Will State Lawmakers Heed New SBA Data, Small Business Concerns?
Jan. 26, 2012
There’s more evidence that small business plays a pivotal role in creating jobs in Washington and other states, according to the Office of Advocacy in the Small Business Administration (SBA). The Office of Advocacy released small business data for each of the 50 states.
SBA believes the new data is “an invaluable resource for small businesses, legislators, academics, government officials, and policymakers in each state.”
Why?
“Small businesses are the foundation of economic growth in Washington and in our nation” said Dr. Winslow Sargeant, Chief Counsel for Advocacy. “By supporting policies that promote innovation and entrepreneurship, we help small businesses tackle these challenging economic times. These statistics are a resource for a path to economic growth.”
As for Washington state, the report explains “small business employment; business starts and closings; bank lending; business ownership by minorities, women, and veterans; and firm and employment change by major industry and firm size.”
Salient data about small business:
- There were 532,162 small businesses in Washington in 2009. Of these, 142,854 were employers and they accounted for 53.3 percent of private sector jobs in the state. Small firms made up 98.1 percent of the state’s employers.
- Throughout 2010, the number of opening establishments was lower than closing establishments and the net employment change from this turnover was negative.
- Washington’s real gross state product increased 0.7 percent and private-sector employment decreased 1.8 percent in 2010. By comparison, real GDP in the United States decreased 1.3 percent and private sector employment declined by 0.8 percent.
- Self-employment in Washington surged over the last decade. Female self-employment fared the best compared with other demographic groups during the decade.
To promote entrepreneurship, this week the Washington Policy Center sent state lawmakers in the 2012 legislative session these recommendations:
- Revisit the voluntary settlement agreement as passed by the state Senate in 2011 – $1.2 billion
- Reform the displaced worker retraining program
- Simplify sales taxes by using an ‘origin based’ tax (as opposed to a ‘destination based’ tax) and creating a flat rate for out-of-state businesses
- Review regulations to ensure that Washington rules don’t exceed federal regulations
- Enact Tort Reform
- Do no harm in transportation policy – do not reduce road lane capacity
- Do not follow Seattle in enacting statewide paid sick leave
In addition, Gov. Gregoire suggested her strategies to aid small business — business and occupation tax relief.
How has the Legislature responded? Lawmakers have ignored their $1.5 budget-deficit crisis.
Instead, lawmakers are considering other matters – mandating paid sick leave and safe leave, banning plastic bags, abolishing the death penalty and gay marriage.
When will Washington’s Legislature demonstrate wisdom?
From the Coach’s Corner, also read:
WPC Hits Target, but Will Washington State Legislature?
Washington: A Balanced Budget Is No Longer Enough
Does the Federal Reserve Understand Small Business?
Knowledge is knowing a tomato is a fruit. Wisdom is not putting it in a fruit salad.
_______
Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
Marketing Principles Needed in Wall Street Protests to Create Culture of Economic Patriotism
From New York to Seattle, people are wondering about the impact of the Wall Street protests. No one is asking, but if the protesters want to know how to win, they need to conduct a cohesive major-marketing campaign.
So, if you can humor me, let’s consider this a review of marketing best practices. Along the way, perhaps we’ll see an improvement in corporate ethics. My motivation, you ask? The nation needs a new culture – call it economic patriotism. I’ve been convinced that it’s partly an issue of How CEOs, Taxes and Policymakers Fail the U.S.
The corporate and Wall Street entitlement attitudes – certainly not everyone but a significant number – helped cause and exacerbate the Great Recession. The U.S. will continue to precariously suffer in its fiscal doldrums until economic patriotism becomes the norm, and productive public policies are implemented to improve the pecuniary environment for the creation of jobs.
It wasn’t just the questionable mortgage activities, but many banks and credit card companies behaved in a predatory fashion. Because they’re domiciled in about six states that allow high interest rates on credit cards and related lines of credit, banks were able to charge exorbitant interest rates on small businesses and consumers – as much as 38 percent for dubious reasons. And they abruptly cut off lines of credit for countless companies and micro-businesses. Consequently, many have poor credit ratings, and can’t qualify for Small Business Administration loans.
