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Poverty and Entrepreneurship in Developed Economies

Michael H. Morris, Susana C. Santos and Xaver Neumeyer

While extensively explored as a solution to poverty at the base of the pyramid, this is the first in-depth examination of entrepreneurship and the poor within advanced economies. The authors explore the underlying nature of poverty and draw implications for new venture creation. Entrepreneurship is presented as a source of empowerment that represents an alternative pathway out of poverty.
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Chapter 12: Making sense of the economics

Michael H. Morris, Susana C. Santos and Xaver Neumeyer

Extract

The role of profit as a signpost and source of livelihood for the low-income entrepreneur are reviewed. The underlying logic of profit in start-up ventures is examined. A simple framework is introduced to capture the entrepreneur’s profit model. It includes margins, volumes, operating leverage and revenue capture. The model indicates the relative attractiveness of the venture. It helps illustrate why low-income entrepreneurs struggle to make much money from their ventures, and rarely get rich. The model also serves as a diagnostic tool that the entrepreneur can use to enhance the profit potential of the business. Specific ways in which the profit potential of low-income entrepreneurs can be increased are identified.

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