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Entrepreneurs and black money

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Since IntoTheMinds has started giving trainings on market research at The Brussels Enterprises Agency, one remark is coming over and over again.

We explain to future entrepreneurs that it’s useful to have a look at competitors’ balance sheets and analyze the figures. If you pick the right competitors (in terms of size for instance) you’ll get a good comparison basis which will allow you to judge whether the industry you want to do business in is really as attractive as you think. For instance, if you expect a 20% margin and all your competitors report a 1% margin chances are high that your calculations are wrong and that you’ve forgotten something.

Among the participants to our workshops, those who have a project in the so-called HoReCa sector (Hotels Restaurants Coffee shops) explain that balance sheets make no sense and cannot be taken as a reference because of all the black money made, and that they even count on black revenues to survive.

My take:

First of all  I find odd to start a business if it’s only to survive. Entrepreneurship research shows however that external factors explain the reasons why people decide to start a business and that a certain number of entrepreneurs are pushed by unemployment and crisis conditions to do so. In that sense I’m ready to accept it.

Second, it’s true that the HoReCa sector is not known for being the most respectful of fiscal laws and the black money is certainly a major source of revenues. Balance sheets must therefore be cautiously analyzed.

What I have more difficulties to accept however is that entrepreneurs purposely count on black money to make a living and take this factor into account when preparing their business plan. Let’s face it: we are still in an economic downturn and the Belgian State is looking for €22 billions; the HoReCa sector is one of the most controlled sectors by the tax authorities; the amounts that tax authorities claim back are increasing every year, which shows that tax inspectors make their job properly and consciously; cash registers with a sniffer system are under discussion to avoid black revenues. Who, under those conditions, can still count on black money? If you want to start a business, here’s my advice. Make sure you have a solid business plan which will allow you to make a decent living without black money. It’s the only real good way to build a sustainable business.

Last but not least, here’s a little story from the last session. One participant told me the following: “black money allows to pay for your holidays”. “the next holidays you take may well be in a penitentiary” I answered.

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Author: Pierre-Nicolas Schwab

Dr. Pierre-Nicolas Schwab is the founder of IntoTheMinds. He specializes in e-commerce, retail and logistics. He is also a research fellow in the marketing department of the Free University of Brussels and acts as a coach for several startups and public organizations. He holds a PhD in Marketing, a MBA in Finance, and a MSc in Chemistry. He can be contacted by email, Linkedin or by phone (+32 486 42 79 42)

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