Monday, October 20, 2008

Control of Your Investment

Much has been made in recent months of Wall Street versus Main Street in the fallout from the financial system's woes.  Since that team, a lot of oxygen has been consumed and wasted with opinions on how to fix the system and kvetching about the impact of the fall on personal investments.  However, I have found that active entrepreneurs are impacted very differently by the financial _______ (NOUN -- depending on your alarm level).  

Recent years have supported a widely-held conception that home prices are supposed to appreciate by 10 to 20 percent per year and stock prices always go up.  The common theme in these "investment strategies" is that they are outside of your control.  Those in small business are more accustomed to investments which they can control (at least moreso than the stock market).  

This lies at the heart of the relatively muted--or at least more focused--response of entrepreneurs to the financial crisis (I'll use the common word here for convenience, but you can still insert your Mad Lib entry from above).  In discussions with those in small business, the focus on the financial fallout is on how it will impact their business and that of their customers.  They are also acutely aware of the impact on the inordinately more important, but less discussed credit markets.  The second and third order effects of the fallout on banks can have enormous impacts on small business, especially as banks have centralized into a much more analytically-driven, centralized operation instead of personal and local.  

In the end, entrepreneurs can exert control over their investments through a variety of levers that depend on their business--stealing market share, cutting staff, across-the-board belt-tightening, creative financing with suppliers and customers, etc.  

The question for the would-be entrpreneur is do you consider that more or less comforting?  One huge trade-off is that the small business investment is typically focused on one business--essentially the anti-mutual fund.  In the end, that ability to control can often carry the day and mean the difference for surviving the lean times in order to succeed in the long run.  These times present another lens for the "know thyself" process that can set you up for a successful small business venture.

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