Capitalism depends on entrepreneurs. We incrementally contribute to the economy by borrowing money, and then doing something that adds value. If we are meeting a desire of consumers of our services and products sales will occur. From the difference between costs and revenue theIRS (I like to run those two words together to remind me it’s “theirs”) steps in for their share. What’s left is ours to spend or reinvest.
Sounds simple, doesn’t it? In fact, most entrepreneurs start out something like I did. I bought a used Lincoln Continental (looked like an inflated jelly bean). It had a huge trunk. I got some plastic bins from Target with space for files. This was long before there was a cloud for data storage. I would make my scheduling calls in the evening to confirm the next day’s schedule. An answering service took calls during the day as there was no voicemail yet. During the day, with a pile of dimes (yes, the pay phone was still only a dime back then) I would check in with the answering service or return calls when not in meetings. All my files were in the trunk so it was easy to access information. Today, a few clicks of a mouse provide the same information and Lyft or Uber can run you around town while you use your cell phone.
My professional life started out with me being the Lone Ranger. Riding in on my white horse, I provided solutions to their problems. Pretty quickly, I saw that I needed services that a Tonto could provide. Today, how many Tonto’s do you use? How many people do you “employ”?
What digital tools or hardware do you use? How did they get to you? Who built them? Who supplied the parts and paid people to assemble them? All of those entrepreneurs contributing to the economy is called the multiplier effect. Each time you obtain a good or service, you are putting someone else to work.
For every dollar we spend, many more dollars are created because of the people noted above who directly or indirectly provide us a service. There is a whole posse of people, most of whom we never see or know, who benefit from the dollars we spend or invest in growing our business.
Sadly, many young people are anti-business. Someone had to come up with the idea for their favorite coffee shop, source and obtain the beans, buy a roaster and espresso machines, rent or buy a location, furnish it with chairs and equipment, employ their favorite baristas, advertise their services or at a minimum, pay for a sign. They might be paying a music download service for your pleasure while there and they are certainly paying for the energy to heat and cool the space. Someone is making and packaging the pastries. Maybe someone else delivers the fresh milk and cream. They may have a cleaning service and a linen service for aprons. They probably employ a bookkeeper to account for revenue and expenses and remit the appropriate sales tax and employee benefits. Someone is handling the payroll. For the larger firms, there’s technology behind the rewards program and mobile ordering and payment options. Have you ever stopped to think about how much goes into that latte?
Today, our increasing regulatory environment in Washington, DC makes it harder for an entrepreneur to go to a community banker with an idea and ask for a starter “Lone Ranger” loan to begin a business. Maybe if your family is financially blessed you may be able to beg, borrow, or cajole them into investing in your BIG idea. There are some online funding options for start-ups but they can create commitments that are hard to fulfill in the time frame of the investors’ expectations. Be careful if you choose this route.
Capitalism creates entrepreneurs. How many budding entrepreneurs are willing to sacrifice today’s comforts for tomorrow’s success in spite of the roadblocks and hurdles?