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Archive for the “Small Business” Category

9cca04c3fa40e38e9597fac4611272ceYou should know about Carissa Reiniger.  She is a kick-ass entrepreneur, but, more interestingly she is a generous soul and is a source of servant wisdom and ennobling inspiration.  She just launched a “Thank You, Small Business” tour in support of her new book by the same name (with Roger Arnold), as well as a helpful new small business foundation.  Catch her if her tour comes to your town.  (NYC, Boston, Dallas, Detroit, Atlanta, Miami, Seattle, Portland Philadelphia, Denver, Tucson, Las Vegas, and Oakland)

Carissa’s general purpose is to increase the awareness of how important small business is to the economy.  She hopes to create an ongoing resource offering free support and business advice on any number of topics to members of our community.

Here are a few facts.  Small companies make up the vast majority of productive enterprise in the U.S.  They are 99%of the employers, 50% of non-farm GDP, and over half of private sector employment.  They account for 97% of exports and 70% of new private sector jobs.  Essentially the small capitalist enterprise community is the foundation on which the economy sits.  Yet, small businesses were not bailed out in the late financial crisis like the big banks and automobile manufacturers, and precious little concrete help has been forthcoming for us from the government. Quite the opposite.  Furthermore, It is projected that 70% of all small businesses will not be around in five years.  We all know the government regulation that has been piled on us and the political rhetoric that has at times been quite diminishing of small business.  (You didn’t build that!)  Ms. Reiniger believes this trend must not only stop, but be reversed—and quickly–if the country is to maintain economic vitality.

She states, “The economy needs small businesses to grow.  They are not growing.  We have got to figure out collectively how to make that happen.”  She is a missionary with a crusader’s zeal for entrepreneurship and she is passionately convinced that solutions to global problems must and will come out of small business.  But small business needs help.


Accordingly she has established the entirely not-for-profit Thank You, Small Business, which she is self-funding with the help of some large corporate sponsors like American Airlines, Citrix, Nespresso, and others.  The total revenue of her new book also is dedicated to her non-profit.

So kudos to you, Carissa Reiniger.  Thank you for your whirlwind energy and spiritual generosity in creating a new resource to aid public understanding of the crucial value created for everyone by small business, as well as offering efficacious tools to all entrepreneurs to promote the general health and growth of innovative enterprise.

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Who is John Galt?  Well, he’s pretty much the bloody patron saint of entrepreneurship and capitalism. Saint John Galt.  Of course, his provenance is as the cryptic, chimerical entrepreneurial hero of Ayn Rand’s Atlas Shrugged.  But his essence is becoming spookily real again as personified by a spirited, unspoken, unorganized strike that may be taking hold in the entrepreneurial community.  This is not a good or healthy thing for the economy.

The most recent Bureau of Labor Statistics report shows the sum of new business “births” was lower than any other year since it’s research began in 1994.  Robert Litan of the Kauffman Foundation states, “If this persists–the sputtering engine of entrepreneurship–it will discourage future generations of entrepreneurs.”

Mr. Litan is right. The economy simply cannot afford the continuing degradation of the private sector, particularly juxtaposed to the expansion of the public sector.  Entrepreneurship is the goose that will increasingly not be able to generate the golden eggs of national prosperity.

For example, on Saturday I was idly watching CNN and an economist cited this statistic:   In 2008 the Department of Transportation had one employee making over $170,000.  Today it has 1,090 such employees.  Wow.  This while businesses continue to tighten and lay off.

John Bussey states in an article in The Wall St. Journal of August 12 (Section B, page 1):

“Imagine a small airstrip where single-seat planes head down the runway, get 100 feet into the air and crash back to Earth, joining a heap of wreckage that grows by the day. You’d think this might discourage people deciding to become a pilot.

That’s a snapshot of what the recent recession did to many small businesses in America, where beneath the wreckage of failed companies lies a collection of would-be entrepreneurs.”

Entrepreneurship cannot thrive in a cautious, timid, uncertain culture and in the face of hostile governmental rhetoric and bureaucratic overreach.  Certainly, with the advent of Obamacare,  business will increasingly be forced into a position of being the administrator and flow-through mechanism for the money of the nanny state–a cash cow for a statist dirigisme.  This is a nuisance, an annoyance, a distraction and an inhibitor of efficient enterprise.

A prime personal reason I became an entrepreneur was simply for personal freedom.  It is my prime non-monetary motivation to create and lead my firm Corporate Rain International.  Dignity and autonomy are the rewards for the personal act of courage that is entrepreneurship.  Growing governmental control diminishes this incentive.

