Everyone seems to have an opinion about the economy whenever a wave of financial hardship arises, but how many people really understand how the economy works? There are some steps each of us can take towards doing our part to creating a healthier economy! The big idea behind improving the status of the economy may be smaller than most may think. Let’s take a close look at how the private sector is the foundation that a global economy is built on, and why our foundation has a crack in it.
How Farmer John and Mike the Mechanic Prosper
The private sector is simply the part of the economy that isn’t state controlled, and is run independently by individuals and businesses for profit. To understand how economy works one must understand the concept of cash flow. I’ll use Farmer John and Mechanic Mike to illustrate healthy localized business to business economy within a private sector.
Meet Farmer John:
· He is a local farmer (surprise!), who grows various organic fruits and vegetables and even livestock
· He has a meat-market and a farmers market in-town
· The cash-flow from his two businesses are used to create a living for his family and investing back into his farm(equipment, maintenance, inventory, employees, and more)
· John gives back to his community by donating regularly to local food pantries and soup kitchens
Meet Mike the Mechanic:
· He does most of the mechanical maintenance around town, but when the workload is backed up he makes referrals to local affiliates within the same industry who offer similar services.
· He has a crew of employees he shares his knowledge with and encourages to gain experience.
· Like farmer John his cash-flow goes towards creating a living for his family (buying food, housing, clothing, etc.) and back into his business (tools, hardware, parts, and more)
· Mike gives back to his community by offering pro-bono maintenance on donation vehicles
John will use the money he earns from his markets to pay Mike to work on his farming equipment, and Mike in turn uses that money earned to purchase food from John’s markets to feed his family. Perhaps instead of exchanging dollars they may exchange goods and services directly, but they affiliate and advertise towards each-others success, because success for one means success for the other.
One day, John gave a good word about Mike’s business to the Cathy’s cab company and now she has signed an exclusive agreement with Mike to have his team maintain all her company’s vehicles. Now Mike, in turn, has offered free maintenance to John as a commission for his valuable referral, which has enabled John to lower prices on his crops for customers of his markets. Are you seeing how localized business to business relationships spread the wealth around the community? The story can go much deeper as you analyze people like John, Mike, and Cathy and follow how their cash flows. Perhaps they eat at local mom and pop restaurants that get their ingredients from the local markets and convenience stores that carry handmade goods from locals all around town. The homes that were built by local contractors and sold by local real estate agents, and on and on!
Money Makes the World Go Round
Though Mike and John are fictional characters for this scenario there are many people who live their lives in a similar fashion, and these entrepreneurs are an asset to us all! Whether you understand economy or not everyone knows that money makes the world go round, but where the cash is flowing is very important to the health of our economy.
In the private sector where John, Mike, and Cathy are contributing to their community’s growth and prosperity, the cash-flow maintains a healthy cycle within the community on a daily basis. Money exchanging hands from one generation to the next for goods, services, and housing that is provided by the community itself. New entrepreneurs are born and hence creating new businesses that create new mutually benefiting relationships with preexisting ones. With each successful generation, business from the small town begins to spread outward creating opportunity growth to neighboring towns/cities. This is where local small business is important for a healthy global economy, and now here comes big business and global corporations.
The private sector is simply the part of the economy that isn’t state controlled, and is run independently by individuals and businesses for profit. To understand how economy works one must understand the concept of cash flow. I’ll use Farmer John and Mechanic Mike to illustrate healthy localized business to business economy within a private sector.
Meet Farmer John:
· He is a local farmer (surprise!), who grows various organic fruits and vegetables and even livestock
· He has a meat-market and a farmers market in-town
· The cash-flow from his two businesses are used to create a living for his family and investing back into his farm(equipment, maintenance, inventory, employees, and more)
· John gives back to his community by donating regularly to local food pantries and soup kitchens
Meet Mike the Mechanic:
· He does most of the mechanical maintenance around town, but when the workload is backed up he makes referrals to local affiliates within the same industry who offer similar services.
· He has a crew of employees he shares his knowledge with and encourages to gain experience.
· Like farmer John his cash-flow goes towards creating a living for his family (buying food, housing, clothing, etc.) and back into his business (tools, hardware, parts, and more)
· Mike gives back to his community by offering pro-bono maintenance on donation vehicles
John will use the money he earns from his markets to pay Mike to work on his farming equipment, and Mike in turn uses that money earned to purchase food from John’s markets to feed his family. Perhaps instead of exchanging dollars they may exchange goods and services directly, but they affiliate and advertise towards each-others success, because success for one means success for the other.
One day, John gave a good word about Mike’s business to the Cathy’s cab company and now she has signed an exclusive agreement with Mike to have his team maintain all her company’s vehicles. Now Mike, in turn, has offered free maintenance to John as a commission for his valuable referral, which has enabled John to lower prices on his crops for customers of his markets. Are you seeing how localized business to business relationships spread the wealth around the community? The story can go much deeper as you analyze people like John, Mike, and Cathy and follow how their cash flows. Perhaps they eat at local mom and pop restaurants that get their ingredients from the local markets and convenience stores that carry handmade goods from locals all around town. The homes that were built by local contractors and sold by local real estate agents, and on and on!
Money Makes the World Go Round
Though Mike and John are fictional characters for this scenario there are many people who live their lives in a similar fashion, and these entrepreneurs are an asset to us all! Whether you understand economy or not everyone knows that money makes the world go round, but where the cash is flowing is very important to the health of our economy.
In the private sector where John, Mike, and Cathy are contributing to their community’s growth and prosperity, the cash-flow maintains a healthy cycle within the community on a daily basis. Money exchanging hands from one generation to the next for goods, services, and housing that is provided by the community itself. New entrepreneurs are born and hence creating new businesses that create new mutually benefiting relationships with preexisting ones. With each successful generation, business from the small town begins to spread outward creating opportunity growth to neighboring towns/cities. This is where local small business is important for a healthy global economy, and now here comes big business and global corporations.
