Dreams, Necessity, and Opportunity

First, we must understand why people like Maria go into business and their mindset.

Why do people go into business?

"The opportunity to build a business has long been an important part of the American Dream." – Janet Yellen, US Secretary of the Treasury, 2014

It's not only aspirations like the 'American Dream' which is where every person has the freedom and opportunity to succeed and attain a better life. People like Maria go into business for various reasons: by choice to follow their passion and live their dream; be the boss; to help other people; achieve financial independence; or make more money; others to make better use of their time; or give them flexibility. Some are by necessity, for example, when people are made redundant and there is a lack of employment opportunities and job security; or to join a family business; or because it's the only way to make a particular living, such as in agriculture.

Each person starting or running a business has an individual personal reason for doing so and it can be a combination of the above factors. This makes their business and its purpose deeply personal and unique. Not understanding this uniqueness to the business owner leads to banks treating all businesses as the same and causes businesses to feel that banks aren't on their side.

MSMEs vary widely in composition and professional level, and when some people think of them, they imagine market traders or retail businesses like La Dulce Traditie. The sector includes doctors and dentists in private practices, accountants, tax consultants, electricians, plumbers, interior designers, artists, and property agents.

The Mindset of MSME Owners

Understanding the mindset of the owners is essential for retail bankers looking to provide effective financial solutions. Business owners often have deeply personal connections to their enterprises, making financial decision-making more complex than in larger organisations. Their approach to business varies significantly, particularly between entrepreneurs and small business managers, influencing their risk tolerance, financial preferences, and engagement with banking services.

Emotional Connection to Their Business

For many business owners, it is more than just a source of income, it is an extension of their identity and family, and this emotional attachment can significantly impact their financial decision-making. Many owners involve family members in operations, sometimes making succession planning complex. Additionally, they may be hesitant to take on external investors or loans due to fear of losing control of their business. Passion often drives their decisions, sometimes leading them to persist with struggling businesses despite financial warning signs. Retail bankers need to approach these clients with empathy and provide financial education to help them separate emotions from business strategy.

Risk-taking and Decision-making

MSME owners typically fall into two categories: entrepreneurs and small business managers, each with distinct approaches to risk and decision-making. Entrepreneurs are driven by growth and innovation, actively seeking new opportunities and taking bold risks. They prioritise scalability over short-term profits and explore alternative financing options such as venture capital or crowdfunding. Their decision-making tends to be fast-paced and sometimes impulsive, as they invest in new markets, technologies, and expansion opportunities.

In contrast, small business managers focus on stability and long-term profitability. They are more risk-averse, preferring predictable revenue streams and relying on traditional banking services such as loans and overdrafts. Their decisions are based on careful financial analysis, and they may hesitate to take on debt, even when growth opportunities arise.

Understanding these differences enables banks to tailor financial solutions effectively. Growth-oriented entrepreneurs benefit from fast-access funding and flexible financing, while risk-averse small business managers require structured financial planning and stability-focused banking products.

How Banks Should Respond

Retail bankers who recognise the diverse mindsets of owners can build stronger relationships and provide more relevant financial solutions. By understanding their emotional connection to their business and risk preferences, banks can move beyond transactional services and become trusted financial advisors. A consultative approach, rather than a purely product sales-driven one, will help banks support them in making informed financial decisions that align with their long-term success.