Risky Business
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How to Deal with Slowing Payments in a Recessionary Economy
Continue reading… 1 CommentThe Wall Street Journal reports today about the growing problem of slow payments for small businesses.
Back in May I wrote about some concrete ways that small businesses can improve their debt collection methods. This can be important to keep up one's cash flow, which really can be the lifeblood for small businesses.
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Though Economy Contracts, Small-Business Owners Stay Optimistic
Continue reading… 4 CommentsThe news that GDP contracted in the third quarter vindicates people saying that the U.S. economy is going into a recession. Of course, you need two consecutive quarters of negative growth to be in an official recession, but it seems likely that more contractions are coming.
But take a look out your window. Notice that people are not lined up in the street for bread. War, Famine, Pestilence, and Death have not mounted their horses. I'm not trying to make light of a situation that is dire for many people, but just to say—for most small businesspeople in this country, life will go on as normal.
Don't just take my word for it. Intuit Inc. released a survey yesterday that found small-business owners are "optimistic but realistic" about the state of the economy. A strong 82 percent of small-business owners still see opportunities for their businesses, and 64 percent expect their business to grow. The survey is from the second week of October, so it definitely wasn't taken before the worst of this crisis (or at least what we hope was the worst).
While both of those numbers were lower than the comparable figures six months ago, they're still stronger than perhaps the conventional wisdom about a recession would have it.
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Election 2008: Where Do Small Businesses Stand?
Continue reading… 4 CommentsBoth parties in this election want to present themselves as the party of small business. But we rarely hear about the opposite perspective—what do small-business owners think about the issues of their political parties? The American Express OPEN Small Business Monitor has compiled a fact sheet based on its survey of small-business owners:
Issues that will have the most influence on your vote in the elections this November Democratic Republican Independent No Party Overall Economy 39% 37% 43% 36% 38% Tax policy 8% 24% 14% 31% 18% Energy policy 10% 14% 12% 16% 12% Healthcare 21% 7% 8% 3% 11% Iraq 15% 5% 7% 9% 9% Immigration 2% 6% 11% 4% 5% None of the above 4% 5% 4% 3% 4% -
John McCain Campaign: Obama Is a Big Spender, but...
Continue reading… 16 CommentsJohn McCain gave up on Michigan a while back. Maybe that explains why he's allowed Carly Fiorina, one of his top economic advisers, to make the statement she made last night that cuts against his previous open hand extended to the Detroit automakers:
"I don't think the government can rescue the industry," Carly Fiorina, former chief executive of Hewlett-Packard Corp, told Reuters at an event in suburban Detroit.
"Whatever the government does, it should not take away the fundamentals of risk-taking. Sometimes it leads to rewards and sometimes consequences, downside," she said. "In other words, the auto industry cannot be saved from its own bad bets."
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4 Things Entrepreneurs Do in College
Continue reading… 3 CommentsWhat's the education of an entrepreneur? That is a question I have explored a few times in the past. Chad Moutray of the SBA Office of Advocacy has just written an interesting paper that looks at the empirical data on what college means for self-employed people.
According to the study, if you did one or more of the following in college, you are more likely to be working for yourself as an entrepreneur than working for somebody else:
- majored in something outside of the hard sciences (engineering, math, chemistry, biology, etc.);
- tended to be a "jack-of-all-trades"—taking many different courses, but not mastering any;
- did not go on to graduate school;
- had a lower GPA than your peers who ended up working in the nonprofit and government sectors.
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What the Financial Crisis Means for Small Businesses
Continue reading… 1 CommentIt's going to be interesting to see how the surveys of small businesses fare when we see results AFTER the financial tumult of late September and early October. But we're still trying to figure out what the environment was like before that. The United States Federation of Small Businesses released a survey today that was done in August, saying that 95 percent of small-business people feel that they have been challenged. It does not appear to be online anywhere yet. What are some of the specific challenges?
- 23 percent of respondents have cut staff
- 36 percent of respondents have decreased business travel
- 36 percent of respondents have minimized marketing efforts
- 29 percent of respondents have put a freeze on bonuses and raises
How will these results change after the recent developments? One thing to note: Only about 180 people participated in this survey.
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Solo 401(k) Limits Increased
Continue reading… 4 CommentsTons of self-employed people aren't saving for their retirement as they could be because they don't think they're able to start a 401(k). But solo 401(k)'s are quite possible, as I have written about. They just got more advantageous:
For self-employed individuals with a simplified employee pension—a SEP plan—or a solo 401(k) designed for independent contractors such as consultants or real estate agents and sole proprietors, the contribution limit increases from $46,000 to $49,000.
