Monthly Archive for January, 2016

Risk failure to enjoy success

Here are three pieces of wisdom which can only come from those who have known failure and from that acquaintance, found success:

In Uncommon Wisdom, my friend, Tom Feltenstein wrote, “When winners fail, they get up and go again. And the very act of getting up is victory”.

Robert Allen, author of Multiple Steams of Income, wrote, “There is no failure, only feedback.”

Paraphrasing Thomas Edison just a little, “Failure is successfully identifying what doesn’t work.”

And since I certainly am no stranger to failure, here is Jim Blasingame’s contribution to understanding its value, “Failure is the harness mate of success, and I expect to be acquainted with both as long as I live.”

You will never enjoy success until you are prepared to risk failure.

Poll Results: What grade would you give President Obama?

The Question:
From the standpoint of the impact on your business, what grade would you give President Obama for his time in office?

5% - A
6% - B
6% - C
9% - D
74% - F

Jim’s Comments:
As you can see, President Obama is a failure to three-fourths of our small business audience. It’s been clear from day one that the president has been ambivalent to the Main Street economy atbest, and against us at worst. In seven years in office, the only policy he’s proposed that looks anything like pro-business is the Trans-Pacific Partnership trade deal he cut last year.

On the other side of the coin, the anti-business stuff is a long list, which I’m going to innumerate in an article in the near future. Stay tuned. Thanks for participating.

And thanks for your abiding support of our poll each week. Check out our new one on how you would vote today, click here.

To listen to more about these poll results, click on the link below.

Small business owners have give Obama a grade

Is 2016 trending as the year of our next recession?

One of the distinct markers of the United States is what has been termed our “consumer economy.”

It’s pretty intuitive.

Having a consumer economy means that the main driver of GDP (gross domestic product), and therefore, the engine of economic growth, comes from spending by consumers. Other major elements that make up the entire U.S. economy include private investment, government spending and trade.

America is not unique in this distinction, but no other major economy in the world compares to the U.S. in this definition. For example, American consumers represented 71% of GDP in 2013, having risen from 62% in 1960. Around the globe, Japanese consumers are 61% of their economy, with only 36% in China. And in the major European countries, consumers average less than 60% of GDP.

The U.S. has experienced an increasingly robust consumer economy for generations. But one of the implications that has arisen for, let’s say, the past half century is that consumers are more likely to spend their money than save it. There are many reasons for this imbalance: America is the strongest economy in the world; has a diverse credit industry with creative products; and produces and imports a lot of cool stuff, which Americans want even if they have to borrow, instead of save, to get it.

The world economy has long benefited from the exuberance, rational or not, of the U.S. consumer. Indeed, during the global slowdown of the late 1990s and early 2000s, the U.S. consumer almost single-handedly kept the global economy from collapsing. But today, with a declining global economic scenario, will American consumers reprise their earlier role as economic champion? A new data point may provide that answer.

Recently, in our online poll, we asked small business owners if the significant drop in gasoline prices ($1/gallon in six months) was manifesting as increased spending by their customers. Less than one-fourth of our respondents reported such a trend was evident or slightly evident, while almost half said they saw no such evidence.

One of the reasons for the consistent moribund U.S. economy since 2008 has been the debt-reducing behavior of both American businesses and consumers. But it now seems the consumer’s cash conservatism continues unabated because, in addition to our poll results, other surveys indicate people are using the gas price dividend to reduce debt and save.

During the first quarters of 2014 and 2015 the U.S. economy went negative, producing one half of a technical recession, while the Dow Jones Index rose to new record highs. But 2016 has begun with stock indexes retrenching toward bear territory, a decline in both imports and exports, and no apparent help from consumers. Consequently, a negative Q1 this year may prove to be just the first one, rather than a one-off like the past two years.

Write this on a rock … The best way to not participate in a recession is to be prepared for one.

11 financial fundamentals every small business CEO must know

Regardless of the size of the business, ultimate responsibility for success lies with the CEO. If you’re a small business owner, that’s you. And the most critical CEO tasks that result in success or failure lie in the knowledge and practice of financial management fundamentals.

Statistics show that over half of small businesses fail within the first four years. Clearly that mortality could be significantly reduced if, before a business opened, the founder/CEO was required to pass a course that teaches business financial fundamentals and how to operate a business with them.

If you could use a little help in this area, allow me to identify some of the key elements that would be part of the curriculum of such a course.

-  CEOs shouldn’t do their own accounting, but successful ones learn how to manage with regular (at least quarterly) financial statements (balance sheet and profit-and-loss) that an internal and/or external accountant produced.

-  Successful CEOs know what their gross profit margin needs to be and what it is.

-  Smart CEOs track monthly sales-to-expense ratios in order to know when to adjust spending.