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Watch out. Our next financial crisis is impending, brothers and sisters. That crisis, that looming black cloud, that lurking bête noire, is state bankruptcy. And it could be more cataclysmic than all the adjustments demanded by federal mandates passed for us in the last two years.

While there is general relief in our entrepreneurial community about the extension of the Bush tax cuts, the increasing distress of states is a floating iceberg for entrepreneurs, mostly obscured from view, but dangerous nonetheless. What is coming is potentially so bad that it is worth considering abandoning the most egregiously troubled of our states.

This incipient threat is on the doorstep and is getting insufficient attention. Where it will descend first will be California, New Jersey, Illinois, and my beloved New York. Many others will follow in their wake. Pensions, salaries and debt are overwhelming for these states. They are desperate for money. The most obvious place for states to get money is our small business community. We are simply the easiest, largest, most vulnerable money pool for them to go after.

And it is not just the states themselves. It is also their cities, their school districts, and their multifarious independent taxing authorities.

Here’s a story for you. It concerns a company I know well. My own.

Six years ago my firm received a small bill from the unemployment insurance office of New York claiming I should pay NY unemployment insurance for four out-of-state consultants I was occasionally using. I appealed the assessment and fine and won my appeal after three in-person administrative court appearances. Much to my surprise I was notified months later that my case was overturned on appeal, without me even being informed of the appeal. When I called the state to protest this high-handed, unfair action they basically told me, “Tough. That’s the way we do it.” My option, they kindly informed me, was to spend big dollars and time appealing my small debt through the regular courts. I paid. That is the kind of justice by bureaucratic fiat that small business can expect as states grow increasingly desperate.

In truth there are only a few states that actually try to nurture small business, Texas being chief among them. In a recent editorial in the NY Post (Dec. 10, 2010), Ray Keating of the Small Business and Entrepreneurship Council notes the conclusions of the “Small Business Survival Index 2010.” Keating states that, in many states, politicians have spent decades creating over regulation, high taxes, and wasteful public spending that has outrageously raised the cost of economic risk-taking and chased away business. “What we have in these states is one vast anti-enterprise zone.” My theory is that it can only get worse–lots worse–when states hit the panic button.

Call me paranoid. But watch out. As Brooks Atkinson put it in Once Around The Sun, “Bureaucracies are designed to perform public business. But as soon as a bureaucracy is established, it develops an autonomous spiritual life and comes to regard the public as the enemy.”

Amen, Brother Brooks.

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The past three years have been among the most trying and dispiriting for business in American history. The numbers recently have turned murky again, arousing fears of a double dip recession, permanent high levels of unemployment, and the passing of the American baton of entrepreneurial and economic pre-eminence to China, India and Brazil, where the passion for success and growth seem to have blossomed while ours has waned. According to Robert Schiller, Yale’s famous and most visible economist, things will not get materially and emotionally better until “animal spirits” return to the market. We all know exactly what Schiller means.

The trouble is that animal spirits cannot be arbitrarily conjured into existence. Unlike dogs who merely need a nice day to spontaneously experience their own animal spirits, we humans need reasons to feel enthusiastic and to then commit to plans and actions. The current administration may have saved the economic system from its own worst excesses and self-delusions–the infinite expandability of leverage–but in many ways it has acted in inhibitory, controlling and arbitrary ways when it comes to a return to growth, employment and consequently, optimistic actions.

One could argue that the government in Washington has used this financial crisis to “socialize” as many sectors of American life as possible. That means more control, more regulation and a consequent reduction in entrepreneurial options. That depresses those responsible for turning their desires into action. People like me.

It is essential that small businesses look to the future as a time of renewed, worthwhile endeavors and not submit in anger and frustration to the current anti-business atmosphere. Acceptance is defeat.

Tim Askew has expressed the desire to periodically invite fellow entrepreneurs and small business colleagues to contribute to this weekly blog. This week’s guest blogger is Robert Millman. Robert is the owner of Wine Executive Seminars. He tastes and rates over 5000 wines per year. In addition to his successful small business, he is also a professor of philosophy at Pace University.

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Here’s my general feeling about new hiring these days. No way, José. The choice for my 30 employee firm, Corporate Rain International, is to not hire now unless we absolutely have to.