Among the hard-hit domestic automobile manufacturers, it’s worth noting Ford has been outstanding in its recovery approach. Consequently, Ford didn’t ask the taxpayers for help.
But the banks and the other auto companies had the temerity to lobby for bailouts, as countless Americans lost their jobs and homes. Foreclosures are still rampant, and the financial institutions are hoarding their cash following the bailouts.
GOP and Democrats
In part, the blame for the Great Recession also falls on Republicans in Congress. Don’t get me wrong. I haven’t changed my stripes. I’m still a strong business and free-enterprise advocate. But the Republicans looked the other way during all the predatory behavior, and continue to do so.
Democrats failed to speak out as it was occurring, and they failed to include small-business protections in passing the Dodd-Frank Wall Street Reform and Consumer Protection.
Further, the Obama Administration has been cozy with Wall Street, ostensibly, to attract political donations. I took originally took note of the administration’s behavior in writing Sen. Cantwell Is Right to Question Risky Derivative Dangers, Geithner. So it’s an irony to me that Democrats are disingenuously trying to capitalize on the Wall Street protests.
Let’s not forget another entity. I wonder: Does the Federal Reserve Understand Small Business? No.
Fortunately, let’s consider that the Legal War on Wall Street Chicanery Isn’t Finished.
But how can the protests help change the culture of corporate greed for economic patriotism?
Protestors need more articulation – not just inane ramblings about corporate greed and spreading the wealth – and organization. Merely sticking it to the wealthy with taxes, and closely allying with opportunists, such as the Rev. Al Sharpton, won’t help the cause and enable good messaging.
The movement needs to grow roots and needs a credible leadership to espouse American values, just as the Vietnam War protests gained traction. Instead of just a bunch of hippies, pacifists and students, it became a movement for moderate American patriots as they began to question the justification for the war.
The Wall Street protests need to focus on corporate ethics.
Again, a classic marketing line of attack is needed. A rag-tag approach doesn’t lead to successful marketing results.
Moreover, it isn’t likely to happen, but leadership is to needed to avoid the typical 14 reasons for the failure of campaigns.
In marketing failures, there are 14 salient causes:
- Inadequate analysis of strengths, weaknesses, opportunities and threats
- Drawing incorrect conclusions from the analysis (leading to ineffective overall strategic planning)
- Unrealistic budgeting
- Ineffective testing of ideas and messaging
- Arrogance – over confidence
- Poor coordination with centers of influence
- Not developing effective teamwork and communication among stakeholders
- Targeting the wrong market
- Lack of job descriptions – who will do what and when?
- Wrong people in many key positions
- Poor positioning in attributes and benefit statements
- Ineffective allocation of promotional funds – wrong mediums preventing top-of-mind awareness in customers, or voters
- Unproductive evaluation of the campaign and return on investment
- Unsuccessful responses to negative surprises and failure to capitalize on opportunities
Thanks for humoring me. Let’s hope for meaningful reform.
From the Coach’s Corner: here are more thoughts about Wall Street greed.
“Three great forces rule the world: stupidity, fear and greed.”
-Albert Einstein
__________
Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
Does the Federal Reserve Understand Small Business?
To answer the question, I have a simple one-word answer: No. It appears at least one of the Federal Reserve’s 12 districts does not have a practitioner’s understanding of small business.
Small business is really the straw that stirs the drink in the nation’s ability to increase the number of jobs in this country.
According to Small Business Administration (SBA) figures, small businesses make up more than 99 percent of all employers and employ more than half of all workers. Another SBA stat stands out: Small businesses have created 64 percent of all jobs in the last 15 years.
But small businesses have really suffered during and after the Great Recession.
So why is it that a 2011 study by the Federal Reserve Bank of New York draws the wrong conclusions as to why small business employee rolls dropped a lot more than big-business employment in the recent recession?
The Fed’s study concludes that a drop in consumer demand triggered the cutbacks. Huh?
