Author Archive for Jim Blasingame

After a Lost Decade, the REAL Economy Is Ready for Expansion

There’s an old joke about a person paying last respects to an atheist friend. Looking into the casket, the friend lamented, “All dressed up, nowhere to go.”

Thinking about the U.S. economy makes that joke come to mind. Almost a decade since getting really sick, but not dying, America’s businesses – especially the small ones – spent the last nine years all dressed up, nowhere to go.

Since the 2008 financial crisis and associated Great Recession, which actually began Q4 2007 (a year before Barack Obama was elected), the economy has recovered at less than 2% GDP growth – never reaching expansion altitude. Because of the aggregate contribution of America’s small businesses, we know that at least half the missing growth, and millions of new jobs, didn’t come from Main Street. Here why:

One of the historic markers of the small business sector is an optimistic pathology that makes Pollyanna look like Negative Nellie. I never thought I’d see a political/economic environment so demoralizing as to effectively dim the American entrepreneurial floodlight into a glimmer. If you think this characterization is hyperbole, study the NFIB Index of Small Business Optimism – as I have. Alas, that proof in the Main Street pudd’n has been almost a decade of consistent and unprecedented pessimism.

Why so much dourness? Since 2009 the rhetoric and policies of the Obama administration made small businesses feel inconsequential at best, and the enemy at worst. Rhetoric like “You didn’t build that!” doesn’t make business owners feel froggy about capital investments or new hires. Nor do policies like tax increases, Obamacare, piercing the franchise industry’s employer/employee status, the Overtime Exemption rule, and an unprecedented regulatory assault, just to name a few. But wait! There’s more.

Whether through ignorance or ideology, too many talking heads perpetuated the fake news that the economy languished because banks wouldn’t make loans to America’s small firms. But anyone who cared to check heard small businesses calling out these false prophets by reporting, month after month, that they could borrow if they wanted – but didn’t (NFIB). In fact, they’ve spent a decade deleveraging. Which brings me to the single silver lining in all of this: By deleveraging and belt-tightening, small business balance sheets and cash accounts became stronger than ever. I’ll come back to this in a minute.

You’re no doubt wondering how I’ll reconcile my story with the record-setting stock market. First, for generations it was an article of faith that whether stocks were trending up or down, that trajectory was a leading indicator of the economy six months hence. But today, the stock market is merely a leading indicator of itself, and the real economy is on its own. Two prime reasons include:

1) the crossing of the moral hazard Rubicon by the government with bailouts of too-big-to-fail corporations and banks,

2) the Fed’s counterfeiting policies ($3.7 Trillion in QE). Both spawned empty-calorie financial capitalism at the expense of muscle-building market-based capitalism.

Help me reconcile how GDP went negative during Q1 in both 2014/15, and almost did again in 2016, but the Dow reached new record highs in all three quarters. Only in Bizarro World is that a sustainable reality.

And then we had an election. Out here on Main Street, you’d think the phone rang and the warden said it was the governor with good news. Most people don’t need me to catalog the good, bad and troublesome about President Trump. But, warts and all, small business owners are attracted to at least four of his credentials: 1) he knows how to make a payroll; 2) he knows what it’s like when the government gets in your grill; 3) he understands the incongruity of over-taxing and over-regulating a group sorely needed in America today – job creators; and 4) he hates Obamacare.

For the first time in a decade, there is simultaneous, almost giddy optimism on both Main Street and Wall Street. The NFIB Index just reported the highest one-month jump in small business optimism in the survey’s 43-year history. They know those squeaky balance sheets will deliver unprecedented profits in the hoped-for expansion. Meanwhile, incredibly, the Dow-Jones has added 2,000 points since election day, to push through the 20,000-point milestone/firewall.

With all of this pent-up energy, investors and job creators of all shapes and sizes are all dressed up, looking for a place to go. We’re thinking economic expansion, but unfortunately, what happens next is not up to us.

Write this on a rock … Note to President Trump & the Political Class: Don’t screw this up!

