THE RECIPE FOR ECONOMIC GROWTH
THE RECIPE FOR ECONOMIC GROWTH – BASIL SPRINGER COLUMN TO APPEAR IN THE BARBADOS ADVOCATE’S BUSINESS MONDAY ON 23 MARCH 2009
“His lord said unto him, Well done, good and faithful servant; thou hast been faithful over a few things, I will make thee ruler over many things: enter thou into the joy of thy lord” – Matthew 25:23
Over 20 years ago the Brundtland Report provided a key statement on sustainable development defining it as: “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs”.
The implication here is that for each and every country in the world there must be a sharp focus on economic development as a necessary condition for sustained socio-economic well being of the national populace. The Brundtland Report reminds us that whereas economic development is necessary it is not sufficient and we do have to pay attention to spiritual awareness, environmental protection and social equity as well.
What is economic development? It may be defined as a qualitative measure of progress in an economy. It refers to development and adoption of new technologies in the transition from agricultural through industrial now to knowledge based economies. Suffice it to say that economic development is the driver to which each country must pay specific attention but, at the same time, each country will have its own optimal mix of technologies which drives their individual economy.
To be more specific what is economic growth? It is a positive change in the level of production of goods and services by a country over a certain period of time. How do we achieve economic growth? This time there is a simple answer which is common to all countries, “one successful enterprise after another”. Whether we are dealing with existing enterprises, emerging enterprises or ideas which have the potential to be converted into enterprises, the answer is the same. Economic growth can only be achieved “one successful enterprise after another”. This has to be the national focus but admittedly, in the interest of securing global equity, there may need to be the redistribution of resources towards poorer nations to provide a stimulus for their enterprise development.
My professional mandate is to identify or attract enterprises, primarily in emerging Caribbean nations, which have high growth potential or which have the “DNA of an Elephant”. In practical terms, this means enterprises which have the potential for exponential growth on the global market. Then it is my responsibility, through a shepherding process, to mould and nurture these enterprises so that they achieve the high growth potential and collectively contribute to national economic growth. It is a very fulfilling occupation but unfortunately, like many other things in life, has a number of downside constraints which inhibit the rate of progress at which one would like to realise the upside potential.
One must first determine whether the enterprise has potential for growth and if the achievement of this potential is deemed to be feasible under realistic assumptions. This is done through an interactive process with the entrepreneur that results in a diagnostic business health profile of the enterprise. The system characteristics which must be positive to warrant further attention being given to the enterprise are: (1) a knowledgeable and passionate entrepreneur(s) who is willing to lead the enterprise forward; (2) sales projections which show that the business exhibits potential for exponential growth over a 3-5 year period under realistic assumptions; and (3) costs of producing goods and/or services which are less than the projected sales.
Experience has shown that there is no shortage of innovative passionate entrepreneurs in the Caribbean. Working with these entrepreneurs we have found many businesses that exhibit high growth potential. An experienced shepherd can work with the entrepreneur to contain costs and increase productivity.
A colleague of mine once said: “Show me potential sales, and I will show you potential profits”. To look at it another way, if you do not have sales how can you expect to get profits. However, sales do not guarantee profits. If there are sales one can: identify profitable elements of the enterprise and expand them; work on containing costs and increasing productivity. This strategy will result in increased profits, enterprise expansion and economic growth, one successful enterprise after another.
A projection of potential sales is one thing but achieving the projections is another. The science and practice of marketing will deliver those sales but at a cost. Shepherding will facilitate increased profits but at a cost. These will both contribute to the overhead expense of the business. A comprehensive business plan will inform as to the capital investment required for the business to cover cost of business plan preparation, marketing, shepherding, research & development, physical plant, equipment, training and working capital. We have found that Venture Capital is necessary to complement traditional sources of funding.
The undertaking of a diagnostic health profile of an enterprise followed by a business health maintenance and growth treatment in the form of a business plan is the recommended strategy. The failure to provide adequate, timely and appropriate financial capital to implement the business plan is an exercise in frustration for the entrepreneur and futility for the country.
The message here to the faithful entrepreneurs who have been diligent in implementing the recommendations of the business plan, is that if you are faithful over many little things, then so successful will your business be. The many successful enterprises will redound to the benefit of national economic growth.
(Dr. Basil Springer GCM is Change-Engine Consultant, Caribbean Business
Enterprise Trust Inc. – CBET – Columns are archived at www.cbetmodel.org)