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Results of my 2014 Crystal Ball Predictions

Here are the results of my 2014 predictions, what happened and my score.

Prediction: Five years after the Great Recession ended, the economy will average less than 3% growth. Actual: Although surging, 2014 GDP will be about 2.3%. Plus 1.

Prediction: Even with a slightly improved economy, small business (SB) optimism levels will still be below the NFIB Index’s 41-year average of 100 points. Actual: NFIB Index 2014 SB optimism is below 95 points. Unfortunately, plus 1.

Prediction: Continued uncertainty for the sixth straight year will make SBs reluctant to invest and borrow money. ActualNFIB Index shows small businesses loan demand and investing at record low levels. Plus 1.

Prediction: Uncertainty about Obamacare’s impact will cause SBs to continue hiring reluctance. Actual: NFIB and other surveys shows SB hiring still negligible. Plus 1.

Prediction: Obamacare will continue to be an economic headwind in 2014. Actual: Owners and managers continue to identify Obamacare as a significant negative factor in business decisions. Plus 1.

Prediction: More significant than the media favorite U3 unemployment rate, the employment participation rate, currently 63%, will remain at a 38-year (Carter) record low. Actual: Current labor participation is 62.8%. Plus 1.

Photo by Garry Knight on Flickr.com

Photo by Garry Knight on Flickr.com


Prediction: The Fed will discontinue unprecedented quantitative easing (QE) that infused trillions of dollars into Wall Street since 2008 without benefiting Main Street. Actual: Fed ended QE in October. Plus 1.

Prediction: A combination of disruptions will produce a challenging year for Wall StreetActual: Nothing seems to impede the madness of Wall Street crowds. Can you say bubble? Minus 1.

Prediction: Obamacare’s constitutionality will be challenged by many lawsuits. Actual: Currently 104 lawsuits have been filed against Obamacare, including one before the Supreme Court. Plus 1.

Prediction: Democrats running for re-election in 2014 will run from the president. Actual: No Democrat wanted Mr. Obama anywhere near their campaign, but it still didn’t help. Plus 1.

Prediction: The GOP will regain control of the Senate and maintain a majority in the House in November. Actual: Republicans swept almost everything, from the Senator down to dog catcher at the local level. Plus 1.

Prediction: President Obama will prevail on immigration but will lose on minimum wage. Actual: Immigration win by Obama’s executive order but no minimum wage increase. Plus 1.

Prediction: Hillary Clinton will not announce her 2016 presidential intentions before the mid-term elections. Actual: Everyone knows she’s running; she just hasn’t announced yet. Plus 1.

Prediction: Auburn will defeat Florida State in the BCS Championship Game. Actual: Great game, but the Noles won 34-31. Minus 1.

Write this on a rock …

This year I’m 12 for 14, or 86%, taking my 14-year record to 73% (’08 was a rough year).

Jim Blasingame is author of the award-winning book, The Age of the Customer: Prepare for the Moment of Relevance.

Crowd funding is not new, but crowdfunding is

Crowd funding is not new, but crowdfunding is. Completely intuitive, both terms mean funds conveyed by a crowd to a solicitor.

Crowd funding is actually traditional banking, insurance, stock markets, charities and the like, where the crowds are relatively small and absolutely defined. Now a new word, crowdfunding is very similar except that it’s conducted on the Internet where the crowds are innumerable and possibly anonymous.

It’s largely due to those two words, innumerable and anonymous, that crowdfunding has caught on to the point where several online platforms now aggregate funds seekers with funding crowds. Now with crowdfunding, the Internet simultaneously facilitates and disrupts our experiences with what I call the Four Cs of Modern Society: Connect, Communicate, Communities and Commerce.

So far, crowdfunding fits primarily into two categories:

Contributions/Fundraising

This is where an emotional connection motivates members of a crowd to give to a cause, project, idea, ideal, etc.  Besides the emotional motivation, merchandise like a T-shirt or first album, for example, are likely to be involved as a token of thanks. This crowdfunding form is nothing more than donations.

Business funding

This money goes to a commercial venture, often a startup, with the expectation of receiving a first-of-its-kind product or future discount. The crowd knows the funds partially pay for the merchandise and partly capitalize the venture to which this crowd also has an emotional connection. This is business funding in the form of a commercial transaction, not investment.

Recently, crowdfunding has nudged closer to debt and equity capitalization. Peer-to-peer lending is an emerging form of crowdfunding, while the investment model still has legal and practical hurdles.

It’s clear that the future of small business capitalization will look a lot different than it does today. But for most small businesses the jury is still out on how the crowdfunding options will be part of their capitalization future.

In my next column I’ll use a practical approach and some tough love to reveal the challenges facing both the debt and equity sides of crowdfunding.  Ironically, those two advantages of crowdfunding mentioned earlier, innumerable and anonymous, will manifest as potential barriers as we discuss the more sophisticated forms of crowdfunding.