What Macy’s and Sears didn’t know about barbells

The American retail industry has been going through a major shift in recent years, but very recently we’re seeing increasing pressure on the Big Boxes.
In my last column, I introduced the macro-economics concept of The Barbell Effect now being created by this disruption in the retail sector. This column reveals why that macro-disruption should be good for Main Street businesses out in the micro-economy. If you missed the first column, check it out. In the meantime, here’s the gist:
The Barbell Effect occurs when entrenched, legacy practices are disrupted by forces like new technology, innovations, and shifts in demographic behavior, like when people stop going to malls. Those industry players who fail to adapt to the shift are forced to retreat into the contracting middle, the bar. Those who adapt will prosper in the bell ends, where most customers are going. Remember, the barbell doesn’t exist prior to the disruptive pressure — it’s the result, not the cause.
As the Big Boxes are being squeezed into the claustrophobic, bar-of-irrelevance, they’re closing stores faster than you can curl a two-pound free weight - by the hundreds. Their legacy model — customers walking into their stores to buy stuff — is built around a 150-year-old paradigm that’s shifting. Futurist and implications expert, Joel Barker warns, “When a paradigm shifts, everything goes back to zero.”
The energy driving this shift is the fast-evolving customer expectations, which are increasingly associated with e-commerce. Customers are finding it easier to shop for and acquire stuff online, which fits their 21st century lifestyle and saves them time. Here’s the retail barbell by the numbers: currently, online sales are just over 8% of all retail, but with a bullet of a half-point a year. Meanwhile, the legacy brick-n-mortar sector has seen 27 months of declining sales (Bloomberg).
Of course, we know who’s greasing this shift: the 1200-pound Internet gorillas like Amazon and Google, plus one more disrupter — mobile. Mobile computing wasn’t any part of our past, but with 20% of online sales and a faster bullet, it will dominate our future — as in tomorrow. You must have a mobile strategy.
In his 1982 book, Megatrends, John Naisbitt prophesied, “The more high tech we have, the more high touch we will want.” Make no mistake — this retail Barbell Effect is the fulfillment of the Naisbitt prophesy. The good news for small business is the Big Box retreat is leaving a High Touch vacuum you can fill, if you understand what’s happening on the ends of the barbell:
  1. The digital bell - for when customers seek sexy, high tech, virtual contact, while allowing Big Data manipulation and scratch-your-own-itch service;
  2. The analog bell - where customers go to satisfy their craving for that special sauce made from Main Street high touch AND slightly-less-sexy high tech. It tastes like this: “We’ll help you scratch your itch” customization; “Good to see you again, Mrs. Smith”; “Thank you for your business;” “Be sure to check out our mobile site.” “Follow us on Facebook.”
The reason it’s The Barbell Effect, and not The Lollipop Effect, is because of the primal truth that powers the analog bell: One hundred percent of customers who demand digital are themselves 100% analog. You and I, and every one of our customers are as analog as a caveman or a kumquat, which means we’ll always have analog, high touch itches. And with all the high tech leverage they can muster — 3,642 backscratcher purchase options (I checked) — Amazon can’t scratch one analog, high touch itch.
In the wake of the big retreat of the big retailers, combined with the analog limitations of the big e-tailers, that High Touch vacuum will be filled by Main Street businesses delivering their high tech/high touch special sauce. And since your small business doesn’t have to conquer the world to be successful, you don’t care if the digital bell is sexier and bigger than your part of the analog bell. The big guys need all of that to survive — you don’t.
Write this on a rock … Vacuums don’t stay vacuums for long, and there’s no room for you in the bar. Tick tock.

Beware the Barbell Effect, unless you’re a small business

Once upon a time, in a land far, far away – in Internet terms that’s about 10 years ago – a small business owner didn’t have to worry too much about macro-economics. Well, that was a nice trip down Memory Lane.

Today, Main Street business owners have to operate every day in their micro-economy, while keeping an eye on what’s happening at the macro level. Alas, macro-economics isn’t easy to get your head around when your highest priority on Monday morning is to cover payroll on Friday.

