Daylight Saving Time
Consider this!
Today is the end of Daylight Saving Time for this year, so I thought I would share a bit of wisdom on the subject.
Sadly, it seems that Wisdom is something seriously missing in our government—on every level.
More Costs for Small Business
Well, the House went public with their new healthcare bill this morning. Here are just a few highlights that might interest small business:
—House Majority Leader, Steny Hoyer (D-Md) said, “We will keep our promises and commitment to the integrity of the process by making the bill’s full text, to make sure we have this exactly right, publicly available for 72 hours before the members are asked to vote.” 72 hours—to read, study and analyze a 1,990-page bill from the House of Representatives …before they vote to make it a version of a law. I guess they expect Washington to shut down for 72 hours while everyone analyzes the bill.
“This report, by its very length, defends itself against being read.” —Winston Churchill
—The bill apparently does take a pretty good whack at both the health insurance industry and the pharmaceutical industry. This will certainly shift the people on K Street into high gear.
—More small businesses will be exempted from the mandate to provide health insurance to employees—those with payrolls up to $500,000. This is good news for small business, as the prior House bill capped the exemption at $250,000.
—The cost of the bill will be paid in part by taxing individuals with incomes over $500,000, and families with incomes over $1 Million. First, it is not too difficult for many people in this group to manage their incomes down below the threshold. Second, even if the tax was exorbitant, there are not enough people, technically, in this group to make a major dent in the cost of the new bill.
—The rest of the cost of this new bill is expected to be made up from savings in Medicare. The Seniors are not going to like this part. Doctors today are dropping Medicare patients in droves, because Medicare payments are so low, any doctor treating Medicare patients could likely make more money being a plumber or an electrician.
For a complete copy of this new (1,990-page) bill, click here (Huffington Post—4th paragraph). I’m sure you can have it properly read and analyzed before Sunday, November 1st, at 10:a.m. (72 hours from release).
The good news for small businesses may be short-lived, however, because there is a problem with the government’s math. The Congressional Budget Office pegs the cost of this healthcare bill at something north of $1 Trillion for the next 10 years. Be that as it may, I previously posted an analysis of projected healthcare costs, for the additional insured only, that totaled $2.6 Trillion over 10 years…check it out here. This analysis assumed that every person brought into the new program would receive care at least as good as the Veterans Health Administration (VHA) provides.
On the other hand, there are two options to my analysis; (1) reduce the quality of healthcare way below the VHA standard to bring the costs in line with the budget estimates, or (2) increase taxes to pay for the costs above the budget estimates.
Savings? The administration is saying there are savings to be gained by streamlining healthcare—Forget it! Here is what President Obama’s healthcare czar and major healthcare advisor, Dr. Ezekiel Emanuel, had to say about healthcare savings:
“Vague promises of savings from cutting waste, enhancing prevention and wellness, installing electronic medical records and improving quality are merely ‘lipstick’ cost control, more for show and public relations than for true change.” (Dr. Ezekiel Emanuel, Health Affairs, February 27, 2008)
So…small-business folks; as you update your long-range business plan, be sure to include an ever-increasing expense for health insurance for you and your employees. There are not enough wealthy people in the U.S. to pick up the $2.6 Trillion tab, and any savings being talked about is only cosmetic. Yet, the money to pay for everything must come from somewhere—most likely; you, me, and our small businesses.
Small Business Needs Leadership in Washington
In my last post, I presented the fact that American banks were actually cutting back even more on loans to small business. Then today I read a post by Arianna Huffington, on the Huffington Post, where she discusses this same issue, plus, the lack of leadership in Washington to resolve this problem. I have included some excerpts from Arianna’s post below, but I would encourage all small business owners to read her post in its entirety.
—The president, in a recent radio address, said he would take appropriate steps to “encourage” banks to meet their responsibilities. Encourage them? Pundits encourage while presidents execute…that’s their job!
—The president’s plan of action for getting small business back on track financially is to convene a conference in the coming weeks. Instead of taking decisive action, the most powerful person on earth is going to “convene a conference.” Here is what Arianna had to say:
Of course, we all know that in Washington-speak ‘I’m going to convene a conference’ is somewhere up there with ‘I’m going to establish a blue-ribbon commission’ in terms of kicking an issue down the road.
But, is there anything the president can really do, other than use moral suasion, to sway the behavior of our financial system? Of course there is! How about this:
—Open up the Fed to full transparency. This should have been a condition for the president appointing Bernanke to a second term. Instead, the Fed is now fighting an audit proposed by Congress—and the White House is silent.
—The president also appoints the heads of the Office of the Comptroller of the Currency (supervises commercial banks); the Federal Deposit Insurance Corporation; the head of the Office of Thrift Supervision (regulates savings and loans); the head of the Securities and Exchange Commission; and the head of the Commodity Futures Trading Commission (oversees derivatives). If these powerful people cannot move the banks to support small business…it is time for the president to make some re-appointments. That’s what would happen in any successful American business.
—More importantly, the president picks the person who runs the Treasury Department. Here is what Adrianna said about this appointment:
…the Treasury Department…is not legally mandated to be overseen and staffed by former Goldman Sachs executives and their friends. And there is nothing in the Constitution that says the Treasury Secretary has to be in near-constant contact with the heads of Goldman, Citigroup, and J.P. Morgan, often taking their calls late at night.
Perhaps this is an appointment that needs to be reconsidered now.
—The president also has the power to regulate. Instead, he has chosen to allow the proposals for financial regulatory reform that are working their way through Congress to be riddled with loopholes and exemptions favorable to Wall Street.
