How entrepreneurs can create and preserve wealth
What percentage of entrepreneurs who start businesses in Jamaica become wealthy from their enterprise?
It’s a question that needs robust research and discussion, particularly given the weight the country is placing on entrepreneurship as a key driver of economic growth, and the Government’s ongoing push for new entrepreneurs to take bold risks and start ‘high-growth potential’ businesses.
In fact, our national MSME and Entrepreneurship Policy, which was launched just last year, emphasises that micro, small and medium-size enterprises are essential to the economy, not just because they create employment, but also because they facilitate wealth creation and form the backbone for private-sector growth.
Aspiring entrepreneurs and policymakers need to know what the true odds are when it comes to winning and losing big in business so each can make better informed decisions.
That said, most entrepreneurs I know would tell you that creating wealth, that is, an abundance of assets of worth, has been an elusive dream.
The reason? Many businesses operate for years on paltry profits or none at all, while some which make significant profits don’t
sustain it. This is often blamed on the small and unstable economy, high taxes, weak demand, government bureaucracy, high-interest loans and other external factors.
It’s true, these are major impediments to wealth creation but there are other internal
factors which are also responsible. It’s why I asked some of our most experienced and successful business leaders for insights on entrepreneurship and wealth.
BARRIERS TO WEALTH
One obstacle to creating wealth is going into a business with
limited profit potential and/or not seeking viable external markets.
According to Island Grill CEO Thalia Lyn “not undertaking research before embarking on, and during the course of any business operation is a grave error”.
She recommends investing in research and planning first and foremost.
Omar Azan, CEO of Boss Furniture, is encouraging entrepreneurs, particularly manufacturers, to seek external markets.
“If I were relying on the local market alone, I would’ve had to scale down operations long ago. I’ve been able to find new
markets, especially within Caricom,” he said.
He says products that do well in Jamaica are usually successfully received in other Caricom countries, particularly because of preferential duties.
His strategy to enter new
markets involved Internet research to identify potential customers, then sending them product photos and price lists. Once he got serious interest he would travel to meet prospects and send them furniture samples. “Yes, it will cost you a few hundred US dollars to fly there
and ship samples, but I’ve never travelled overseas and not come back with an order,” he said.
Another wealth blunder is pursuing a lavish lifestyle. Manpower and Maintenance Services CEO Audrey Hinchcliffe said too many entrepreneurs try to make their lifestyle a public show of success, and this often cannot be sustained from the company’s revenue.
“The type of vehicle, housing, travelling, entertaining, and partying – this is a false show of having ‘arrived’,” she said.
Thalia Lyn agrees, saying spending money on non-essentials will prevent entrepreneurs from creating personal wealth.
Azan wants entrepreneurs to resist the urge to ‘impress’, noting that “this is a time of wealth preservation, not necessarily wealth creation. Many companies are now in survival mode, so this is not the time to buy the latest cellphone, designer wear or luxury vehicles.”
When asked whether it is wise for entrepreneurs to invest 100 per cent of their funds in the business, they urged caution. Hinchcliffe says that decision depends on the type of business and whether there will be quick, positive cash flow from which to pay yourself or cover living expenses.
“Consider how your family’s life would be impacted if the business fails, investing 100 per cent of your resources is high risk,” she noted. Thalia Lyn admits she took big risks, but had support from her husband.
“I invested 100 per cent of my funds, plus borrowed money and had many sleepless months when interest rates skyrocketed. Luckily my husband was gainfully employed as a pilot. So if you can’t take the stress, don’t! It’s not prudent management of your funds. You can take that risk when you’re young and can bounce back quickly, but it can also ruin you.”
So what are their top tips for wealth creation and preservation? Here’s what they recommend:
1. Think long-term – set realistic goals and work towards them at a moderate pace, as rapid growth puts pressure on resources and cash management;
2. Create a culture of savings and prudent investment. Get advice from tried and proven investment houses and get
3. Live within your means; control debt; practise corporate social responsibility and giving back to society. It’s good for business and builds loyalty.
Dave Ramsey’s Journey to Financial Peace is grounded in sound financial principles:
1. Start an emergency fund for those unexpected events in life you can’t plan for.
2. Pay down your debts
3. Have three to six months in expenses saved
4. Invest 15 per cent of household income into tax-friendly
5. Create a college fund for your children.
6. Try to pay off your house early.
7. Give some wealth away.
1. Emotional intelligence and goodwill are the best assets. In business, you’re selling yourself. Don’t be bashful, and differentiate yourself as a leader. Getting involved in community/philanthropic service will redound a hundred fold;
2. Leave nothing to chance – research, learning, networking, business plan, focus, perseverance;
3. Continue to take advantage of business opportunities, diversify and never become bling-obsessed or so arrogant that you don’t listen anymore or take advice.
Lyn also sent me this quote from her late younger brother, celebrated entrepreneur and philanthropist Raymond Chang: “At the end of the day, a good life is not measured by the amount of wealth you have accumulated. It is evaluated according to the
contributions you have made to society – of yourself first and of your resources next.”
n Yaneek Page is an entrepreneur and trainer in entrepreneurship and workforce innovation. Email firstname.lastname@example.org; Twitter: @yaneekpage; Website: yaneekpage.com.