President Obama and small business

I was once again impressed with President Obama’s clear thinking and oratory power as I listened last night to his talk to congress and the world. He was realistic and clear about the depth of our national and global problems, yet optimistic and hopeful about an economic recovery. While he does have an ambitious agenda, he also has the energy and support to carry out much of his program.

The president did brush briefly on the plight of small businesses and apparently his proposed assistance to them is to reduce taxes. This may help some of the larger “small businesses” who will be able to plow more of their retained earnings into capital and human investment, but will have a negligible, if any, effect on most small businesses. As I wrote in an earlier post, the government appears to be somewhat blinded to the needs of the majority of small businesses – those with fewer than 20 employees. I will restate that the administration and congress need to develop programs to encourage entrepreneurship and assist the very small businesses with financial resources and training to enable them to grow, employ, and survive. I again recommend and support a council or round-table discussion about very small business issues with the administration.

Small Business Open Letter to President Obama

Dear President Obama:

The Small Business Administration (SBA) was established to assist small businesses and to provide guidelines to other government agencies which from time to time may or must deal with small businesses. Accordingly it has established numerical size definitions, either in dollar sales or number of employees, for various industrial classifications. Aside from agriculture virtually any business with under 500 employees or $7 million in sales is classified by the SBA as a small business.

Census bureau statistics reveal that there are over 20 million businesses with just a single employee,  5,377,631 business with between 2 and 19 employees employing almost 30 million people, and only 627,000 businesses between 20 and 500 employees.

I submit that the very small businesses consisting of owner/employee businesses and enterprises with less than 20 employees have issues not even imaginable by the folks who run the small minority of businesses designated as “small” which would have 100 or more employees. Yet it is the larger of the small businesses which have  leverage with the SBA, the administration at large, and the congress.

It is no secret that our economy, today more than ever, is being driven by millions of small businesses. The number will only grow larger as thousands of unemployed people get the entrepreneurship bug and open their own companies. Now the sad news is that many existing small business and many new ones are destined to fail through bad timing, bad management, and lack of capitalization.

The time is now for the federal government to give recognition and assistance to the very small businesses to empower more of them to survive and provide increased employment.

Let’s start with a national roundtable discusson of top government officials meeting with a cross section of owners of companies with fewer than 20 employees to discuss the particular concerns, issues, and problems facing these organizations. Use the findings from the discussions to craft an agenda that will help improve the survival and success rate of these businesses.

Short of a national roundtable, a few measures that could and should be quickly considered are:

1. Provide tax credits to anyone investing in a startup or very small business.

2. Provide grants or tax credits to any business for each new net employee hired.

3. Release TARP money for low-interest lending to very small businesses with minimal paper work. Thousands of businesses are struggling because banks have either called their loans or will not issue lines of credit.

4. Release TARP money for business startup loans which could be forgiven upon achieving preset hiring milestones and profitability.

5. Encourage entrepreneurship at the high school level by funding courses that teach young people how to be innovative successful business owners.

President Obama, I can’t even begin to imagine how big your job is in dealing with mid-east conflicts and a financial crisis at home and world-wide. I am convinced that paying attention to, and helping out, small business is one of the tools you need to use to help restore economic health to our great nation.

Sincerely,

Will Limkemann
Small Business Counselor
will@limkemann.net
www.neobizadvisor.com

Funding for small businesses

This post is an open letter to President Obama, Governor Strickland of Ohio, and leaders all over the nation who are concerned about small businesses.

While it is well accepted that small business is the backbone of our economy, the definition of small business is a bit fuzzy. Some federal agencies specify that businesses with fewer than 200 employees are classified as small. I would submit that a business with 10 employees has issues that are foreign to a firm with 200 employees. These very small firms, and there are millions of them, are the real backbone, and combined, hire millions of workers across the United States.

These very small businesses are being hit especially hard by the recession. While it is true that many of them would not be in dire straits were they better managed, most are being deeply affected by the 2009 economic climate. They typically have no cash reserves and today are virtually unable to secure bank loans or other financing, and so are having to lay off employees or consider closing their doors. These businesses are not making the news as they are laying off one or two employees at a time.

Many folks who have lost their jobs from large and small companies are  budding entrepreneurs who could create jobs for themselves and others while contributing to the economy, but are unable to secure funding to get started.

So here is my, perhaps naive, suggestion to President Obama and other leaders.

You are currently spending billions of dollars to justifiably shore up some mega companies to prevent the whole house of cards from collapsing. While this is necessary and noble, please, please, don’t overlook the thousands of small businesses that are on the verge of failing. You can help them by making easily available low-interest loans – loans that might even be forgiven should the businesses reach certain economy-driving milestones.

I’m not talking about handouts. Establish criteria that will not result in a bureaucratic nightmare. The criteria should include numbers of jobs to be saved and potential job growth. The criteria might also require that business owners either enroll in and attend business management classes at local colleges, or be supported by approved business advisers, in order to improve their management skills. The funding should be open to new entrepreneurs and existing companies who can prove need in any industry.

Pass the money through local banks, and hold the banks accountable for responsibly distributing the funds to businesses in need who meet the criteria. Money should be distributed over time depending upon a business achieving specified milestones agreed to between the bank and the business owner.

Finally, I would challenge President Obama to immediately convene a very small committee of folks who really understand the plight, needs, and challenges of small businesses to come up with a workable program.

The Return of the Family Business

I was talking with a friend last week about the proliferation of small businesses as more and more people are losing their jobs from large corporations. The millions of small businesses, including about twenty million operated from home, will only increase during the coming years.

My friend observed that the concept of large business is a very recent one spawned by the industrial revolution. Prior to the mid-nineteenth century, most businesses were family owned and operated – as either farms or as small shops. During past decades small shops have had a negative connotation as “mom and pop” stores.

Fortunate, the stigma of such micro businesses is gone. Even home-based businesses which, for years were not taken seriously, are now mainstream. While most new home-based businesses are started by one member of a family, they often draw in a spouse or children – who do bookkeeping, design the business web site, help produce merchandise, prepare mailings and much more.

While big-business will never disappear, small businesses have retaken their rightful place in our economy and hearts.

The Economy

I had lunch yesterday with a group of about 20 other business owners at the Federal Reserve Bank in Cleveland. Through COSE, the Federal Reserve had gathered us to talk to us briefly about where they see the economy, but more important, they wanted to get a snapshot of the economy through the eyes of small business owners. I commend them for the initiative. I was honored to be included.

The Fed’s presentation was  a series of graphs, with commentaries on the graphs, the gist of which was that an economic recovery is anticipated half-way through next year. Honestly, I really do not think the experts have any better crystal balls than the rest of us do!

Some of the owners present indicated that their businesses had not yet seen a negative turn due to the current crisis. Many, however, did relate real concern for their businesses. Concerns about getting new credit, and even keeping existing credit lines with banks, was mentioned a number of times. One person pointed out that the fine print in credit line agreements allows the bank to change the terms or even terminate the line at any time.

A commercial builder was distraught because his lumber supplier, a third generation company, has just closed due to lack of credit and falling lumber prices. The builder is also concerned that tight credit will also either delay or cancel future projects.

A large candy maker is solving her credit concerns by requiring a 50% deposit with all orders.

On the positive side, a software developer who helps larger companies with document management systems, said her company is doing very well, although payments are getting slower. I do believe that businesses, like hers, which improve productivity should be quite recession-proof.

I give the Feds credit for listening to small business owners. I hope they, and other government agencies, do much more listening in the future.

Will Limkemann
Limkemann Business Advisors
440-871-0976
www.neobizadvisor.com