Here is Arianna’s closing statement:
…if only Barack Obama would stop acting like a pundit, egging on change from the sidelines, and start acting like the president, dictating the game from the middle of the field.
Every small business in America has a congressional representative and two Senators, who have been elected to serve and represent those who put them in Washington. Now is the time to tell these representatives, as well as the president, that it is not Wall Street, nor K street who deserves their allegiance—it is the people who elected them, and we demand to be represented. It is up to us to demand leadership. It is also up to us to reappoint our representatives at the ballot box, it they don’t do their job.
Read Arianna’s entire post here.
NOTE: This Friday, Arianna, along with Howard Dean, will take part in a debate on C-Span with Dick Armey, and John Kasich on the question “America’s Future: Can Capitalism Survive? This is something that should interest every small business owner in America.
More Bad News for Small Businesses
A few days ago, MarketWatch published an article titled, “Banks cutting back on loans to businesses.” Here is a quote from that article that I find most disturbing:
U.S. banks are reducing their lending at the fastest rate on record, tightening the credit squeeze and threatening to leave many otherwise viable businesses unable to borrow money to expand their businesses, meet their payrolls, or refinance maturing debts.
To counter this, President Obama just presented his plan for helping small businesses obtain loans. The President’s plan calls for money to be made available to small banks from the TARP pool at a low interest rate, and the ceiling for the SBA’s most popular programs to be raised from $2 million to $5 million.
Unfortunately, the changes to the SBA programs require Congressional action, and that could take a long time. Moreover, the money from the TARP pool comes with strings attached, and here is what Cam Fine, President of the Independent Community Bankers of America trade association had to say:
…family-owned banks are not going to want to subject themselves to compensation restrictions imposed by TARP, because it is their own personal money that is the capital of the bank.
Even if banks do get more government money, are they going to loan it to struggling small businesses? According to an article in BusinessWeek, banks are putting much of their available capital into Treasury and other securities. As a result, loans and leases are taking a back seat. Also, banks are complaining that tighter regulation, plus a special assessment to replenish the FDIC, is affecting their ability to make loans.
So, what is a small business owner to do? Well, I’ve been in situations like this before, and, although not pleasant, they can be managed. Some banks are still lending to solid businesses that have a history of profitable operation, so polish up your “public” business plan and spend some time pitching your business to small banks. This is assuming, of course, that you are not already over-extended—remember; banks are not Venture Capitalists.
If your cash situation becomes critical, you will need to look for alternative sources of money, such as taking on a partner, looking for venture capital, or borrowing “hard” money. Alternative sources of money could also include personal resources, such as, home equity loans, family members, credit cards, selling assets (boats, RVs, motorcycles, cars, vacation cabins, etc.) and borrowing from friends.
If you have tried all of these things, and still cannot balance your cash flow, it may be necessary to sell a portion of your business, merge it with another, or cut it down to a manageable size.
Times are very difficult for some small businesses right now, and you may have to do things you likely never thought of when you started your business.
So, stay the course, be persistent, involve your employees and advisors, and don’t give up—you can weather this storm.
Small Business Startups–Beware! Part 2
Last week I wrote about the angel investor scam that Jason Calacanis recently brought to light on his weblog. Jason has now posted Part 2 of his series, which includes testimonials from entrepreneurs who have been victimized, and also comments from a few former employees of some of these questionable operators.
After reading the testimonials in Jason’s Part 2, I am appalled that such a flagrant scam is being perpetrated on entrepreneurs trying to start a business. It appears that this is just another example of the greed and selfishness of unscrupulous business people.
Calacanis also reported that he is now being sued by Keiretsu Forum for mentioning them in his Part 1 post. It appears he is expecting more lawsuits in the future as he digs deeper into this issue. He says he will sell his Tesla, if he has to, to pay his own legal bills.
Jason apparently is trying to get people involved in this issue on his weekly podcast “This Week in Startups.” He is inviting people from both sides to participate, although, after reading his newest post, I doubt that any investors will want to be on his show
If you are looking for startup funding, and considering angel investors, you may want to review Calacanis’s weblog posts first. Part 1 breaks the issue wide open, and Part 2 presents some “smoking guns.” The posts are long, but they could save some people a lot of money.
As I stated in my first post, there are many investors, both angels and Venture Capitalists, who operate ethically and openly—you do not need to pay just to get a meeting with them. You do, however, need to give a compelling reason for them to meet with you, i.e., a great idea, and a well-thought-out business plan.
But remember, unless you are starting a technology company, this is usually not the best source of funding for most small business startups.
Children are Watching and Listening
One of my favorite bloggers, Judith Ellis, made a post on her blog, The Being Brand, this morning, entitled Being a Child. It has to do with a 4th grader’s question to President Obama at a town hall event in New Orleans. This young boy wanted to know “Why do people hate you?” Judith’s post includes a CBS News video of the question and the President’s response. I encourage you to check out Judith’s post.
But, to me, the most important part of Judith’s post was her words following the video. Here they are:
When adults behave badly we snuff out the goodness and innocence of children. Children are sponges. We really must be more careful; children are watching and listening.
How true this is, and I don’t think any child has expressed this better than DeClan Galbraith, when he recorded the following back in 2006. I think he was around 11 years old at the time:
(email subscribers, view on my blog)
As adults, parents, business leaders, teachers, family members, neighbors, government leaders, and just plain “folk”—what are we teaching the children? Really teaching them?
Thank you Judith, for this important message.
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