I wrote in my previous article about how the annual $46,000 allowed for a solo 401(k) could drop someone a tax bracket. It's now an even better tax shelter thanks to this limit increase.
Of course, 401(k)'s have gotten a bad rap in the media recently after so many lost value because of the drops in the market. But really, despite the ups and downs of the market, over a long period of time, your 401(k) will very likely benefit.
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Do Federal Agencies Hate Small Businesses?
Continue reading… 2 CommentsYou might have seen several headlines yesterday saying something like "The Federal Government Misses Small Business Contract Goal." The federal government is obligated to make sure that at least 23 percent of its contracts go to small businesses. They've failed to do that in recent years, it turns out, and the Washington Post reports that mistakes, such as considering subsidiaries of big businesses like Lockheed Martin to be "small businesses" and giving millions of dollars in contracts to them, have been made.
Government contracting has, of course, become a highly publicized and controversial topic in recent years because of the scandals involving Halliburton and Blackwater. The American Small Business League, whose president is quoted in the Post article, puts a lot of effort into making the argument that the federal government is screwing over the little guy in favor of doling out favors to big, connected corporations.
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Last Post on Joe the Plumber
Continue reading… 8 CommentsI was reading through the whirlwind of discussion that my post last week on "Joe the Plumber" set off, and I noticed that most readers were in agreement about one point: I am dead wrong about licensing.
Here's a good example from commenter "Ol' Whip":
Yes it does matter. It is an outside certification that he actually knows what he is doing and won't cause your house to flood, your sewage to back up or your boiler to explode.
Lot's of folks can change a light bulb but I sure don't want them claiming to be electricians and working on my house.
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How Will Entrepreneurs Fare in a Recession?
Continue reading… 3 CommentsWhen something gets riskier, you get less of that thing. Just look at how the trend of a decline in venture capital activity has amplified as the economy has worsened.
So consider the following claim a blow against the conventional wisdom about small businesses and start-ups:
Turns out that even in a downturn, the number of business start-ups is pretty constant, hovering at around 640,000 a year. Economic slumps typically last six months, so they don't tend to affect entrepreneurial plans that have been years in the making. Nor is the start-up success rate hurt by the vagaries of the business cycle, says Brian Headd, economist at the Small Business Administration.
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iPod Entrepreneurs: How to Make Money by Saving Money
Continue reading… 2 CommentsHere's a good profile of an entrepreneur who has figured out how to make use of your iPod that never seems to last more than two years.
Mosley, president and CEO of BuyMyTronics.com, is the brains behind a "trash for cash" concept that purchases used and, in some cases, broken electronics such as iPhones and iPods in exchange for money. The devices are fixed and later put up for bid on eBay or sold to other resellers.
This is the kind of start-up that can do well in a recessionary economy—high-tech but focused on helping people save.
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Why It's No Problem That Joe the Plumber Lacks a License
Continue reading… 108 CommentsSome of the commenters on yesterday's post seem to think that we can ignore concerns about taxes on small businesses because Joe (Samuel?) Wurzelbacher is not a licensed plumber in the state of Ohio.
First, it's not clear to me how it's deceptive to call yourself a plumber when you do plumbing work for a licensed plumbing company, even if you are not the owner of said company. Maybe that's not good enough for the plumbers union to consider you a plumber, but for 95 percent of people, that job description sounds like "plumber."
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Presidential Debate: Why Joe the Plumber Matters
Continue reading… 16 CommentsAs of last night, the tax burden on small businesses has become one of the central (if not THE central) issues of the 2008 presidential campaign.
In a year when wars both foreign (Iraq and Afghanistan) and cultural (latte-sipping media elites versus hockey moms) dominated the headlines, how did this happen?
Strangely enough, we can thank one man: Joe Wurzelbacher of Ohio, or as he is better known, "Joe the Plumber." His feelings about Obama's tax plan were basically the centerpiece of last night's debate.
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A Bailout for Small Business?
Continue reading… 19 CommentsYesterday the Federal Deposit Insurance Corp. announced that it will take the biggest step any part of the federal government has taken to "bail out" small businesses in the wake of the financial crisis. Forbes reports:
The FDIC will also expand deposit insurance for non-interest-bearing transaction accounts used by many small businesses. Many businesses that had accounts larger than the Federal Deposit Insurance limit, currently $250,000, were pulling accounts from smaller banks and moving them to larger, safer banks. Under the new program, the FDIC will provide full insurance coverage for non-interest-bearing accounts until the end of next year. Banks will pay a new premium to cover the expense of the program.
