Business Owners Tell It Like It Is

Earlier this week, we shared a fictional video that depicted the uncertain regulatory climate and its impact on business. Now, two groups – Public Notice and the Small Business & Entrepreneurship Council – have a series of stories from actual small business owners who are in the position of wondering about their ability to survive.

"Moving Forward in Uncertain Times," begins a four-part series called "The Story of Business." The first video features Wes Garner, President of Great Lakes Calcium Corp. in Green Bay, Wisconsin. 

"Like families across America, business owners are having to make tough choices.  They’ve cut hours, costs, and even laid off dedicated employees. These entrepreneurs are heavily invested in their businesses and have everything to lose-but they don’t see Washington making the same tough choices," said Gretchen Hamel, executive director of Public Notice.

In order to survive and thrive, business owners need pro-growth policies that provide clarity and certainty. Without these, business investment, expansion, and job creation suffer. Unfortunately, Washington has produced new laws and regulations that have added to business costs and widespread confusion among business owners.  In addition, unresolved issues – like what the tax rates will be next year, and whether certain tax incentives will be available – are keeping entrepreneurs on the sidelines, and general business confidence in the tank.

"Small business owners do not have it easy, even in good economic times.  They’ve certainly been put to the test during the last two years.  Unfortunately, Washington only made matters worse — imposing mandates businesses can’t interpret and threatening to raise taxes to make up for years of overspending. Entrepreneurs face an uncertain future and they simply can’t afford what government is currently dishing out," said Karen Kerrigan, President & CEO of the SBE Council.

10 Keys to Entrepreneurial Success

Jay Goltz of The New York Times offers 10 reasons for entrepreneurial success. If you’re thinking of starting a business, or just want to separate your small business from the competition, these thoughts might help you:

  1. Look for opportunities to do something better than just about everyone else.
  2. Accept risk as a necessary evil. It makes for much less competition.
  3. Act responsibly to customers, employees and vendors.
  4. Goals aren’t enough. You need a plan. You need to execute the plan.
  5. You need to fix the plan as you go. Learn from your mistakes. Most people don’t.
  6. Do not reinvent the wheel. Learn from others — join a business group.
  7. Make sure the math works. I know plenty of people who work hard and follow their passion but the math doesn’t work. If the math doesn’t work, neither does the business.
  8. Make sure that every employee understands and works toward the mission.
  9. There are going to difficult times and you need to be resilient; whining is a waste of time.
  10. There will be sacrifices. Work to find a balance so that you don’t become a financially successful loser. It’s not about the income, it’s about the outcome.

Obama Wants More Money Loaned to Small Businesses

President Obama has called for a $30 billion loan initiative for American small businesses, a plan he announced this week at a town hall in New Hampshire. Other initiatives he’s proposing to aid businesses include providing a $5,000 tax credit to employers for each new worker they add to their payrolls this year, cutting capital gains taxes on investments in small businesses to zero and expanding loan guarantees provided by the Small Business Administration. The Christian Science Monitor has more:

President Obama has proposed a small-business lending initiative designed to help shift America’s job-creation engines out of reverse gear.

The idea addresses the problem, in effect, by going back to Square 1 – the financial crisis and the health of banks.

At a town-hall meeting Tuesday in New Hampshire, Mr. Obama called for congressional approval to invest up to $30 billion in small banks – the ones most likely to make loans to small employers. The money, to be taken by banks that voluntarily opt in, would provide capital as seed money for new loans.

A shortage of capital is just one of the obstacles for the economy’s flow of credit. The weak economy means that many banks are wary of lending, and many businesses don’t even want to borrow. But more capital could help to revive lending, at least to a modest degree, economists say.

"Jobs will be our No. 1 focus in 2010. And we’re going to start where most new jobs do – with small businesses," Obama said at the event in Nashua, N.H. "Bank lending standards have tightened, and many small businesses are struggling to get loans."

To give banks an incentive to make loans with the money, the Treasury would ask for smaller dividends on the capital from the banks that make the most loans. Dividends would start at a 5 percent annual rate but fall to as low as 1 percent if a participating bank were to expand its lending by 10 percent this year.

UPDATE: The Small Business & Entrepreneurship Council contends the President’s agenda may sound like a boon for small businesses, but it’s more about rhetoric than truly aiding commerce. What do you think?

SBA Has New Approach, New Critics

W. Todd Roberson of the Indiana University Kelley School of Business wrote a guest column for our BizVoice magazine analyzing the new look of the Small Business Administration. Here’s a taste, but he explains the reasons some are for and some are against new measures in the full column:

The American Recovery and Reinvestment Act of 2008 (the “stimulus bill”) authorizes significant changes in the way the 338 federally sanctioned Small Business Investment Companies (SBICs) can support small enterprises. In a nutshell, firms supported by venture capital (VC) now qualify for SBA guaranteed loans, grants and assistance. In other words, VC firms can now tap into federally guaranteed funds double the base of capital they have to invest in emerging enterprises.

The SBA also has raised the amount that VC firms can invest in any one business to 30% of the total capital under management. For favored small business owners this translates into less time pounding the pavement to find financing – a great advantage in a period of severe credit contraction. Time, after all, even in a new age, is money.

Note the word “favored” above. Herein lies the rub. Critics note that truly “small” firms generally do not interface with venture capital. (The current definition of “small” at the SBA is $18 million or less in net worth.) One direct and immediately observable effect of the SBA’s foray into working with VC firms is the increase in the lobbying outlays by the National Venture Capital Association (NVCA): from $500,000 in 2005 to over $2 million in 2008.

