Tag Archive for 'profits'

RESULTS: How will low fuel prices impact your sales and profits?

The Question:

Lower crude oil prices are expected to keep fuel prices low all year. How much will this impact your sales and profits?

19% - It will help to both increase sales and lower expenses.
38% - It won’t impact our sales much, but a reduced fuel budget will improve profits.
11% - We should see improved sales but don’t use a lot of fuel.
32% - It’s unlikely we’ll benefit from lower fuel prices in any way.
Jim’s Comments:
Now that crude oil has escaped the clutches of speculators and dropped well below $100 per barrel, a number of interesting things are happening.  Working-class folks have gotten what is essentially a huge tax cut, and global economies should benefit. But it is also creating interesting dynamics regarding currency exchanges and geopolitics.

We wanted to know what this drop in such a widely used commodity would mean out here on Main Street, so last week we asked our small business audience about it. I was surprised to see less than one-fifth allowed that the lower prices would benefit them in both sales and expenses. This response is likely a result of the new, more virtual economy, which I think was also why one-third said they wouldn’t be impacted at all by lower oil prices.

As you may have seen in my 2015 predictions, I believe you can count on oil prices averaging less than $70 per barrel for the rest of the year.

SBA Poll: What’s important in 2013?

The Question:
What’s the single most important thing you’re working on in 2013?

57% - Sales - we need more revenue

30% - Profit - sales can always be better, but we need to improve profitability

2% - A bank loan - so we can take advantage of growth opportunities

11% - People - we need employees who are qualified to do our work

My Comments:
What these responses confirm is that the economy on Main Street is still languishing.

  • Sales and profits are both cured by a robust economy.
  • When small businesses grow, they usually fund that growth with a loan from a bank.
  • I’ve been told by economists that there may be one million jobs going unfilled in America because employers cannot find qualified candidates.

The last time the U.S. marketplace experienced such a moribund economy for this long was when Jimmy Carter was president, during the period he described as having a kind of “malaise.”

President Obama, Carter’s presidency is not a comparable you want to be associated with your legacy. Please allow me to introduce you to small business owners who can give you some tips on how to get this economy growing.

Check out more of Jim’s great content HERE!

Take this week’s poll HERE!

Watch Jim’s videos HERE!

SBA Poll: Are your small business profits up?

The Question:
Some surveys indicate that small business profits are up. What is your experience?

17% - We’re profitable and are seeing profits increase lately.

57% - We’re profitable but are not seeing any improvement.

14% - We’re not profitable, but we’ve started heading in that direction.

12% - We’re not profitable and it doesn’t look like we’re going to be soon.

My Comments:
As you can see, less than one-third of our sample said they were seeing an improved profit trend, while the rest of our respondents refuted the news. Small business profits have always been an elusive beast - almost mythological to many. I’m going to have more to say about this in my column in two weeks. Stay tuned.

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Listen to my latest interviews with Sam Norwood of Tatum, LLC. We discuss the latest Tatum Survey of Economic Business Conditions.

Tatum Survey: Cap Ex and borrowing are not growing

Tatum Survey: Sales and hiring are up

Tatum Survey: Business conditions are improving

Check out more of Jim’s great content HERE!

Take this week’s poll HERE!

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The kinship of private equity and small business

Mitt Romney’s record in the private equity industry has become part of the election year political debate. The Romney campaign offers it as a positive credential and the Obama campaign has disparaged the industry as a way of casting a negative on Romney’s record.

Recently, a former leader in the private equity sector and President Obama’s former “car czar” and loyal supporter, Steven Rattner, weighed in with support for private equity by allowing that these firms are completely legitimate and add value to our economic system. But, as if to throw a bone to his former boss, Rattner also pointed out that private equity firms are founded to create wealth, not jobs. Here is one of Rattner’s quotes on this issue:

“Bain Capital — like other private equity firms — was founded and managed for profit … earned legally and legitimately. Any job creation was a welcome but a secondary byproduct.”

With this pronouncement, Mr. Rattner finds himself in historic company.

In his seminal work, “The Wealth of Nations” (1776), Adam Smith, introduced his now immortal “invisible hand” theory, which proposes that an individual, “led by an invisible hand” in pursuit of “his own interest, frequently promotes that of society more than when he really intends to promote it.”

For Smith, who is considered the father of economics, there was no chicken/egg quandary. The chicken – individual self-interest – comes first, followed by the egg – benefit to society. Mr. Rattner, perhaps without intending it, is singing Smith’s song in 21st century English: profit first, jobs second.

Nor is there a chicken/egg quandary today. In our capitalist, free-market economic system, the chicken is profit and the egg is jobs. It’s superfluous to say that jobs are the secondary byproduct of private equity; jobs are the byproduct of capitalism – period. In fact, the only economic system that has job creation as a founding imperative is communism.

From the very first small business created in America to the millions that have been formed since, from the sole proprietor to the 499-employee high-growth enterprise, all were founded with the nuclear notion of generating profits that will ultimately create wealth. And as essential as employees are to accomplishing a business founder’s wealth-creation goal, no pre-start-up entrepreneurial dreamer ever thought, “I want to commit all of my time, energy and resources – and risk everything – so I can create jobs.”

Like any venture that takes risks, private equity firms have to make tough business decisions and they make mistakes, which are fair game for critics. But if you’re going to malign private equity firms because their founding principle is to create profit and wealth, then you would have to extend that indictment to all 26 million American small businesses.

Led by an invisible hand in pursuit of their own wealth-creation self-interests, America’s small businesses benefit society by producing over half of U.S. GDP, creating most of America’s new jobs and delivering tens-of-millions of paychecks to their productive and grateful employees every month.

For small business, the chicken is profit and the egg is jobs.

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I talked more about the “Profit first - jobs second” business motivation on The Small Business Advocate Show. Click here to listen or download.

Check out more great SBA content HERE!

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