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A Small-Business Depression? Think Again
Continue reading… 1 CommentThe year that everyone seems to be thinking about is 1929. There are constant reports that we are witnessing a financial collapse unparalleled since that year and that drastic action is needed to prevent a second Great Depression.
But when it comes to small businesses, we don't need to go back to 1929. Is the economic downturn hurting them even as badly as recessions did in recent decades? I quoted National Federation of Independent Business chief economist William Dunkelberg in an article the other week where he argued that credit problems are not nearly as bad now as they were in the recession in the early '80s, for example.
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One Way Out of the Credit Crunch: Retirement Savings?
Continue reading… 2 CommentsElderly people make up a surprising number of entrepreneurs. I've written about how some retirees are looking at starting businesses as a fun thing to do with their time. It's also timely because, in an economy where credit is scarcer, retirement savings are one hassle-free resource to tap to get financing. But only if you know what you're doing.
The New York Times today reports on an even riskier phenomenon—people well before retirement age tapping into their 401(k)s (through a complicated but innovative profit-sharing scheme) as a way to finance a start-up.
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Healthcare Costs: a Problem That Won’t Go Away
Continue reading… 0 CommentsTuesday's presidential debate has everyone talking about healthcare reform. But that's an issue that has been on the mind of small-business owners for some time. I just recently interviewed Thomas Sullivan, the outgoing chief counsel for advocacy at the Small Business Administration, for a Q&A that should be up next week. He told me that, during his tenure at the SBA, the one constant has been that the soaring cost of healthcare is the No. 1 problem cited by small-business owners.
One "solution" to rising healthcare costs is to have more things like smoking bans and regulations on fatty foods in an attempt to force people to lead healthier lives. The rub is that when people live longer, new healthcare costs pop up because there's more demand for care in old age.
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Credit Crunch? Your Move, Peer Lending
Continue reading… 3 CommentsIt's a popular notion recently to say that "Wall Street is dead." It may be true that Wall Street as we once knew it has been irrevocably changed, but let's not jump to Chicken Little conclusions about that like "no one will ever be able to get credit anywhere." As traditional sources of finance dry up, this creates a market opportunity for entrepreneurs to develop new, risky (but innovative) methods for lending and borrowing.
Here's one such new entry. And here's a tidbit from the press release about this new site, Loanio.com:
Borrowers with poor or no credit scores will be permitted to participate on the p2p lending platform by using a Co-Borrower or guarantor. According to CEO and Founder Michael Solomon, "...only around 10% of borrowers on p2p lending sites wind up getting a loan. Many of them have less than stellar credit profiles. With options for these borrowers drying up elsewhere, we believe this feature and others on the website will fill a sorely needed void in the p2p lending arena."
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Obama and McCain in a Town Hall Debate: Some Small-Business Questions
Continue reading… 9 CommentsHere are two questions that I would love to see aimed at the presidential candidates when they debate tonight in Nashville.
For Barack Obama:
Senator Obama, you insist that 95 percent of Americans would receive a tax cut under your plan and that only the fabulously wealthy would see a greater tax burden. But your tax “cuts” for lower- and middle-class Americans come in the form of tax credits that expire as a family moves up the income ladder, resulting in, some researchers have shown, significantly higher marginal tax rates for some families. If we really want to encourage people to start businesses, shouldn't we make the tax code simpler and easier to plan around, rather than stuffing in more exemptions that could cause a potential entrepreneur to wonder if boosting his or her income is worth it?For John McCain:
Senator McCain, you actually sounded like a maverick when you told a crowd in Michigan that lost auto jobs “aren't coming back” and that Michigan workers should develop new skills for a new economy. But, having voiced support for $25 billion in loans for the Detroit auto industry, your actions seem to express the opposite sentiment: that we should hold on to the old economy for dear life. How can Michigan develop a new economy if large, failing companies are receiving a bailout from the government that small entrepreneurs could never hope to receive because they don't have the same political clout? -
Where Do Small-Business Owners Stand on the Bailout?
Continue reading… 3 CommentsWe won't know for several months whether or not the just-passed bailout plan will help the economy. (And even then, it's more than a bit sketchy to figure out whether it helped or hurt.)
Of course, that won't stop people from making predictions about the effects of the bailout. Put small-business owners in the "decidedly skeptical" category.
A new poll by online payroll service SurePayroll asked small-business owners around the country what they think of the plan, and the result is a 50-50 split.
