Armageddon vs. Business-as-Usual
With all the whining, hand-wringing, and economic trash talking by pundits everywhere, I thought it might be interesting to look at something a little more substantial—like some historical facts maybe? I’ll bet most people don’t even know the last time our country lost almost 3 million jobs. How quickly we forget.
About all we see and hear in the media is the tragedy of Wall Street and the exorbitant paydays for the CEOs, plus the excesses of the oil industry—and rightly so, because these people certainly did not EARN their big paychecks.
On the other hand, many of these same pundits are saying our country must protect these large corporations, because they are the people who pass down the corporate wealth so workers can have jobs.
So, considering that, in general, American large corporations have traded off our country’s manufacturing base to foreign manufacturers, for fat paychecks, let us see how well the big corporations do at providing jobs during and immediately after a recession.
(The following data are from the U.S. Census Bureau.)
Our last economic downturn was 2001 to 2002 when we lost about 2.7 million jobs in the U.S., and all of these people were put back to work by 2004. Total employment in 2004 was almost identical to total employment in 2001, so I picked these two data years to see who put these 2.7 million people back to work.
Here is what I found:
- From 2001 to 2002, large corporations (over 500 employees) lost 1,643,373 jobs, and small businesses (less than 500 employees) lost 1,017,157 jobs for 2,660,530 total jobs lost.
- In 2003, large corporations lost an additional 83,889 jobs, while small businesses created 1,081,278 new jobs.
- In 2004, all the jobs lost in 2002 were replaced, with large corporations adding back 443,110 net new jobs, and small businesses added 2,232,160 new jobs.
- It would be 2006 before large corporations replaced all the jobs they lost in 2002.
- Do not assume that the small business jobs were just service or fast food jobs, because small businesses hire 40 percent of all high tech workers (scientists, engineers, and computer workers), and produce 13 times as many patents per employee than large patenting corporations. (Office of Advocacy, Small Business Administration.)
Therefore, during the last major economic turndown, it was the small businesses of America that turned it around and put people back to work. My conclusion is that, it will be the small businesses of America—the real entrepreneurs—who will turn us around again…and create the jobs to put people back to work again. The big corporations just cannot do it.
Will it happen quickly? Of course not—emotions control our economy, and it takes time for emotions to stabilize. But, it will happen, and it will happen regardless of what Washington does…it may even happen faster if the government minimizes their involvement.
I only wish our politicians would realize this.
A Plague is Among Us!
A plague of cell phones, that is—or more appropriately, a plague of inconsiderate users of cell phones. I am writing this while sitting in the foyer of a medical building, waiting for a friend. There are 5 other people sitting out here with me—4 of whom are talking on their cell phones.
I now know more about several other families than I probably know about my own. Maybe that’s because I have my cell phone turned off. I am certainly learning more than I care to know.
I don’t understand why people have to SHOUT when they are talking on a cell phone…there is no possibility of tuning out their conversations…I think I could still hear some of them if I was outside the entrance doors.
I do find it fascinating watching one twenty-something talk to her sister on one cell phone, while texting someone else on a second cell phone. I guess that is the ultimate in “multi-tasking.” These must be scintillating conversations.
Oh, my, I did NOT need to hear that!
It’s nearly impossible today to go anywhere and not be inundated by insipid and meaningless one-sided cell phone conversations carried on by people around you. Makes one wonder what people did before the proliferation of cell phones—maybe they had more time to think, or create, or observe, or at least have some consideration for those around them.
Probably not going to happen in today’s society.
Federal Regulations Unfair to Small Business.
American businesses pass on to the American people $1.1 trillion in costs of complying with federal regulations. This is more cost per U.S. household than the cost of health insurance.
Smaller businesses bear the heaviest load of the cost of business regulations. They spend four and a half times as much per employee to comply with environmental regulations, and 67 percent more per employee on tax compliance than big businesses do.
This is data recently released by the Office of Advocacy of the Small Business Administration. The Office of Advocacy has been trying for decades to get many of these regulations modified for small businesses—all to no avail to date.
Yet, small businesses—with fewer than 500 employees—are truly the backbone of U.S. Industry. Here are some little known facts about the importance of small businesses in America:
Small Firms:
- Represent 99.7 percent of all employer firms.
- Employ half of all private sector employees.
- Pay nearly 45 percent of total U.S. private payroll.
- Have generated 60 to 80 percent of net new jobs annually over the past decade.
- Made up 97 percent of all identified exporters.
- Hire 40 percent of high tech workers (scientists, engineers, and computer workers).
- Produce 13 times more patents per employee than large patenting firms, and these patents are twice as likely as large firm patents to be among the one percent most cited.
(The Office of Advocacy of the Small Business Administration also recently published this information.)
So, in spite of all the challenges thrown at small businesses…by government agencies and private institutions alike…small businesses have remained the backbone of America’s Free Enterprise system.
Now, with the economy in the tank, our small businesses are in even greater jeopardy. Let us not allow the politicians to build the barriers any higher.
For Want of a Nail…
Almost every day I encounter another example of what contributes to the failure of small businesses, or at least what makes them miss real success. Today was no exception:
I stopped at a Saxby’s coffee shop that I had been into a few times. During my last visit the clerk at the cash register gave me a plastic “coffee card” and said the next time I came in with my coupon and “loaded” the card with $20 I would get a free cup of coffee.