Write this on a rock…

Crowdfunding is just new tools to accomplish traditional fundraising and capitalization.

The irony of successful sales growth

The following scenario plays out every day on Main Street:

“My business is really growing these days,” a small business owner confides to his friend, “but we’re still experiencing too much negative cash.”

And then, with that deer-in-the-headlights look on his face, he completes his concern, “I thought by now, with sales and profits up, cash flow would be the least of my worries. I used to be afraid I couldn’t grow my business; now I’m worried that’ll collapse.”

This entrepreneur’s lament is one of the great ironies of the marketplace; a small business in danger of failure as a result of extreme success.

Beware Blasingame’s 2nd Law of Small Business: It’s redundant to say, “undercapitalized small business.” This maxim is especially true for growing small companies because sales volume growth depletes cash in two dramatic but predictable ways.

1.  When the business is growing, organizational upgrades are to be expected in order to handle the new demands: new vehicles, staff, technology, etc. Of course, you must fund these things, often before the newfound success has made it to the bank.

2.  Selling to customers on an open account—where payment for work or products is collected after delivery—is essentially making loans to customers. And while it’s true that vendors may let you do the same, typically they allow less time to pay than you allow your customers. The difference between when you pay and when you collect creates a negative cash condition.

Here’s how to manage these challenges.

1.  Growth plans must be compatible with the ability to fund that growth.

Too often we think the big growth hurdle is getting customers to say yes. But the impact of sales growth on cash flow must consider before delivering a proposal. If you can’t fund the opportunity, you shouldn’t go after it.

2.  Don’t use operating cash to fund acquisition of capital assets, like equipment, etc.

Capital purchases should probably be funded by bank debt, and the interest is the cost of Blasingame’s 2nd Law. If you don’t like debt or paying interest, that should motivate you to leave profits in the business as retained earnings, which is the best way to overcome being undercapitalized.

3.  Monitor the relationship between AR & AP.

Understanding the relationship between Accounts Receivable Days and Accounts Payable Days is an “a-ha” moment for every business owner. This ratio must be monitored for sustainable growth.

Write this on a rock … It is possible to succeed yourself out of business.

RESULTS: Is your small business showing economic improvement?

The Question:

The NFIB Index of Small Business Optimism shows small businesses see economic improvement and hiring is up. What is your experience?
Photo courtesy of Wealthyauthority.com21% — Our business is improving and we’ll add employees this year.
55% — Our business is improving but we’ll handle it with existing people.
3% — We’re not growing but still plan to staff-up to pre-recession levels.
21% —  We don’t see improvement and won’t be hiring.

Jim’s Comments:

The good news is that three of four of our respondents are seeing economic improvement. The bad news is those who plan to hire number barely one in five.  This means that the growth being seen is merely an upward trend, not economic expansion.

Furthermore, the business owners I talk to say the current regulatory state, including the spectre of Obamacare, is causing them to make adding new people a last resort.

Thanks for participating.  Be sure to participate in our new poll below.

Success is not measured only by money and stuff

Believe it or not, much of the potential for success in your small business depends upon two things:

1.  Your ability to effectively function physically, mentally, and emotionally.

2.  How well you balance where the business stops and your personal life starts.

"The best way to be successful AND happy is to be able to define success in many ways, including having a life that’s balanced with richness outside of the business."There actually are times when being one with your business is not only a good thing, it’s essential. But extreme commitment weaves a fine seam between business and owner. And unfortunately, entrepreneurial single-mindedness will often result in the opposite of what is intended: a business in jeopardy run by an unhappy human.

The best way to be successful AND happy is to be able to define success in many ways, including having a life that’s balanced with richness outside of the business. Getting that new customer on board is an essential part of your business’s future. But making the time to attend a child’s activity in the middle of the day is also important to the long-term well-being of your business.

A small business is more like a patchwork quilt than a gilded security blanket. Some patches represent good things and some not so good. Some patches are about the business, others are about the owner, and some are hard to tell. Happiness will be found by those owners who can feel successful regardless of which patch is in front of them.

Having multiple touchstones of success, not just money and stuff, helps keep the rough patches in business and life in proper perspective. If you became a small business owner to find financial success, good for you; as a capitalist I admire that motivation. But if you think being rich will make you happy get your umbrella out, because I’m going to rain on that parade with these two truths:

1.  Wealth only provides options, not a guarantee of happiness.

2.  If you can’t be happy without money and stuff, you aren’t likely to be happy with it.

Now let’s talk about fun.

The most successful business owners I know are those who have learned that one of the keys to their success is to run a tight ship while encouraging their people to laugh and find joy in their work. Every day that goes by without some kind of joy is a precious opportunity lost.

Two final thoughts:

1.      Think of happiness as a business best practice and a success fundamental.

Write this on a rock —

Learn how to define success in more ways than just money and stuff. And don’t forget to have fun.

_________________________________________________

Jim Blasingame is the author of the new book, “The Age of the Customer: Prepare for the Moment of Relevance.”




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