Why? For me and most of my small business colleagues, clients, and friends, the present Great Recession is a stunning entrepreneurial ambush. It’s a flabbergasting rule changer and assumption challenger. However, the conventional wisdom is that we’ve now turned a corner and that the entrepreneurial class is and should be beginning to make new hires.  As I mentioned on May 18 (Chicken Little and Entrepreneurship), I remain less that sanguine about a robust recovery, with it’s concomitant implications for a hiring ramp-up.

The news is technically positive. The Wall Street Journal reported on June 4 that unemployment is down to 9.7%. Payroll giant ADP reports private sector jobs increased 55,000 last month and the number of claims for unemployment went down by 10,000. Ford and GM are rehiring some autoworkers. Payrolls climbed 431,000 and pending home sales rose 6%. White House Head Economist Christina Romer spoke on Friday of “continuing signs of labor market recovery.” But before popping the recovery champagne, I have some very cautionary thoughts.

No one likes bad news. But beneath the patina of good news mentioned above (and emphasized in government press releases) there are lots of corrosive caveats. The first of these is purely factual. How much of this employment news is really true?

John Crudele of the NY Post has been on an editorial jihad about the undependable and illusory nature of governmental employment figures for some time, pointing out that much of what is accepted as factual truth about employment, new company formation, and economic activity is really hypothetical, and often quite optimistic, guesswork. In his column of June 3, titled, “Census Workers Share Their Horror Stories”, he shares anecdotal evidence that, among other things, the Census office hiring figures may be inflated. He states, “A couple of weeks ago I found out that Census was repeatedly hiring and firing workers without any apparent reason. I questioned if this was being done to artificially boost the nation’s employment figures since the Labor Department considers it a new job created whenever someone is hired to work as little as one hour in a month. Was Census churning jobs to make the economy look healthier than it really is?” Good question, John.

But even assuming governmental figures for employment were not disingenuous, 411,000 of the recent new payroll jobs were indeed with the Census Bureau, creating very short-term governmental employment. After predictions of a 200,000 gain in private sector jobs last month, the actual figure was 41,000. That’s not good. Despite lots of governmental cheer leading and happy talk, the private sector is just not coming back.

Pardon my pessimism, friends, but I feel more strongly than ever that small business is the canary in the coal mine that presages nothing good for the US economy. President Obama seems genuinely bemused as to why we small businessmen refuse to start hiring. Hasn’t he stimulated the economy out the wazoo? Yes. Probably excessively so. But little of this largesse has been directed toward the entrepreneur.

No less than Bill Gross of PIMCO, being interviewed on Bloomberg Radio (8:45 AM-June 4), stated job growth in the private sector is moribund, and that without temporary governmental stimulus unemployment would be over 11%. Even überliberal Robert Reich wrote a cautionary op-ed in The New York Times on Wednesday, June 2 titled “Entrepreneur or Unemployed?” which challenges optimistic assumptions about supposed increased entrepreneurial activity. Reich asks, “So why all this entrepreneurship last year?…In a word [it’s actually] unemployment. Booted off company payrolls, millions of Americans had no choice but to try selling themselves. Another term for ‘entrepreneur’ is ‘self-employed.” Reich reports that layoffs have surged while hiring has almost disappeared. And these are permanent job losses, replaced by labor-saving technologies, outsourcing or contract labor. He predicts a 50% likelihood we will slip back into recession.

In addition to our current entrepreneurial conundrums, there are growing long-term disincentives that militate against small business hiring.

  • The major disincentive is potential large costs of tax and bureaucracy associated with the new health care legislation. But, even worse, is the uncertainty this cryptic 2,000 page monstrosity has created. What the hell is really in it? I sure don’t know. I don’t think even the people in our government know. It’s bloody scary for a businessman.
  • Second, how does private business hope to compete for employees with the increasingly bloated salaries of public sector workers? Westchester County Association executive Amy Allen, in the June issue of Westchester magazine, points out that the average public sector salary in my region of New York is about 6% above the average salary in the private sector. And this is before figuring in large pensions and health care for life. According to the Cato Institute, the average federal civilian salary with benefits is $119,982 compared with $59,909 for the average private sector worker. Wow.
  • Third, states like New York are near bankruptcy. To solve their financial conundrum I predict these states will fall on small business with more taxes and more red tape–like lions on a lamb. Small business is vulnerable and weak compared to big business and public sector unions. I sure hope and pray I’m wrong on this one.

My cri du coeur is that the small business issue be addressed more insistently, more forcefully by the press and media, as well as government. Pay attention to us! All is not well out here in little business land. It would be utter imprudent madness for most of us to hire and rehire employees in the present environment.

Hire more workers?  Hell no.

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