Fortunately, a blog by Dr. Scott Shane nailed the reason.
“I think two factors – reduced access to credit and the concentration of small businesses in the worst hit sectors of the economy – play a bigger role than the Fed researchers acknowledge,” he wrote.
I like his work, and have quoted him previously (Is the U.S. in Danger of Becoming Second-Rate in High Tech?). Dr. Shane is an entrepreneurial scholar – the A. Malachi Mixon III Professor of Entrepreneurial Studies at Case Western Reserve University.
The Fed was right about the loss of small-business employment rolls — 10.4 percent among companies with fewer than 50 employees. And Dr. Shane agreed. As Biz Coach, a business-performance consultant, I see it every day. Small businesses did lose more jobs than their bigger counterparts during the Great Recession. So, we’re in agreement on the job losses.
“Businesses with fewer than 50 employees accounted for 28 percent of the 121 million Americans employed in the private sector in 2008, the latest Small Business Administration figures show,” wrote Dr. Shane. “That’s too much employment in small businesses for policymakers to find a way to fix the job problem without getting the smallest companies to boost hiring.”
He’s right again.
“Small businesses are underrepresented in two sectors that have weathered the downturn relatively well: exporters and those in research-and-development-intensive industries,” he wrote. “And small businesses account for much more of the employment in the sectors hardest hit by the downturn.”
As an example, he cites construction.
“While total employment fell only 4.4 percent from 2007 to 2009, employment in construction dropped a 19.4 percent. With so many small businesses in construction, this has meant heavy job loss,” he explained.
“The Fed researchers also play down the importance of tightened credit markets in accounting for the losses, arguing that most of the decline in borrowing by small businesses during the recession came from a decrease in demand for loans – not a reduction in supply,” he asserted.
He cites figures from the National Federation of Independent Business: “In March 2009, at the depth of the recession, only 29 percent of small business owners reported that their borrowing needs were being met, down from 40 percent back in February 2007.”
Dr. Shane points out home-price declines adversely impacted small business credit.
“A 2007 survey by Barlow Research Associates shows that one-quarter of small business owners use the equity in their homes to fund their businesses,” he wrote. “And research by Kean University professor Samuel Bornstein shows that many of the loans used to tap that equity were the Alt-A, adjustable-rate and interest-only mortgages at the toxic heart of the crisis…”The decline in housing prices sucked a large amount of small business credit out of the system.”
Dr. Shane indicated home equity loans for small businesses decreased $25 billion.
“If policymakers want to counteract the job losses in small business, they need to do more than say that the cause is decreased demand,” he concluded. “Rather, they need to stimulate the small business heavy industries that were badly damaged by the recession and keep credit flowing.”
Amen. Naturally, it follows that new strategies for small business credit are needed. However, now there’s a bigger problem.
My sense is that the small business credit situation – in the aggregate – won’t qualify such firms for loans. The chicanery by big banks led to reduced credit limits and they got away with charging 38 percent interest on business credit cards for dubious reasons.
From the Coach’s Corner, here’s a resource link:
11 Strategies to Keep your Small Business Floating above Water
“Dreams come true if you survive the hard times!”
-George William Curtis
__________
Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
Small Business Owners Get Commercial-Mortgage Refinance Help
March 29, 2011
New real estate capital is available for small business owners via the Small Business Administration (SBA). Congress has approved a two-year, $15-billion budget aimed at benefiting as many as 20,000 small business owners.
So if you’re a small business-owner needing to refinance your commercial mortgage, you might consider this SBA program. The SBA has changed its temporary 504 refinancing program for mortgages that mature after Dec. 2012. Depending on their eligibility, small business owners can get long-term financing.
“With the collapse of the real estate bubble, many small business owners have found themselves unable to refinance as a result of inflated real estate values at the time they took out their mortgage,” SBA Administrator Karen Mills said in a statement.
“SBA’s temporary 504 refinancing program was first made available to those small businesses with the most immediate need,” she explained.
