Monthly Archive for July, 2011

Small business economics

Two years after the technical end of the Great Recession, the U.S. economy is still struggling to recover. It’s clear that the residual of the causes of this downturn have yet to be absorbed. In fact, GDP growth for 2011 is tracking at a slower pace than last year.

As we’ve done periodically in the past year, we recently asked our audiences about their experience in the economy right now. We asked, “Based on your small business right now, which of the following most closely fits the economic conditions you’re experiencing?”

The first choice, “Up - our business is good,” was chosen by barely more than one in ten of our respondents. This is pretty close to the top response in the last poll we took.

The middle question, “Flat - we’re doing okay, but growth is slow,” was the big group, coming in at 65% of our sample. The last options, “Down - we’re barely holding on,” was admitted by almost one-fourth of our respondents.

With almost 90% percent of our poll participants reporting either slow or no growth, this, unfortunately seems to track pretty close with other polls I report about on my radio program, The Small Business Advocate Show, as well as the national economic indicators.

It’s clear to me that the U.S. economy is not going to grow until small businesses are able to grow.  What part of this is lost on the so-called leaders in Washington who are doing more than anyone to dampen the enthusiasm of America’s marketplace heroes, small business owners?

How do you feel about what our political leaders are doing to stimulate the economy?

I talked more about the economy and small business on my radio program, The Small Business Advocate. Take a few minutes to listen…

Should your business change its DNA?

In nature, all life comes in two forms - plant and animal.

In the marketplace, all business entities are found in two forms - human and non-human. But unlike plants and animals, a human business can morph into a non-human entity.

The human businesses are sole proprietorships and partnerships. Of the non-human entities, there are three: C Corporation, S Corporation and the Limited Liability Company (LLC).

So why should your human business morph from human to non-human? There are three excellent reasons:

  1. To acquire certain tax advantages. Talk with your accountant about this.
  2. The “corporate veil” provided by a corporation or LLC can shield personal assets from legal obligations or claims on the business. Talk with your attorney about this.
  3. Many larger customer prospects won’t take your business seriously as a vendor unless you are a corporation or LLC.

If your business is very small, you might be able to spend the incorporating expense - $500 to $1,000 - on something more immediately critical, like a computer or marketing. But one concern is that you might wait until it’s too late. Here are three organizational and operating triggers that should help you decide when to morph from a human to a non-human entity.

  • When you hire the first employee.
  • When you enter into contracts on behalf of the business.
  • When you establish any credit, including with vendors.

Non-human entities do require maintenance to be able to sustain the benefits against outside interests. Here are a few critical maintenance tips:

  • Tell EVERYONE that your business is formed as a non-human entity.
  • Identify the legal ownership designation (like Inc., or LLC) on all documents, signage, etc.
  • Operate the legal entity’s finances completely separate from personal activity, especially checking accounts.
  • Maintain proper corporate documentation, like shareholder and annual meeting minutes.

And finally:

  • Don’t forget the triggers.
  • Be proactive, not reactive, about your entity.
  • Keep up the maintenance on your non-human entity.
  • Business entity laws vary by state.

Your business is not a plant; you can change its DNA.

Recently on The Small Business Advocate Show, I talked more about the legal structure of small businesses. Take a few minutes to click here and listen. As always, tell us your experiences in changing the legal structure of your small business.

Your customers have connection preferences

One of the markers of the digital age is the proliferation of handy electronic connecting tools, like email, text messaging and social media platforms. And as with any element of our lives where there is an abundance of choices, over time we establish preferences.

These days there are actually two preference scenarios in play with regard to the digital connecting platforms:

  • How we prefer to connect with family, friends and business associates; and
  • How we prefer to be contacted by businesses for order follow-up, and with information and offers.

The preference rule of thumb for connecting with family, friends and associates typically depends upon the generation. If you prefer email, that probably means you’ve been in the marketplace for a few years - Baby Boomers and much of Gen X. If you prefer texting you’re probably under 30. And if you prefer social media, you’re definitely under 30.

In the second scenario, where customers give a business permission to connect with them electronically, preferences are still evolving. So recently, we asked this question of our radio and Internet audiences: “When you give a business permission to contact you, which digital method do you prefer?” The results were instructive.

The response we received from those preferring a business contact them by email was overwhelming at 95%. All the rest, 5%, preferred to be contacted by text messaging. That’s right, not one of our respondents preferred to be contacted by either of the two social media choices we offered, Facebook or Twitter.

It’s not surprising that email won the preference race; it’s been around the longest of the digital platforms. But even though texting came in a distant second, and social media didn’t even move the digital needle, believe this: These options will grow as preferences for how customers will want your business to contact them.

