Yesterday Goldman Sachs announced it with the help of its largest shareholder; Warren Buffet was going to make available $200 million to assist small business owners and managers gain valuable business education. There were numerous news accounts of the gesture, many calling the idea a PR stunt. My feeling is very simple. Any money that flows down to small businesses to help their owners get critical business education is good. I don’t care who it comes from.
Goldman Sachs through its foundation will donate an additional $50 million to help fund Community Development Loan Funds (CDFIs). CDFIs have been the unsung lending heros of this recession. When traditional banks have had their pocketbook closed, CDFI lenders in their local communities have been making loans based on merit and impact to their local community.
I have written many times that most small business owners need to have ongoing education to succeed. Running a small business successfully requires so many skills and talents it is the rare seasoned owner who can’t benefit from education.
Under the Goldman Sach’s grant for community education, training will be provided by existing community colleges which is the best source for the type of business education business owners need.
Sadly, in my 18 years of banking experience, I can only name a handful of business owners I loaned money to who could really read and use their financial statements to manage their business. In nearly every case they were CPAs and had professional training.
A typical example is a business owner I met last night at a business function. He is a brilliant electrical engineer with a high level of expertise in the next generation of cellular radio design. He has decided to launch his own consulting company to provide larger companies very specific talent that will be billed on a time and expenses basis. He told me he had a stack of qualified employees’ resumes as thick as a telephone book. I asked him a few questions about his general business background. He has none. I asked him how much he was going to charge his customers for the most talented engineers he intended to hire. His answer was $175 an hour. I did a little math for him. To grow to the size of business he anticipated with the number of employees he expects to have, he will easily have over $500,000 in accounts receivable. He didn’t know how he was going to finance it. I asked him what his burdened cost of labor was. Again he couldn’t answer the question. Like many business owners this gentleman is good at what he does, but he doesn’t know what he doesn’t know about running a business.
I do volunteer instructing at
Clearly I am happy Goldman Sachs is investing through its foundation in business owner education. Even though Warren Buffett through Brookshire Hathaway isn’t putting money into the endeavor, his trusted name may get more deserving business owners to take advantage of the opportunity to become stronger business people and leaders of their companies.