“Today’s step opens this critical assistance to more small businesses, giving them the opportunity to restructure their debt and free up capital that will be essential to keeping their doors open and also their future ability to grow and create jobs,” she added.
Eligibility provisos:
- Your business must be at least two years old
- This is only for owner-occupied real estate
- The original loan must be at least 24 months old
- Loan proceeds are solely for 504-eligible business expenses
- You must be current on your loan payments
SBA’s 504 loan program mandates three elements:
- A lien for 50 percent of the cost of the project
- A second mortgage held by an ”SBA certified development company,” which carries a 100 percent SBA guarantee for as much as 40 percent to the total value of the property
- The small business owner must have at least 10 percent equity
What all this means is that qualified small business owners can refinance as much as 90 percent of the appraised property or 100 percent of the outstanding mortgage – whichever is lower. Of course, there are financing charges. Excluded from eligibility are government-guaranteed loans and existing 504 loans.
The SBA site has more information.
From the Coach’s Corner, not to be a curmudgeon, the truth is that many small business owners won’t qualify for these SBA-backed programs. In many cases, it’s because of damaged credit from dealing with predatory lenders and credit card companies, and other factors from the economic downturn.
For such business owners, here’s a column: Step-by-Step Solutions for a Company Turnaround.
Economic Climate for Small Business – Has Obama Misread the 3 Ms?
Sept. 8, 2010
Using the 3 Ms as criterion, it’s report card time for the “summer of recovery,” as predicted by President Obama last June. From the perspective of most small businesspeople, the three Ms can be defined as the mandate, moment and mood. Based on his strategies, has Mr. Obama misread his 3 Ms?
Clearly, after President Obama’s election nearly two years ago, the nation appears uncomfortable with his strategies for hope and change. There are worries about the economy and dissatisfaction with the nation’s leadership coupled with a huge lack of confidence – Americans see too little action – too late.
Consider President Obama’s recent Gallup Poll ratings:
- Job approval – 42 percent (only 39 percent among Independents)
- Economy – 38 percent approval rating
- Obama on Healthcare reform – 39 percent approval.
- Country – right direction – 32 percent say yes.
Why such bleak approval ratings? Well, when it comes to Main Street, the Obama Administration has a tin ear.
Bailouts, heavy spending, healthcare overhaul, and cap-and-trade legislation have been the misguided priorities for the Obama Administration. He has not been confused with President Lincoln. As a result, Mr. Obama has been off-target with assessing strengths, weaknesses, opportunities and threats. He has accomplished little regarding the economy and job creation, as the 9.6 percent unemployment rate is poised to climb higher.
His message is also off-base – really missing the target. The nation’s confidence is sinking. He needs to understand why President Roosevelt was widely respected during the depression years.
Admittedly, his proposed tax breaks are welcome – accelerated write-offs for investments in plants and equipment – and tax credits for research. Companies could deduct investment expense in one year instead of the current provision for three to 20 years. But they will not yield a quick fix for struggling businesses.
The tax breaks should have been proposed 20 months ago – businesses do not have an incentive to take risks, and they will not add to their payrolls. Even for a beleaguered construction industry, Mr. Obama’s proposed $50 billion spending for roads, railways and runways is seen as a political payoff to unions.
Government policy should be focused on alleviating uncertainty for employers – not creating chaos. For businesses to increase spending, it starts with confidence. So, they’re not likely to buy machinery or high-tech, which would create jobs.
Big companies can borrow at lower interest rates. Even though small businesses comprise the lion’s share of the nation’s economic engine for job creation, most small businesspeople feel as though government has declared war on them. Many have suffered severely and have lost their positive credit ratings – making it impossible for them to borrow at decent rates. That’s a shame.
Small Business Administration (SBA) figures show small companies represent 99.7 percent of all employers, and employ more than 50 percent of the private-sector workforce. The SBA says account for 44 percent of payrolls, and more than 50 percent of the nation’s non-farm gross domestic product. They comprise 97.3 percent of exporters, and are responsible for 13 times more patents per employee than big companies. But the patent-application process takes more than half a decade (see this column: “Is the U.S. in Danger of Becoming Second-Rate in High Tech?”)
