Tag Archive for 'American dream'

How vacations reveal American Dream may be in jeopardy

For several years we’ve polled our small business audience weekly about issues and conditions that impact them.

Whenever a question is seasonal or a recurring issue, besides serving that poll, the responses often produce a bonus. For example, the potential to identify year-over-year trends, or illuminate a current market trend.

In last week’s poll response, we scored both of these bonuses. The subject was a seasonal one that’s almost unique to small business ownership – “Will you take a vacation?” – with three response options: 1) “I’ll take an entire week off;” 2) “Only mini-vacations, like a long weekend;” and 3) “Vacation? I can’t even take a day off.”

This year everyone moved. Historically the real vacation group fluctuated close to 50%. I was happy to see our new poll had almost six of ten (59%) respondents allowing they were taking a week off, whether to go incommunicado, or expecting to check in. The long weekend responders in the middle thinned out compared to past years, while the sarcastic, “What’s a vacation?” bunch increased.

The classic evolution of time off for a business owner looks like the inverse of our response options. In the beginning it’s, “What’s a vacation?” then you graduate to long weekends as the business matures, and finally to a full week off, or more, at maturity. Maturity means having your organizational and capitalization stuff together.

This week’s response also supports two forecasts I made in 2009.

As the Great Recession technically ended, I predicted small businesses would increasingly diverge into two categories: they would either become stronger, or inevitably erode their equity and credit and go out of business. That’s what I’m seeing in the responses to our vacation poll this week. The sector that formerly could only take off a few days is diminishing because they’ve either joined the organizationally and financially stronger ranks, or gone the other way toward extinction.

Historically speaking, it would be intuitive and accurate to think that the no vacation group would include startups, rather than just declining businesses. But I also predicted in 2009 that there would be fewer startups in this economic recovery cycle. As you may have seen reported by real research organizations, my startup prediction, unfortunately, has come to pass. According to the U.S. Bureau of Labor Statistics, there has been a steady, 10-year decline in businesses less than one year old, and the category total is 10% fewer today than 20 years ago.

So our vacation responses indicate a barbell effect happening on Main Street. And it’s good news that so many small businesses have survived and become stronger. But since every business, large and small, begins as a startup, the overall decline of entrepreneurship in the U.S. does not bode well for the future robustness of the U.S. economy or the business ownership component of the American dream.

Write this on a rock …
If small businesses were a plant or animal species, it would currently be classified as threatened, on a path toward endangered.

You can buy your American Dream from someone else

The American Dream has many components, but the big three are: liberty, business ownership, and home ownership.

The order of my list is intentional. Liberty is prime because it makes the other two possible. And business ownership has produced a jobs-creating economy, making homeownership a reality for millions of Americans. Liberty is our inalienable right as Americans, while homeownership is possible for all Americans, but not guaranteed. Business ownership, however, clearly is not for everyone.

For most of us, when the entrepreneurial sap starts rising in our bark the first thought is typically to start from scratch—a.k.a. a start-up. It’s a natural process to envision your new business and then set about creating it out of whole cloth. But maybe someone has already created it. Consider these three points before you start from scratch.

1. Think of your local marketplace as a Honda Civic with five really big guys already crammed in it and you want to get in that car with them. It’s possible, but guess who’s gonna get squeezed? That’s right—and you get the console. Ouch!

That’s what it feels like when you add a new business to a marketplace. The folks already there have the best seats, and you get what’s left. I’m not saying it can’t be done—I did it—but it’s a rough ride. And remember, the console doesn’t have a seat belt.

2. Look at that fully-occupied Civic another way. Let’s say you talk one of those five big guys into selling his seat. This time you get a real seat, with a seat belt. In the marketplace, that seat represents an existing location, a known brand, phone numbers, website, vendor relationships, experienced staff, and most importantly, customers and cash flow, which represent your seat belt and air bags. With this plan, your first day as a new owner won’t be day-one of your business.

3. The biggest lament for every small business dreamer is, “How do I get the capital to fund my new business?” Here’s some really good news: almost all small business sales involve some seller financing. So when you’re talking to that big guy about selling his seat, be prepared to discuss how the two of you can be creative in developing a multi-year payment plan that combines your investment and his financing.

And before you convince yourself that the price tag of that seat is too high, compare it to the cost of replicating the existing customers, cash flow, contacts and good will that come with that acquisition.

Remember: even if you buy a business instead of creating one, you’re still going to have the hardest job in the world.

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Check out my latest segment below from The Small Business Advocate Show® where I talk more in-depth about buying your American Dream.

You can buy the American Dream

Check out more of Jim’s great content HERE!

Take this week’s poll HERE!

Watch Jim’s videos HERE!

The Small Bank–Small Business Cascade

America is exceptional for many reasons, not the least of which is the way our pioneer DNA morphed into entrepreneurship. But all DNA has to be nourished, and the food of entrepreneurship is capital.

As America’s pioneers claimed Manifest Destiny they simultaneously created businesses and markets, which were funded at first by sweat, blood and personal capital of the pioneer/entrepreneurs themselves. As businesses and markets grew, additional capital was needed, which was provided by another American invention: locally owned banks. Today we call them independent community banks (ICB).

There are a number of reasons America became the world economic leader. But no factor was more important than the financial, legal, regulatory and trust environment that fostered relationships between ICBs and small businesses. These two Main Street sectors formed a symbiosis that simply does not exist anywhere else on planet Earth. Indeed, without this symbiotic relationship, the twin pillars of the American Dream – home and business ownership – would not have been possible, nor would the financial foundation of American exceptionalism.

Alas, this unique relationship may be in peril. But not because of anything the two primary partners have done.

The financial crisis of 2008 shined a bright light on the behavior of large financial institutions, which had become too complex to regulate, too big to manage and, according to the government, too big to fail. But as the federal government and regulators attacked this crisis, ICBs are becoming collateral damage as the new regulatory regime does not differentiate enough between big banks and small ones.

It’s troubling enough to learn that existing ICBs are finding it difficult to manage under the new regulatory pressures, but that’s not the worst of it. Prior to 2008, when an ICB closed or was acquired by a larger bank, the marketplace would produce a new ICB to fill the newly vacated relationship-banking niche. But the following stats foretell an alarming trend.

According to the Independent Community Bankers of America (ICBA), there are 1,119 fewer ICBs today than in 2007. Only 96 new ICBs were chartered from 2008 to 2010, and since 2011, there have been no new ICB charters. Not one in 18 months! And if industry experts are correct, the net number of ICBs will continue to drop, ultimately to a dangerous level.

There are many causes of this alarming trend, but presently the biggest offender are the one-size-fits-all “solutions” being imposed by overreacting politicians, overreaching regulations and overzealous regulators.

In nature, when one member of a symbiotic relationship is diminished, the other is usually harmed too. Fewer independent community banks will result in a weakened small business sector. I call this trend The Small Bank–Small Business Cascade, and it must be stopped.

Small businesses are not only the backbone of the U.S. economy, they’re also the seedlings of future big businesses and the personification of the American Dream.

America, beware The Small Bank–Small Business Cascade.

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I’ve talked with Mike Menzies, President of Easton Bank & Trust in Easton, Maryland about the dwindling number of independent community banks in the U.S. and the impact on small businesses. Click on one of the links below to download or listen.

The symbiosis of small banks and small businesses

Why fewer community banks is not good for small business

Check out more great SBA content HERE!




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