When Warren Buffet was first starting out in business as an investor, naturally, he needed funds to invest. Like many small business people, he turned to friends and family to get his stake. Specifically, six close relatives and a college roommate helped Buffet get started.
Among those believing and investing in the young man was Buffet’s Aunt Katie. Over several installments during those early years, Aunt Katie eventually invested about $20,000 with her nephew. In an interview with Fox Business on the occasion of his 50th anniversary in business, Buffet was asked what Aunt Katie’s investment was worth when she passed away,
“Oh, probably a couple of hundred million dollars,” replied Buffet.
Similar to Warren Buffet, Richard Branson was also given an early assist by an older relative, in his case, his mother. Branson says that when he was 16 he wanted to start a magazine to give the youth in Great Britain a voice, especially given the war in Vietnam. The problem was that he had no money and neither did his family.
It was fortuitous that around this time his mother found a bracelet on the street. She turned it into the police as a lost item. Two months later, when it still had not been claimed, the police said it was legally hers to keep. Wanting to support her son’s dream, Branson’s mother sold the bracelet for $200 and gave it to him, which he used to start the magazine (and what would eventually become The Virgin Group).
While the story of family and friends helping entrepreneurs is not an unfamiliar one, it still is interesting. It turns out that more often than not, small business owners turn to their extended tribe to get help with launching and growing their businesses.
This fact is borne out by the latest Bank of America Small Business Owner Report. The Report is a bi-annual survey commissioned by Bank of America that looks at the views and aspirations of small business owners. While this fall’s Small Business Owner Report examined, among other things, economic confidence and hiring trends, it also surveyed the extent to which small business owners rely on friends, family, and community in their businesses.
It turns out that they do, a lot. Consider these interesting statistics from the survey:
- More than half of those surveyed (53%) rely on family to serve important roles in their business (advisers, employees, investors, partners, etc.)
- More than one-third (38%) have received financial gifts or loans from family and/or friends to fund their business
- Nearly two-thirds (62%) report that residents in their community actively shop at small businesses
Sharon Miller, Managing Director and Head of Small Business for Bank of America says,
“For this report we looked closely at the roles that family, friends and communities play in supporting small business owners. The vast majority of entrepreneurs depend on their family for emotional, operational and/or financial assistance, and more than one-third have at some point received financial support from family and/or friends to fund their business . . . while nearly half say the local community plays an important role in the success of their own individual enterprise.”
There is a view out there that entrepreneurs are iconoclastic lone wolves; that they are this unique breed of individual who can buck a trend and head off in an uncharted, unique direction that only he or she can see.
That is a misconception.
What we see from this latest Small Business Owner Report is just the opposite. Oh sure, entrepreneurs have to have a vision – whether it’s creating an investment firm or a student-run magazine or launching a dry cleaner – but the fact is, they can’t and don’t do it alone, and they don’t want to.
Whether it is enlisting relatives to invest in the dream or hiring their kids to clean the shop or recruiting elders to act as advisors, the fact remains that entrepreneurs weave together a rich tapestry of people in order to create businesses that serve us all.
About Steve Strauss
Steven D. Strauss is one of the world's leading experts on small business and is a lawyer, writer, and speaker. The senior small business columnist for USA Today, his Ask an Expert column is one of the most highly-syndicated business columns in the country. He is the best-selling author of 17 books, including his latest, The Small Business Bible, now out in a completely updated third edition. You can listen to his weekly podcast, Small Business Success, visit his new website TheSelfEmployed, and follow him on Twitter. © Steven D. Strauss.
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