Just like during the Bush Administration, the SBA in the Obama tenure has decimated government-contract opportunities for small businesses. Twenty-three percent of all federal government contracts must be allocated to small businesses. This year, the Obama Administration admitted it failed to achieve the goal, even though it claims to have given $96.8 billion in government contracts to small business. Or did it? No.
A study released in June by the American Small Business League (ASBL) concludes that a whopping 60 percent of the top 100 contracts resulted in welfare for big companies.
To name names: Boeing, British Aerospace, Dell, General Electric, Honeywell International, Lockheed Martin and Raytheon all received corporate welfare – government contracts intended for small entrepreneurs.
Small businesses are getting a raw deal in other ways. Consumers have been so hammered, they can’t buy goods and services – even if they want to do so. Financial reform did nothing to help consumers and small businesses long pillaged by predatory credit card companies. New cars and trucks continue to be parked at dealerships.
Because this isn’t a nurturing economic climate, there’s also been a decrease in self-employed businesspeople. Recent Labor Department figures show there are 8.68 million self-employed persons. That’s down 13 percent from four years ago, December 2006, when there were 9.98 million people working for themselves.
It’s small business that creates jobs in this era of corporate-bailout largesse. However, small businesses are being choked because they can’t get credit and they’re facing a slump in demand.
They’re also facing a health reform law that favors bigger companies. Other government-forced paperwork will increase. Plus, every company must produce a Form 1099 to each vendor when annual purchases total more than $600. The SBA says employers with 20 or less workers now have to spend 45 percent more of their hard-earned resources to stay in compliance with federal mandates. IRS audit hours for small firms are up 30 percent in just five years. You guessed it – audit hours for their big-company peers are down by a third over the same period.
Summer of recovery? No. Every economic report has delivered bad news. President Obama has misread his 3 Ms.
The bottom-line: Small businesses want a healthy economy. They want to hire workers when feasible. But they do not feel expansion of government, high taxes and new regulations will help them succeed.
Small-business success is our best hope. Public policy should reflect this reality. Mr. Obama should emulate President Lincoln in deciding policies, and Franklin Roosevelt for delivery of the right message to inspire confidence.
From the Coach’s Corner, from a more macro perspective, it’s also been alarming to watch American officials scold the Germans for not spending enough. But it’s Germany with the healthiest economy in Europe.
An article in Forbes explains it well: “The U.S. Killed The Summer Of Recovery – We did it by framing the wrong problem,” by scholar Thomas F. Cooley.
Agency Tries to Help Small Business Cope with Federal Government
April 10, 2010
If you’re a small business owner, most likely you’re feeling the pain of overzealous regulation by government.
Small business owners feel the pain – losses in time and money – more readily that management in large companies. They’re closer to the cash register and have fewer resources – especially, micro businesses.
That means, in general, they’re more fiscally conservative and more likely to implement change to improve their cash flow. And in my experience, depending on the locale, the majority of small businesspeople complain of bureaucrats that make profits hard to achieve.
Even a federal agency agrees, according to published reports. The Office of Advocacy at the Small Business Administration (SBA) states that federal rules cost business $1.1 trillion. And it costs small businesses 45 percent more than big businesses to comply.
That costs jobs.
So the SBA’s office says it’s been doing something about it with its regulatory review and reform initiative; what it calls “r3” to target regulations that are “ineffective, duplicative, or out of date” (http://www.sba.gov/advo/r3/).
In 2008, it received 82 nominations for onerous rules that need reform. After two years of study, it whittled down the list. In 2010, it decided to focus on 10 federal rules that need revision.
“Only 10?” you’re thinking. Well, just as it took the SBA two years to decide on 10 finalist rules, getting government to reform anything takes years. So let’s congratulate the agency for its efforts.
In difficult situations, a positive attitude works wonders. The place to start is to chart progress. It’s a healthy exercise to focus on what’s right than on what’s wrong. Relish your progress. So regarding the 10 rules, let’s try to appreciate how far the agency has come.