So, today I gave the card and the coupon to a different clerk and told her to load up $20 and I’d take my free cup of coffee. The clerk informed me they didn’t do that. I said “…one of your clerks gave me this card the other day and said you did do that.” The clerk rudely insinuated that I was lying, but the Barista was standing close by and said, “Yeah, we do that.” That’s when the clerk stomped over to the manager’s closed door and knocked. The manager came to the door and spoke with the clerk, telling her “no deal”—the customer can give us his $20 to load the card, but no free coffee. I paid for my cup of coffee and left. Will I ever return? Not likely, at least not until they advertise “under new management.”
Obviously, considering my penchant for coffee, a free cup of coffee has absolutely no effect on my coffee budget. A free cup of coffee, a “sample,” or a friendly “thank-you” are simply gestures…they tell the customer they are welcome and appreciated and that the business wants them to come back. These kinds of gestures are inexpensive and much more effective than hundreds of dollars worth of advertising.
What was wrong here?
- The manager of this small business stays holed-up in her office instead of spending time out on the floor with her employees and customers. The few times I was there, I never saw the manager come out of her office.
- The manager obviously had not adequately trained her staff. Each clerk had a different understanding of the store policy—not to mention the rude approach of the last clerk involved.
- The manager missed a great chance to make a long-term loyal customer, and she blew it—she missed the importance of the “gesture.” She made me think she didn’t care if I every returned or not. Success does not come from taking your customers or clients for granted, or treating them with disdain.
If this were an isolated incident, it would be ridiculous to even mention it, but, unfortunately, disdain for customers seems to be the norm—it happens to all of us way too often. If you have a small business, you cannot afford to treat your customers with disdain. Show your appreciation for their business with an occasional “gesture.” Sometimes a friendly smile, or a pat on the back and a “thank you” is all it takes.
“In this age of email, supercomputer power on the desktop, the Internet, and the raucous global village, attentiveness—a token of human kindness—is the greatest gift we can give someone.”
—Tom Peters
Each of us is only one customer or client, but remember the old rhyme: For want of a nail, a shoe was lost, for want of a shoe, a horse was lost, for want of a horse, a battle was lost, for want of a battle, a kingdom was lost?
So, for want of a customer…..
Watch Out–The Sky is Falling!
While the political pundits, news anchors, and morning show hosts are acting like “Chicken Little,” the rest of us have to deal with the realities of the day. How do we keep our businesses viable? What will happen to the growth we were experiencing, or counting on to pay our debts? Where will our startups get the money to start up?
The news people seem to be ecstatic when there is panic in the streets. In our society, bad news always sells better than good news. How terribly sad.
Maybe I’m jaded because I have always dealt with businesses that had problems…sometimes life-threatening problems. Some companies I became responsible for couldn’t borrow a penny, initially, and the Sheriff was usually not far away waiting to close us down. We could hardly call it a “credit crunch” when there was zero credit available to us. Interestingly, in these cases, we not only survived, but we thrived—it can be done.
So, we need to quit wringing our hands and get used to it…times are going to be tight for a while. Businesses that are not financially strong, or do not have a good relationship with their local banker, might have to change the way they do business…or perish.
Entrepreneurs who are looking for a truckload of cash to start their business may have to go back to the drawing board with their business plans, or maybe postpone their start up. But, remember, it’s “business,” not the end of the world. If an entrepreneur cannot handle setbacks in their business, they probably should not be in business in the first place. Stuff happens…terrible challenges face most entrepreneurs at some point—think about the hundreds of businesses in New Orleans that were impacted by Katrina.
The good news is that we are entrepreneurs, and, as a group, there is nothing we cannot face and still come out stronger than before. We have the creativity, innovation, drive and determination—plus old-fashioned guts, to see our businesses through any kind of challenge.
Yes, times are tough and we will have to roll up our sleeves and get to work, but there is no way that either Wall Street or Washington DC is going to get the best of us. I certainly don’t have all the answers, but I do have experience in this arena and I hope to share what I can with others of you who may be facing serious difficulties in the coming days.
Home Office Deduction
Of the 21 million non-farm small businesses in the U.S., 53 percent of them are home based. Unfortunately, these small businesses fall under most of the same tax requirements and regulations as the large corporations. That is why taking tax deductions for having your office in your home is so complex. Many of us do not even bother with this deduction any longer. The Office of Advocacy of the Small Business Administration states that, tax compliance is 67 percent more burdensome for the smallest businesses compared to their larger competitors.
Now, Senator Olympia Snowe (R-ME) has introduced a bill in the Senate to simplify home office deductions: “Home Office Deduction Simplification and Improvement Act of 2008” (S.3371), and Representative Charles Gonzalez (D-TX) has introduced companion legislation (H.R. 7074) in the House.
The issue of onerous tax regulations on small businesses has been debated for many years. I attended my first conference on this issue over 20 years ago, and little has been done—by either political party— since then.
If you have a small home-based business, I would highly recommend that you look at S.3371 and H.R. 7074. If you think they would benefit your tax situation, drop an email to your respective Senators and Representative encouraging passage.
My Book
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