Critics suggest an alternative: simply lower business taxes on the nation’s entrepreneurs. In fact, studies by the Ewing Marion Kauffman Foundation (a think tank associated with American entrepreneurship) find no correlation between long-term job creation and early-stage association with venture capital. The correlation, however, is striking between VC involvement and government and university (read: quasi-government) grants.

SBA Seeks Nominations for Small Business Week 2010

From the U.S. Small Business Administration:

The U.S. Small Business Administration is seeking nominations for awards in celebration of the 47th National Small Business Week. Indiana Small Business Week awardees will be recognized in Indiana in the spring. There are various awards for the small business community along with advocate awards for those that support or promote small businesses.

Award categories include Small Business Person of the Year, Small Business Exporter of the Year, SBA Young Entrepreneur of the Year, Jeffrey Butland Family-Owned Business of the Year, Community Rural Lender of the Year and Entrepreneurial Success Award.

Champion awards include Financial Services Champion of the Year, Home-Based Business Champion of the Year, Minority Small Business Champion of the Year, Small Business Journalist of the Year, Veteran Small Business Champion of the Year and Women in Business Champion of the Year

Nominations must be received at the SBA Indiana office or postmarked by November 13. For a nomination package or for more information, contact Sharon Murff at (317) 226-7272 ext. 123.

Small Businesses Can Help Laid-off Employees

BusinessWeek offers some useful tips to help small businesses assist their laid-off employees. Valuable information in a time when you may have to reluctantly let good workers go:

When small businesses decide to lay off workers, they often can’t afford generous severance packages or access to professional outplacement services. But employers strapped for cash can still help their departing workers. 

Tap your network. Reach out to clients, vendors, competitors, and others in your network to see if anyone wants to recruit workers you have to cut. "Before I would let someone go, I would talk to other entrepreneurs I knew," says Dan Cohen, a former owner of a specialized construction firm and now a lecturer at Cornell’s School of Industrial Labor Relations. Cohen sometimes shared employees with another company until he was able to rehire them full time.

Start an online forum to pool talent. Some companies are using groups on LinkedIn or Facebook to connect workers they’re laying off with potential jobs or freelance work, says Kathryn Kerge, an HR consultant in New York. "They truly want to see their employees able to find work in the sector when they know they don’t have it for them right now," she says.

Give workers ample notice. Giving employees a month’s notice before they have to leave, instead of two weeks or less, will give them a bit more wiggle room, Kerge says. During that time, be flexible about giving employees time for interviews. If you can’t give them extra notice, consider letting laid-off employees come in and use the office printer, copier, and fax to prepare for their job hunt, says Peter Cappelli, director of the Center for Human Resources at Wharton.

Direct employees to local resources. Career centers run by local colleges or government agencies often have résumé writing workshops, career counseling, job fairs, retraining help, and other resources for the unemployed, says Sally Klingel, director of labor-management programs at Cornell’s School of Industrial & Labor Relations.

Give employees an honest reference. Other potential employers may think you laid off workers because of poor performance. "Often the biggest thing [companies laying off staff] can do is offer to write a glowing letter," says Klingel. Explain why workers were cut and vouch for their experience.

Keep in touch. Business may pick up sooner than you expect. If you maintain a relationship with laid-off workers, you may be able to offer them work—even if it’s just part-time—later on if they’re still looking, a situation that could benefit both sides.

SSTI: Save SBIR Now

The State Science & Technology Institute (SSTI) is a leading provider of tech-related news and information. Its most recent issue offers a straight-to-the-point editorial about a lack of action in Congress that could prove devastating to small businesses across the country.

Inconceivable? Unconscionable? Inexcusable? Which word best conveys what is happening to the Small Business Innovation Research (SBIR) Program? Perhaps all of them. The SBIR program will expire March 20 unless Congress acts before that date.

No SBIR-related legislation has been considered by either chamber of Congress since the current session began in early January, and without action by Congress by March 20, the program expires. SBIR could be attached to some other bill before the deadline, but there is no indication at this point that that is going to occur.

It is inconceivable that one of the most successful federal programs to support the commercialization of innovation will be allowed to expire at the same time the country is desperately seeking investments to prepare the nation for the next economy. As SSTI has reported, significant portions of the Recovery Act are focused on investing in the future. Green technologies. Alternative energy. Information and communication technologies. Smart tech. SBIR should play an important role in that – just as it has supported the early development of a number of important technologies and tens of thousands of companies for the past 25 years.

It is unconscionable and inexcusable to think that a federal program would be allowed to expire that has proven to be effective. In addition to the hundreds of anecdotal success stories and profit statements from small businesses, a multimillion dollar independent assessment conducted by the National Academies of Science found SBIR to be effective.

The battle over inclusion of venture-backed biotech firms in SBIR derailed passage of an SBIR reauthorization bill last year. Both proponents and opponents were unwilling to compromise, and it seems both sides will lose now.

SBIR has proven to be a valuable screening tool for venture capitalists across many disciplines, including biotech. Compared to other small businesses, most SBIR winners are worthy of a closer look when prospecting for firms to add to an equity portfolio. Is VC eligibility going to prove to be the deal-breaker for SBIR’s continued existence?

SBIR, through its competitive application process and market-driven need for the resulting innovations to be commercialized, costs less than $3 billion a year and supports thousands of small businesses across the country and several thousands more high-wage jobs for some of the nation’s smartest entrepreneurs.

This one seems pretty simple. SBIR reauthorization should be part of the economy’s solution.