-  Savvy CEOs monitor inventory levels against projected sales, receivables and cash.

-  Real CEOs know how to calculate Accounts Receivable days and Accounts Payable days, understand the relationship between the two, and the impact of that relationship on cash.

-  Disciplined CEOs develop a capitalization strategy that blends retained earnings with short and long-term capital sources, like bank debt.

-  Capable CEOs identify the critical financial indicators and ratios that are revealed on the balance sheet and its relationship with the profit-and-loss statement.

-  Surviving CEOs believe and prepare for the cruel irony of how sales growth becomes dangerous when not properly funded, indeed, that you can succeed yourself out of business.

-  When a business isn’t profitable, professional CEOs identify the top impediments to profitability and deal with them quickly, decisively, and without emotion.

-  Perennially successful CEOs delegate many things well, but they stay close to the company’s cash picture from tomorrow to the next 12 months.

And finally, arguably the most important financial management CEO discipline:

-  Understand and monitor the relationship between Blasingame’s Three Clocks of Small Business: The Expense Clock, the Sales Clock and the Cash Clock.

If you already own a small business and cold sweat is popping out on your forehead right now that should motivate you to kick your financial education into high gear and become an expert on these fundamentals.

If you haven’t started your business yet, don’t until you can pass this course.

Write this on a rock … The ultimate responsibility for your business’s financial performance belongs to the CEO - that’s you.

To listen to Jim talk more about the 11 financial fundamentals for CEOs, click on one of the links below:

6 financial fundamentals every small business owner must know

5 of the 11 most important small business financial fundamentals

Poll Results: Your small business performance in 2015 and expectations for 2016

The Question:
How did your business do in 2015 and what are you expecting for 2016?

31% - We had a good 2015 and it looks like 2016 will be just as good.
24% - We had a good 2015 but are less optimistic about 2016.
24% - We did not have a good 2015 but are more optimistic about 2016.
21% - We didn’t have a good 2015, and it doesn’t look like 2016 will be better.

Jim’s Comments:
For the seventh year in a row, the yeas and the nays about the economy haven’t changed that much. It’s worth noting that we haven’t seen a double positive response at almost a third in a long time. And when the two 2016 positives are combined, that creates a 55% response, which is stronger than we’ve seen lately.

I’m attributing the slight positive increase to businesses being more financially solid than in the past. As I’ve said many times before, it would be difficult for any business to survive this long in this kind of economic environment without operating in a very parsimonious, and therefore profitable way.

For my part, I’m looking forward to an economic environment where more than 55% of small businesses are optimistic about the new year. How about you?

Thanks for your abiding support of our poll each week. To participate in this week’s poll on gas prices, click here.


Small business owners – still crazy after all these years

“Still crazy after all these years” is the title of a contemplative, 1975 song by the legendary singer-songwriter and multiple Halls of Fame member, Paul Simon. Listening to it on the radio the other day for the zillionth time, the song’s title/refrain made me to think about what makes small business owners different.

They’re different in the way they look at the world. How they think about challenges, imagine outcomes, appraise risk, project potential, and measure all of that against their resources and themselves is different from everyone else. And when they decide to go, like the poker player pushing all his chips to the middle of the table, small business owners are all in. Against all odds. No one else in the marketplace does that.

Still crazy after all these years.

Mountains of evidence should dissuade them from starting a business. The SBA reports over half of all small businesses fail in the first four years, and that’s a 20% increase in mortality over the past 20 years. Every new technology that lowers the barrier to entry for a small business simultaneously disrupts a traditional business model while producing a hundred new competitors. And yet thousands of new ventures are created every year.

Still crazy after all these years.

Many voices ask good questions: “No one’s ever done that before – what makes you think you can?” “How’re you going to create something from nothing?” “How can you compete with the Big Boxes?” “How did you talk the bank into a loan?” To which small business owners have one simple, but classic response: “I didn’t know I wasn’t supposed to.”

Still crazy after all these years.

Small business owners are constantly compared to other, more popularly trodden professional paths that could have been taken. “Why don’t you get a real job?” “Your brother’s job has retirement and healthcare.” “If you worked for a corporation you’d get bonuses and overtime.” “If you worked for the government you’d get paid leave, sick days and job security.” But to someone who took the entrepreneurial path less traveled, those “others” sound like receiving a sentence.

Still crazy after all these years.

In the face of all this, with no fanfare and little recognition, small business owners create over half of the U.S.’s $18 billion economy, 55% of innovations, are 93% of exporters, and sign the front of paychecks for over 70 million Americans, while simultaneously anchoring every Main Street in America.

What’s crazy to others sounds about right to a small business owner. Thank God.

Write this on a rock … Still crazy after all these years. You’re welcome.




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