The easiest and safest investment is a term deposit. Lock it in for 5 years and I’ll get 4.85% per year. Start off with $1,000, end up with $1,267 in 5 years time - 100% guaranteed. No risk, but also no reward.
Second easiest investment is an ETF. There’s loads out there but lets say I luck out and pick a good one that gets me 8% pa returns on average for 5 years (VDHG has returned 10.16% pa over 5 years for example) . That $1000 will end up as $1,469 and I’d only need to pay tax on 50% of the $469 thanks to the CGT discount for holding longer than 12 months. The market is volatile however and I could end up losing money.
But lets say I put that $1,000 into my business - The Sizzle. If I spend $1,000 to get 20 paid subscribers (each subscriber generates $51.05/yr of profit for me), over 5 years, accounting for a generous 5% churn each year (it’s more like 2%), I’d have earned $4,619. That’s the equivalent of 35.8% per year.
Even if that $1,000 only gets me 10 paid subscribers (i.e: I spend $100 to get 1 paid subscriber), that $1,000 results in $2,309 after 5 years. The bare minimum number of paid subscribers I’d need to beat a 5 year term deposit is 4. If I can’t get people to sign up for the Sizzle when spending $250 per subscriber (roughly $25 per lead!), something is really wrong.
Investing in The Sizzle is not risk free. What if I spend the $1,000 and nobody subscribes as a result? That’s certainly happened to me in the past with Sizzle promotions - I’m looking at you Mark Zuckerberg! I can’t just sit and wait for the market to pick up later like with an ETF, that money is gone if nobody becomes a paid subscriber as a result of that $1,000 promotion.
But it feels like I should probably set aside some of my savings to spend on The Sizzle in a serious way, rather than simply throwing all of it into my usual 80/20 mix of ETFs and term deposits.