Here’s a handy macro-economy metaphor: the Barbell Effect. Essentially, this phenomenon occurs when natural forces – new technology, innovations, shifts in demographics and behavior, etc. – disrupts entrenched, legacy practices of an industry. The disruptive pressure squeezes industry players who fail to adapt causing them to contract into the bar. Those who adapt find their way to the bell ends, where there’s room to expand.

At the macro level, the barbell doesn’t exist prior to the disruptive pressure – it’s the result, not the cause. In the marketplace, the energy causing the disruption is customers empowered with new expectations. This will be on the test: When customers are empowered, businesses are disrupted and barbells are likely.

There have been many examples of the Barbell Effect – some small and local, and some even global. I read recently about a housing barbell in one city where units on the high and low ends – the bells – were selling well, while the ones in the middle – the bar – not so much. The American banking industry has experienced its own Barbell Effect this century. As big banks got bigger on one end of the barbell, community banks hung in there on the other end, while medium-sized banks experienced financial claustrophobia as the bar got thinner and thinner.

Right now, the Barbell Effect is creating an existential reaction that can literally be watched by Main Street small businesses from their front doors as no-longer-relevant retail giants are closing hundreds of stores at a breathtaking pace. Here are some numbers: As of this year, 200 Sears stores closing brings their numbers down 60% in the past 5 years, while K-Mart is shuttering over 100 locations. Macy’s is closing 100 stores, and JC Penney is projecting 300 store closings. And besides these big guys, many medium-size retailers are also making the acquaintance of the bar between the bells.

The pressure creating this retail barbell is arising from new and evolving customer expectations, which increasingly means higher adoption of e-commerce – online shopping/purchasing. But the new expectation isn’t about unique products, lower prices, or better service, it’s the most powerful relevance advantage in The Age of the Customer: saving time. Technological innovations and customer care practices – easier mobile shopping and electronic payment, plus free delivery and easy returns – are saving customers enough time to change their shopping behavior and create a barbell.

As we witness the disruption – if not the end – of traditional, big box retail, let’s remember the good news about the Barbell Effect: It has two fat ends – the bells. On one end of the retail barbell are disruptive companies like Amazon, Google, and any other purveyors of the online retail model. On the other end are small businesses that understand that the online, digital model cannot fulfill all of the expectations of their analog customers. Indeed, the current Barbell Effect is producing a customer experience vacuum that will be filled very profitably by small retailers who deliver the special sauce of the both/and business model: traditional, analog retail (High Touch), combined with online, digital capability (High Tech).

In my next column I’m going to reveal what it takes to maintain occupancy of the fat ends of the barbell, and why this current retail phenomenon is great news for small business CEOs who see the micro-impact of the macro-economy.

Write this on a rock … Blasingame’s Law of Business Love: “It’s okay to fall in love with what you do; it’s not okay to fall in love with how you do it.”

Six networking tips for International Networking Week — plus a bonus one

This is International Networking Week. I know – I’m excited too!

But before you head out, help me recognize two world-class leaders for first making networking a thing, and then for making it a big thing.

On February 23, 1905, lawyer Paul J. Harris got a handful of friends together and founded Rotary, the world’s first civic club. Initially, his goal was just to grow his practice. But Harris soon realized this could be big because Rotary clubs caught on and, you might say, went viral. Now after over a century of international success, 33,000 Rotary clubs around the globe meet every week to network. And millions of people worldwide have benefited as Rotarians have delivered on Harris’s founding principle, “Service above self.”

Three-quarters of a century later, Dr. Ivan Misner also had a rather parochial idea that caught on around the world. What began simply as a plan to meet other professionals in order to grow his consulting business, rather quickly became Business Network International. Over 30 years, 7,500 worldwide chapters and millions of business referrals later, the BNI watchword is “Givers gain.”

After more than a half-century in the marketplace, more than 25 years as a Rotarian, and almost 20 years as a friend of BNI, here’s what I call the Networking Power Question: “What can I do to help you?”