Here’s a tip of the Biz Coach cap for the 10 federal rules:
- Update Air Monitoring Rules for Dry Cleaners to Reflect Current Technology
- Flexibility for Community Drinking Water Systems
- Simplify the Rules for Recycling Solid Waste
- EPA Should Clearly Define “Oil” in its Oil Spill Rules
- Update Flight Rules for the Washington, DC, Metropolitan Area
- Eliminate Duplicative Financial Requirements for Architect-Engineering Services Firms in Government Contracting
- Simplify the Home Office Business Deduction
- Update MSHA Rules on the Use of Explosives in Mines to Reflect Modern Industry Standards
- Update OSHA’s Medical / Laboratory Worker Rule
- Update Reverse Auction Techniques for Online Procurement of Commercial Items
Here’s the printer friendly version [PDF File].
Do you have questions, concerns or comments?
Here are two options:
- E-mail advocacy@sba.gov.
- Contact the R3 Project Leader, Keith Holman, at (202) 205-6936 or keith.holman@sba.gov.
Now, if state and local governments would see the light.
From the Coach’s Corner, does your small business need economic data or research?
Here’s an SBA source: www.sba.gov/advo/research/.
How Healthcare Law Would Affect Small Business
Updated May 14, 2010
Some 350,000 small business advocates have joined the legal fight against the healthcare law. They are members of the National Federation of Independent Business. The so-called healthcare reform pushed by Congress and the Obama Administration has caused more angst for small businesspeople than any issue in recent memory. For fiercely independent entrepreneurs, there are questions of socialism and constitutionality. They see a further deterioration in the makeup of the United States.
They’re grateful to the 14 state attorneys general who are fighting the law’s constitutionality. Republicans are hoping for enough votes for their candidates in the November elections to mount a revocation drive when Congress reconvenes in 2011.
Meantime, if the law is allowed to stand, it’s important for small businesspeople to understand how they’re affected. For starters, make sure you convert from a sole proprietorship to a limited liability partnership or corporation.
There would be no limits on premium rate hikes before 2014.
If you have 50 more employees, the government would fine you if you don’t provide coverage to your workers. Employers with less than 50 workers are exempt.
However, personal coverage is mandatory.
There would be 19 new taxes.
Generally, indigent self-employed are likely to get Medicaid. You can’t be denied insurance if you have a pre-existing condition.
Starting with your federal tax filing for 2010, employers with 25 or fewer workers that pay half of the workers’ premiums would get a 35 percent write-off. If employers purchase health insurance through an exchange beginning in 2014, they’ll receive a 50 percent deduction for healthcare premiums on their tax returns.
To save money, companies with as many as 100 workers can join a pool – Small Business Health Options Programs (SHOP). It’s hoped that such SHOP exchanges will enable a lower of premiums.
Federal subsidies would be available to the self-employed for healthcare who earn up to 400 percent of the federal poverty level. Subsidies would be available to families of four earning as much as $88,200.
Dependent children – up to the age of 26 – would be covered on their parents’ policy.
Beginning in Sept. 2010, insurance coverage would include a lot more than basic catastrophic coverage. Preventative care must be included.
For individuals earning $200,000 and families making $250,000 beginning in 2013, the Medicare rates will increase from 1.45 percent to 2.35 percent. For businesspeople getting capital gains, dividends or interest income, there will be an extra 3.8 percent tax.
Lifetime maximum limits on insurance policies would be outlawed.
Finally, regarding the so-called “Cadillac” plans, companies that pay more than $10,200 for individuals or $27,500 for families would be required to pay another 40 percent in the form of a tax. Naturally, this would be a huge hit to many small businesses.
My sense is that the so-called healthcare reform is a denunciation of individual economic and political freedom. And I fervently believe there are grounds to over-rule the law on constitutional grounds.
From the Coach’s Corner, in conjunction with April being “National Financial Literacy Month,” the Small Business Administration is offering entrepreneurs free webinars on its Web site to learn fiscal fitness.
