It is wonderful to hear leaders throughout Indian Country talk about economic development and their desire to improve conditions so that individual tribal members may start and sustain their own businesses on and around the reservation. There is much to be done at many levels in order to conjure up a healthy ecosystem. Political leaders have the tools to create systematic changes using policy, commercial codes, and zoning laws. Third parties such as foundations, banks, and community development financial institutions play a role by providing technical assistance or capital to individual members or Tribal government. The injection of capital into the hands of individuals or Sovereigns builds assets, ideally income producing assets, that over time have the effect of diversifying the local economic ecosystem where a dollar circulates multiple times between businesses, speeding up activity, creating jobs, and making communities more resistant to economic downturns. Individuals can do their part by getting an education, participating in technical assistance classes, and finding ways to gain experience in the industry sector they may want to run a business.
It is commonly known one of the greatest barriers to growing a business is access to capital. Capital is other people’s money -and those people looking to lend their money want to know three things:
1) How much money does the borrower want?
2) For what will the money be used?
3) How will the borrower pay me back?
The best way for a borrower to respond is answer these three questions simply utilizing the support of financial information like an income statement and balance sheet. Lenders become very interested in lending when a borrower can concisely walk into a meeting requesting a specific dollar amount, explaining exactly what (s)he will spend the money upon, the change it will cause in their business, and how it increases the net income after operations to meet the lender’s payments -on time and as agreed.
Speaking generally in regards to small business owners, they are good at operations and sometimes get into business for themselves after being an excellent employee for a period of time. Having talent, experience, and passion are an excellent start but to truly build a sustainable enterprise the owner must have a strong understanding of their operating mechanisms. The income statement will show how dollars flow into a business, the dollars it takes to produce a product or cover the cost of ongoing operations and at the end of a period of time whether the business makes money or loses money. If a business makes money- good; then the question is, how much money in exchange for the owner’s time? If the business loses money then something needs to change or the business will die. The balance sheet describes the overall health of the business and is a tool to understand working capital needs, and leverage.
Knowledge to learn this fiscal language takes time and practice. The good news is a business owner does not need to be an expert overnight. They can obtain the management advice immediately by surrounding themselves with professionals like an accountant or a local Native Community Development Financial Institution (or other technical service provider) and then build their skills over time as they work with the professional. Business is not easy but for those whom possess the will and stamina, it can be a very rewarding experience.