Many people have good business ideas that could be profitable. Why don’t they materialize them? For a number of reasons. Some may not have the ability to transform a good business idea to a good business plan. Others can not set their priorities straight and never find enough time to work on it. These are obstacles related to the potential entrepreneur’s mentality and habits. There is a real obstacle and the most common reason that prevents people from owning profitable businesses, lack of capital. A considerable amount is required not only for the initial investment but also to keep the company running for several months that it will be “in the red”.
Banks do not lend money to those that mostly need it. From their point of view they are right. A company would have to be running for even an angel investor to put some money. There is only one solution to the “lack of capital” problem, co-entrepreneurship. This is an entrepreneur endeavor where instead of one owner, there are many.
An example was given with the high-tech company that needs 6 more employees in addition to the one who has the idea. All required employees for the first 2-3 years become owners. It does not have to be a hightech industry. Something similar can happen with a restaurant or in other labor intensive industries. In the case of the restaurant, employees obviously can’t work at home.
In labor intensive industries, the initial investment is not very big. If it is divided to many owners, it becomes smaller. The bigger part of expenses is paid to salaries. This may sum to a big amount till the company breaks even. A co- entrepreneurship can be in a capital intensive industry but they will have to put a lot of money at the beginning.
Profit is what is left after all costs are added, including salaries. Co-owners will have their salaries as employees and on top of that share profits. During the period that the company is “in the red”, it will be unable to pay full salaries. The rest will be owed to co-owners and it will increase their share in the company. The company may grow and need more workers. The shareholders will decide if they want to hire workers or attract new co-owners that will work in the company as well.
There are a different reasons people may want to be part of a co-entrepreneurship. Some may want to make a lot of money but can’t overcome the “lack of capital” obstacle. Others may just want to have a job. This is a solution to unemployment in countries with a high rate. Others may want to be their own bosses with no one above them. Others may like the common ownership idea. It may be more than one reasons.
Some of these co-entrepreneurial companies may end up being multi-billion dollars corporations. Apple, Microsoft and Facebook started with only a few people. Others will be small or medium size companies. In most countries these make the vast majority of businesses and are the backbone of the economy. Co-entrepreneurial companies can be a large part of an economy. In this way, workers who are also owners get the profits. This will probably decrease income inequality.
Now some may claim that they do not want to become like those who dislike, people who make big profits. First, they do not have to take the profits. It could probably be better to leave them in the company and let it grow. Second, even if they take the profits, they can keep what ever they feel is fair and give the rest to charities and other good causes.
Marx argued that profit is the reason workers are not paid fairly. Salaries are determined in the labor markets by demand and supply mechanism. It is not one market but several. Bay Area’s market for computer programmers is different than the market for gardeners. London’s market for computer programmers is different than Bay Area’s.
Extensive co-entrepreneurship will affect labor market. Supply of employees will decrease because many will be working at their own companies. This will bring salaries up. If a government does not like that, they would have to import workers from abroad. This will increase supply and have a countereffect.