional website can easily cost $10,000, let alone staffing an order center and managing the other aspects.

I can say that the best place I used for wide shoes (I'm an 11½EEE myself) closed down within the last year -- but then they never mastered the web or had a proper social media presence. They were a US-based shoe factory, though, and I don't imagine your friend is proposing actually making the shoes, right? Because that's an investment of like $10-25 million.

So your friend needs to think about what she brings to this shoe-buying experience. An iPhone app that measures your shoe size? Crazy but not impossible. /lazyweb! A flash animation that lets you see a shoe in 3D and rotate it, not just front and side views? What about showing it with various samples of legwear (women might love this)? A way to create a mold for your foot and have your company test it on shoes before shipping? Because just googling your size and the few brands that do sell that size isn't exactly hard (although sifting the results may be).
posted by dhartung at 1:22 AM on May 17, 2013

And then find a way to source those shoes that is not available to anyone else with a computer.

You haven't got close to enough capital to start a business selling shoes. Maybe you could sell pretty shoelaces. On Etsy. But you can't compete with a fraction of the capital of your competitors. Zappos sells shoes in most widths, I have no idea where the scarcity claim comes from. I buy wide boots and have never had trouble finding them online. Maybe most physical shoe stores have limited selection. But who goes to shoe stores? And 10k is a month or two of rent on a modest retail space where there is any traffic.

I know someone who started a clothing retail web business, actually two. She raised several million in startup capital. And she's a small fish still.
posted by spitbull at 4:48 AM on May 17, 2013

$10,000 to open a business isn't enough. You're way under capitalized.

Wanting something, and having the knowledge to make it happen are two VERY different things.

Do some research first, before spending a dime.

For example, Zappos and Nordstrom both have a reputation for having shoes in weird sizes. In what way are they NOT serving that market today? (Answer, they ARE serving it and serving it well.)

One issue is manufacturers. There are only so many manufacturers MAKING shoes in these sizes. If there's a finite supply, then that's all there is to sell. You could have the best website in the world, but if there are only so many shoes...that's it.

You don't know enough and you haven't researched enough to even begin to THINK about opening a business.

If you move forward today, with the little knowledge you have, your friend will be throwing her $10,000 in the toilet.

Here's what I'd do. First, I'd get a job with an on-line retailer. See what it's all about. See what the profit margins are. Understand how much cash you'll need to burn through before you can expect to see a profit.

While having an on-line store sounds like fun, it's a lot more than finding cute shoes, taking pictures of them and then sending them out to buyers. It's a LOT more.

Take the $10,000. Use some of it to go on a nice vacation. Save the rest for a rainy day.

Here's an idea. If your friend has a passion for wide-width shoes, she should start a blog about them. Something along the lines of Fatchic.net, this way she can get to know and understand her product and begin to make contacts in that arena. She may find that once she has a blog following, that she has a customer list as well as the contacts necessary, and at that juncture, she might be able to monitize it.

If your friend can't get folks to follow her blog, there's no way she can get folks to buy from her.
posted by Ruthless Bunny at 6:16 AM on May 17, 2013 [1 favorite]

I have met at least half a dozen people who started successful businesses with less than $10,000, so don't let yourself be fully persuaded by the haters. I've also met a lot more people who started successful businesses with much more money, and even more people whose businesses failed, however.

The successful ones fall into two camps:
1. Start small and get lucky. These people found a very small, unexploited niche, and usually started out by selling to it on a very amateur basis, generally with no expectation of making more than a few hundred/few thousand bucks a year. Imagine keeping inventory in a garage and dealing with shipments and marketing after working a full day at a day job. Only when sales had grown organically over a period of many years did these businesses become profitable endeavors.

2. Plan and research everything. These people also found a small, unexploited niche, but ramped up sales and growth more quickly because they had a deep understanding of the market, a business and marketing plan vetted by experienced professionals, and previous management experience or access to advice from people who've run start-ups in the past.
posted by croutonsupafreak at 8:08 AM on May 17, 2013 [1 favorite]

I dispute that any of the advice above comes from a place of "hate," OP. It comes from a place of concern that your friend not waste that money on an unworkable plan. Both ideas you suggested would seem not so workable given that they involve retail sales of commodity items already well covered by big and small competitors alike. Surely there is no niche market for wide shoes that is underserved. There have been companies in that "niche" for a century. They are irrelevant now because the big online marketers can deliver anything by using factory-to-consumer shipping (how I get my special boots from a big on line western wear company, in fact). You can't compete with them on price as a small capital startup. And the move from brick and mortar to online means you have to compete with them on price. You can't sell service. Someone will be happy to take your service and then buy the product at the lowest price, from Zappos most likely.

Sex toys? Surely there are no niche markets for sex toys that no one has thought of. Be real. Talk about a commodity item.

It can be done. I said as much above. I too know someone who started with less and built something solid. In fact, if you really want to start a business, buy a used van and start doing small moving and yard waste jobs around town. It works. It's one of the few ways you can buy yourself a small business for ten grand, and of course you have to market like crazy, and you're selling labor and not just renting your van out.
posted by spitbull at 10:55 AM on May 17, 2013

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