Do We Really Understand The Economy?
Herein lies the problem.
If we are really going to have a healthy national environment for starting and growing businesses we seriously have to address the educational system when it comes to
• the economy,
• our financial institutions, and
• how they actually work.
Here is a FAQ I just found on the Small Business Resource Center on Reuters.
Question: How can I raise money for my business?
Answer: The main ways to raise money are borrowing it from
• a friend,
• a family member,
• or a commercial lender,
or selling ownership interests (equity) in your business.
What’s wrong with this picture?
I understand that the question is not “How can I raise money to start my business?” but I guarantee you some people will read it that way.
To send people to a bank for money to start a business, especially if they think they are going to get a business loan, is just, to put it nicely, uninformed.
Let’s make it personal and think about our own money. Any financial advising tool, framework, etc. will have us put our “safe” money in the bank – our checking accounts, savings accounts, CDs, etc. How does the profile of the supply of this money match with banks lending to start-ups? Short FAQ answer – it doesn’t.
(I am personally a strong believer in individual [and networked] angel investing for start-ups, but that is a very different pot of anyone’s personal money.)
My question is about how many of our business professionals – attorneys (the authors of the answer above), accountants, bankers, and definitely media and policy makers – really understand how this system works.
This understanding goes beyond teaching entrepreneurship. It means revisiting all the academic business disciplines to incorporate (that’s a joke) content on small and medium size businesses.
These enterprises don’t run the same as big businesses in many ways, and they don’t necessarily want to run the way big businesses run.
And let’s remember, there are a lot, lot more of us – small and medium size businesses (99%) – than them – the big ones (less than 1%).
Just a thought.
President’s Distinguished Professor of Entrepreneurship