There are two fundamental reasons Rotary and BNI caught on and have endured:

1. Networking is the professional version of the naturally gregarious nature of humans – we just like doing it;

2. Done right, the headwaters of networking is a commitment to what’s best for the person on the other side of the handshake. And after a century of organized practicing, we know the awesome power of putting others first.

Now, let’s get your International Networking Week off to a successful start by considering these networking thoughts (NT) that were inspired by my friend and networking goddess, Andrea Nierenberg.

NT #1.  Make eye contact

Clearly the cardinal sin of networking is not looking the person you’re talking to in the eye.  Nierenberg says you should be able to remember the color of the person’s eyes that you just met.

NT #2.  More ears – less mouth

This is an old adage, but it’s an essential NT for most of us. You’ll be more likely to impress someone by your interest in them rather than the other way around. “Tell me about your business,” and then, “Tell me more.”

NT #3.  Smile – a lot!

Ladies are usually better at this than men. But the smile must be genuine, and is best accomplished in combination with NT #1. You don’t have to grin guys. Just turn up the corners of your mouth a little.

NT #4.  Firm handshake

Men are usually better at this than the ladies, but don’t turn it into a wrestling match. And guys, when you’re shaking the hand of a lady, it’s the opposite of dancing: let the lady lead. Ladies, that means offer your hand first and give ’em a good squeeze.  No one likes a dead fish/limp elbow handshake.

NT #5. Elevator speech

This is your very short and concise response when it’s your turn to talk. And unless one of you is actually getting on an elevator, be thinking about NT #2, and follow your little pitch with a sincere inquiry about them. “Now, tell me about you.”

NT #6. Successful networking benefits all parties

Enter any networking opportunity with NT #6 on your mind instead of “What’s in it for me?” and your networking success will increase exponentially. Remember the legendary Rotary and BNI mottos, “Service above self” and “Givers gain.”

Here’s a bonus NT from Misner: “It’s not netplay, it’s network.”

Make it your personal goal to become a professional networker. And then watch success come and play in your backyard.

Write this on a rock … Face-to-face networking is the original social media.

Two reasons quality service can take you down

Successful customer service is the process of delivering value to customers in exchange for payment.

Surely this is the prime directive of any business. But that process isn’t truly successful unless the relationship can be sustained, and only quality produces sustainability.

But what kind of quality?

“Quality service” is a 20th century term that businesses use to declare a commitment to diligent customer support. But customers typically associate it with, and businesses too often tolerate it as promptly addressing a problem. Unfortunately, here’s what quality service often sounds like:

“We’re sorry we delivered the wrong size part. But we’re committed to quality service, so one of our trucks will be there in an hour with the correct part.”

It’s true. Sometimes quality service like that impresses the customer – and businesses even like to brag about delivering it. But while prompt attention is admirable, it’s not optimal because it has a negative impact on sustainability in at least two ways:

  1. The customer was inconvenienced by inaccurate service – you screwed up!
  2. Allowing an avoidable problem to occur is the worst kind of profit-eating inefficiency.

In the 21st century, successful small businesses have converted their problem-fixing “quality service” to the profitable and sustainable “quality process.”

Put simply, executing a quality process is serving customers correctly the first time. Accomplishing a quality process ranges from the very basic, accurate order filling, to the more complex, integrating into your operation only those vendors that share your quality process commitment. It shouldn’t be breaking news that your large business customers have been doing this for a couple of decades, to eliminate weak links in their supply chain.

The optimal goal of your quality process is sustainable customer relationships. That means 1) you did it right the first time; and 2) you made a profit and didn’t squander any of it on mistakes. Such sustainability is in evidence when customers return to find your profitable business still there, ready to serve them again with your quality process.

So why would anyone live with profit-eating quality service instead of managing with a quality process? Because cash is a drama queen and profit isn’t.

Delivering quality service is practiced by crisis managers. The crisis comes when you could lose a sale – possibly even a customer – because an order was filled incorrectly, creating a hit to your cash flow so quickly and dramatically that it takes your breath away: “OMG, get out there right now and fix this!”  Lots of drama for everyone.