Your website is becoming less of a destination for customers and prospects, and more of a distribution center to them. The future success of your small business will depend heavily on asking for and getting permission from customers to “Follow me home” digitally.

And you shouldn’t care which digital method customers prefer you use to contact them. Your job is to make all the prominent digital connection options available wherever customers find you, and then do what your customers prefer.

I talked more about how your customers want you to connect with them on my radio program, The Small Business Advocate Show. Take a few minutes to listen and leave your thoughts on how you like for businesses to connect with you.

Whose policies are responsible for the slow economy?

The end of this month is the second anniversary of the technical end of the Great Recession.  Alas, what I have called the not-so-great recovery has been so not-great that for many, the technical end date is nothing more than a data-point with little correspondence to what’s happening in real life.

Some of the unemployment stats are at or near records, with millions of Americans cyclically or structurally out of work, many chronically so. One-fourth of homeowners with mortgages are upside-down, a term for when you owe more than the underlying asset. And now, almost three years after the financial meltdown of 2008, the economy is softening to the point that some talking heads are talking another recession - the dreaded “double dip.”

Clearly, many of our problems have been brought on by digital greed and not a little marketplace malfeasance. As that legendary possum philosopher, Pogo, once said, “We have seen the enemy, and he is us.” But it’s just as clear that the political class has to answer for their bumblings, bad policies and political non-leadership.

We wanted to know how our audience felt about how much of our pain can be attributed to that person upon whose desk the Harry Truman buck stops.  So last week, in our poll question on the website and in the Newsletter, we asked, “Whose policies do you think are more responsible for the current painfully slow economy?”

Those who thought our economic woes were “… more of a residual of President Bush’s policies,” represented 15% of our respondents.  A little less than 40% said, “After 2.5 years, this is President Obama’s economy.”  But the big number - almost half - said, “I blame the policies of both administrations.”

One of the ways politicians get re-elected is to make us feel that they have the answers to our problems and, given the chance, will fix them. But that sword has two edges and the other side cuts deeper with accountability for perceived, if not real, mistakes.

In Shakespeare’s play, Julius Caesar, Mark Anthony’s eulogy of Caesar includes this passage: “The evil that men do lives after them; the good is oft interred with their bones.”

And so it is to this day.

Click here to take this week’s poll on government regulations.

Take our poll on government regulations

As America celebrates its independence this week, how concerned are you that your business’ independence is being eroded by government laws and regulations?

Click on the question and give us your opinion — it will just take a few seconds and you’ll immediately see the current results of the poll.

Have more you’d like to say? Leave us a comment.

America: Independent & entrepreneurial

Seven score and eight years ago, Abraham Lincoln’s dedication of the Gettysburg Cemetery included these words: “…our fathers brought forth on this continent, a new nation, conceived in liberty and dedicated to the proposition that all men are created equal.”

Four score and seven years earlier, one of those fathers, Thomas Jefferson, penned what is arguably the most important secular document in history, the Declaration of Independence, which included this passionate passage:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights that, among these are Life, Liberty, and the pursuit of Happiness.”

Having the spirit, courage and vision to declare independence, at a time when monarchy was the accepted model of government, is impressive. Fighting for those principles then, and defending them from within and without for over two centuries is unprecedented.

To be sure, America has had lapses in the delivery of some of these tenets. Indeed, while Lincoln was trying to save his beloved country, he made this judgment: “We made the experiment; and the fruit is before us.”

Even today, America is a work-in-progress. We’re on a journey of understanding with many stations where new things are learned and past wrongs can be righted. But in terms of contribution to the world, Ronald Reagan’s “shining city upon a hill” has an incomparable record. Warts and all, the United States is still a benefactor nation with millions of beneficiaries.

Freedom to dream is found in other lands, as is freedom to pursue dreams. But no entrepreneurial soil is more fertile than in America, and it’s because of those who had the spirit to create our founding documents, the will to deliver them, and the courage to defend them.

Life, liberty, and the pursuit of happiness have been essential to millions of American small businesses. If you ask anyone, anywhere on the planet, where to go to start a business and have the greatest chance to succeed and accrue the fruits of that labor, the answer would be America. Generation after generation of small business owners have, like the Founders, demonstrated spirit, will and courage as they have claimed and perpetuated the American dream.

As we celebrate the blessings of another Fourth of July in America, let’s fulfill Lincoln’s hope that the bonds of affection for each other will be “touched by the better angels of our nature.”

I talked more about entrepreneurs and liberty recently on The Small Business Advocate Show. Take a few minutes to click on the link below to listen and leave your comments.

America: We began with freedom

America: Independent and entrepreneurial

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