In Support of Entrepreneurial Capitalism

Codiligent is a passionate advocate of entrepreneurship and the economic system that supports business ownership: entrepreneurial capitalism. 

 

Part of the financial reward for taking entrepreneurial risk often comes from converting a non-liquid business into liquid assets via a business sale. Codiligent helps entrepreneurs successfully sell their businesses in order to realize a financial return, but why? What's the motivation?

Codiligent's impetus comes from the recognition of all of the contributions that entrepreneurial capitalism, business owners, and their businesses make to society and  the economy.

Entrepreneur

/ˌäntrəprəˈnər,ˌäntrəprəˈno͝o(ə)r/ 

 

From the French phrase "cell qui entreprend" or

"those who get things done"

Entrepreneurs change the world

Entrepreneurs
change the world . . . 

Sometimes in profound ways. Watch Matt Ridley illustrate how entrepreneurship, trade / exchange, and specialization have improved peoples' standard of living.

. . . through the
miracle of capitalism.

Specialization, the price system, and entrepreneurs cooperating while pursuing their own self-interest, guide the invisible hand of the free market. Economist Milton Friedman illustrates this using the premise that there’s not a single person on the planet who can make a simple number 2 pencil (see video to the left).

What motivates entrepreneurs?

Greed is not usually the primary impetus to form a company. It is empathy, a sense of contribution, and dare I say . . .

 

                                               love.

 

An entrepreneur identifies an unmet want or need, a solution to a problem, or provides a product or service in a more efficient, effective, economical, timely, or elegant way. The entrepreneur then, voluntarily, invests time, energy, effort, ideas, and financial & human capital to bring such a product or service to market with no certainty that it will be financially successful, but with confidence that it will provide value to customers who will voluntarily pay for it.

 

Don't believe me about "love"? Listen to Steve Jobs and Elon Musk talk about entrepreneurship. 

entrepreneurial capitalism dreamstime_xs_2027677.jpg

Entrepreneurial Capitalism
A moral, voluntary, and cooperative system

The voluntary nature of all parties involved, the entrepreneur, investors, employees, and customers, makes entrepreneurial capitalism a more moral and cooperative economic system than a command economy where there isn't free will from all involved and instead central planners decide what to produce, how much to produce, who will work to produce goods or services, and, often, who will buy or consume the goods or services.

Entrepreneur societal contributions

Entrepreneur societal contributions

Innovation

“[E]ntrepreneurs throughout modern economic history…have been disproportionately responsible for truly radical innovations – the airplane, the railroad, the automobile, electric service, the telegraph and telephone, the computer, air conditioning, and so on – that not only fundamentally transformed consumers’ lives, but also became platforms for many other industries that, in combination, have fundamentally changed entire economies.” 

        - Robert Litan and Carl Schramm

Job creation

  • The USA's 30.7 million small businesses employed 47.3% of the private sector workforce in 2019.

  • Small  businesses created 1.8 million net new jobs in 2019.

                           source: small  business administration

Charitable giving

  • 75% of small business owners donate an average of 6% of their profits to charitable organizations annually. 

  • Small businesses donated 250% more than larger businesses to local non-profits and community causes.

                                                            source: SCORE

Are entrepreneurs inherently greedy?

In recent years, entrepreneurial capitalism seems to be under attack, with some critics associating it with exploitation, profits over people, and income inequality. Yet, many of these critics fail to appreciate the risk and investment of the entrepreneur:

  • Most businesses are not cash flow positive for their first 3-4+ years.

  • Many entrepreneurs don't pay themselves a wage during the first few years in business.

  • Many entrepreneurs invest much of their life savings in their business with no guaranty of getting the investment back.

  • Often loans with personal guarantees fund entrepreneurial businesses.

  • It's an unusual small business that isn't adversely financially impacted by dips in the economic cycle, and in lean times wages and other obligations still must be paid.

  • According to the U.S. Bureau of Labor Statistics, about 45% of new businesses fail during their first 5 years.

  • Businesses can be subject to income taxation even when they are cash-flow negative.

  • Entrepreneurship carries considerable liability risk.

Our belief is that entrepreneurial capitalism is the most moral and efficient method of economic organization. 

Milton Friedman on greed