Having a quality process is a commitment to profitability, requiring disciplined, long-view professional management. You’ll recognize it by the sound of no drama experienced by you or your customers … crickets.

Professional small business CEOs know that focusing on a quality process – doing it right the first time – takes a commitment to quality hiring, efficiency training, and a focus on what customers want, not just what they need. These practices produce sustained profitability and, in time, will eliminate your noisy cash flow drama.

Remember, the quality service you’ve been so proud of may seem admirable, but when delivered in response to something that was avoidable, it assaults profitability, threatens sustainability and ultimately will put you out of business.

Write this on a rock … Convert quality service into the more profitable – and sustainable – quality process.

Top 10 Things That Keep Small Business Owners Up at Night

If you ask any small business owner “How’s business?” invariably they will respond: “Well, I can always use more customers.” So if someone asked you what’s the greatest concern of small businesses, you could be forgiven for being wrong if you said they need more sales, because that’s what most people think – especially politicians.

When it comes to buying and selling, small business owners are pretty good at that – every company is founded, and has been built to do those things. But operating a small business in the 21st century has become more complicated than ever before, which is why people who know small business know the best way to find out what’s really going on is to ask the owner what keeps them up at night.

One organization that knows how to ask small businesses the right questions is the National Federation of Independent Business. As you may know, the NFIB’s monthly Index of Small Business Optimism has been the gold standard for such research for 43 years. They also have a quadrennial report that speaks directly to the “what keeps you up at night” question. It’s the NFIB Small Business Problems and Priorities Survey, and in the 2016 report, you may be shocked to learn that “more sales” came in at #45 out of 75 options.

With an almost 15% response from 20,000 members they surveyed, 2,831 small business owners told the NFIB that their greatest challenges weren’t the competition (31), or social media (64), or online retailers (61). What about poor profits? Nope, that’s #16. Even the most initiated observers of small businesses would feel safe in presuming that cash flow would be #1, but this primordial Main Street challenge is actually #25.

If you listen to politicians, you’d think needing a loan is what wakes small business owners up at 2am. Surely you know better than to listen to politicians when it comes to small business or the marketplace, because needing a loan is almost last, at #70. That monthly NFIB Index I mentioned earlier has reported that since 2007, established small businesses have been adhering to what I call “The Great Deleveraging.” They don’t want no shtinkin’ loans.

So what is the numero uno greatest small business challenge? Drum roll, please: The cost of health care. Number 2 is oppressive government regulations. Number 3 is federal income tax on businesses. Number 4 is uncertain economic conditions. Number 5 is tax compliance complexity. And six through nine are also all government related. This next point is very instructive: The first operating challenge to break through the top ten is #10 – finding qualified employees. Let’s review: Nine of the top 10 greatest small business challenges are directly associated with government.

Some might say health care costs are not the government’s fault, but that would be Rip Van Duffus who just woke up from a seven-year nap and never heard of Obamacare. To be fair, let me hasten to add the cost of health care was a small business challenge prior to Obamacare. And this law did “bend the price curve,” as promised. Unfortunately, for the small business sector, Obamacare bent the cost curve up, not down.

Thanks to the NFIB Survey, President Trump and the 115th Congress can’t say they don’t know where to start helping small businesses. Indeed, they’re neck deep with the Obamacare “repeal and replace” debate right now. But here’s some “Breaking News”: We polled our online audience about that issue and 94% said “Yes” to repeal and replace, but half said, “Take the time to do it right this time.”

There’s no doubt that 26 million American small business owners – with health care costs on their minds – had a significant impact on the November election. So my advice to the political class of all three parties – Democrats, Republicans and Trumpicans– is to take the time to get healthcare right this time. And then quickly start reducing the other eight non-operating challenges government is imposing on the most important job creators in America: the heroes of the Main Street economy – small businesses.

Write this on a rock … What’s good for small business is good for the world.




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