Is local business the key to a strong local economy or an income stream for credit card companies?

by Heather Gurewitz
Mendocino WBC Director

Let's look at two scenarios...


1. Pamela opens a retail store. She does not write a business plan, she has no strategy, and she finances most of her expenses with credit cards. Several years later she owes tens of thousands on her credit cards and is still purchasing inventory on credit. Every penny of profit she makes goes directly to paying the interest on her credit card debt. She never has profit to take home because the interest on her credit cards has become so enormous that she can't possibly make enough profit to pay down the debts. She can no longer afford to support any of the other stores in town (unless she uses her personal credit cards) so every dollar spent in her store goes to the suppliers and high interest predatory lenders. Most of her days are devoted to dodging calls from collection agents. She eventually files bankruptcy, closes the store, and gets a job at the burger joint down the street.

2. Pamela opens a retail store. Before doing so, she takes the Building a Better Business Series with West Company and learns how to start and manage a small business. Then, with the assistance of a West Company consultant she writes a business plan that she uses to help her stay on track. Because she has such a great plan she is able to get a micro-loan from an alternative financing organization and she is soon in her own shop. Pamela continues to monitor her financial situation and adjusts her business to the existing conditions. She uses conservative numbers and keeps track of her inventory so that she knows what and how much to buy. She also budgeted a monthly savings amount in case of the tough times. Pamela's prices aren't the lowest, but they are set based on her profit goals and realistic expenses, so that she has a profit that she can take home and use to pay for her personal living expenses, and to support other locally owned stores in the community. She even has enough extra to support community organizations through donations and event contributions. If she continues on this path she expects to hire an employee and create a new job in the community by the end of the next year.

Building our local economy relies on healthy financial practices

Having a healthy business isn't just good for the owner, it's good for the whole community. Many people have a strong desire to "work for themselves." This means building a financial model for your business that works for you. West Company consultants are here to assist entrepreneurs and business owners come up with a strong financial model to strengthen local businesses creating self sufficiency and wealth in our community.