Showing posts with label small business. Show all posts
Showing posts with label small business. Show all posts
Sunday, June 13, 2010
Numbers Galore
Don't just look at the Fed and BLS numbers--Intuit has an interesting index of small business employment:
Tuesday, September 8, 2009
My Experience as a Lawyer
From what I see, people either distrust corporations or the government. If you tell me which you distrust more, I can probably tell you whether you're a Republican or Democrat.
But if we set aside politics, the first problem with laws is that small businesses--an essential part of our economy--get entangled in regulations that should be designed only for major corporations.
The second problem is that these small businesses--many of them immigrant-owned--don't have litigation budgets or cannot afford to pay a lawyer in advance to comply with every technical law. It just seems unfair that Mr. Cambodian Donut Shop Owner has to learn about some technical violation only when he gets served with a lawsuit and has to go lawyer-hunting.
The third problem is that government doesn't do enough to help these small businesses, even as it taxes them heavily and relies on revenue from them.
The fourth problem--and why change is so difficult--is that major corporations essentially control much of the legislation (when they're not writing it) and heavily influence Congress.
Overall, there are many laws we ought to have, but not if they also apply to small businesses. It's a shame we don't impose minimum revenue requirements on small businesses before subjecting them to thousands of pages of hard-to-understand laws.
But if we set aside politics, the first problem with laws is that small businesses--an essential part of our economy--get entangled in regulations that should be designed only for major corporations.
The second problem is that these small businesses--many of them immigrant-owned--don't have litigation budgets or cannot afford to pay a lawyer in advance to comply with every technical law. It just seems unfair that Mr. Cambodian Donut Shop Owner has to learn about some technical violation only when he gets served with a lawsuit and has to go lawyer-hunting.
The third problem is that government doesn't do enough to help these small businesses, even as it taxes them heavily and relies on revenue from them.
The fourth problem--and why change is so difficult--is that major corporations essentially control much of the legislation (when they're not writing it) and heavily influence Congress.
Overall, there are many laws we ought to have, but not if they also apply to small businesses. It's a shame we don't impose minimum revenue requirements on small businesses before subjecting them to thousands of pages of hard-to-understand laws.
Friday, February 27, 2009
So You Want to Open Your Own Business
The 2/23/09 WSJ had a special report on small businesses, titled, "So, You Want to Be an Entrepreneur." It listed ten questions to ask yourself before becoming self-employed. Here are the two most relevant questions to ask:
1. Are you willing to sacrifice your lifestyle for (potentially) many years?
2. Are you a self-starter?
I found the WSJ's report timely, because I have a friend who left a well-paying job to go into business for herself, thinking she would be highly profitable the very first year. After over a year in business, she is becoming discouraged by the fact she made only $20,000, mainly from activities unrelated to her core business. I wish my friend had read the WSJ report, which warns, "Entrepreneurs frequently won't pay themselves a livable salary in the early years...until their business is financially sound. That can take eight years or longer."
From my battle-tested perspective, I think my friend is doing very well if she made $20,000 her very first year; however, because she made $80,000 in her old salaried job, she feels frustrated. If you're founding a business, it will take two years to lay the groundwork to get a consistent book of business. I don't care if you're doing law or construction--it takes time and money to advertise and get clients to recommend you to their friends. Think about it--would you recommend someone who hasn't been around for at least two years? Here's my advice: if you want your business to succeed, you need to first save enough money to last at least two years. Then, you need to make sure you're comfortable with the idea of not making a dime until the third year.
But it's question #2--whether you're a self-starter--that really grabs my heart. I call this the Mariah Carey/Chumbawamba rule, after two great songs by the aforementioned artists--"Shake It Off," and "Tubthumping." Basically, my rule is this: The last person standing wins. Therefore, if you want to be a successful businessperson, you need to be able to shake off failure, get back up again, and keep going forward. If you're ultra-persistent, you'll probably succeed. For example, an ex-girlfriend once called me a George Foreman lawyer--I don't have much style, but I just keep coming at you. Unless I run into a Muhammad Ali, chances are, I'll be the last man standing.
The WSJ has a curious term for this attitude--"hypomania," taken from John Gartner's book, The Hypomaniac Edge. The book "theorizes that many well-known entrepreneurs have a temperament called hypomania. They're highly creative, energetic, impatient, and very persistent--trait that help them persevere even when others lose faith." [Emphasis added.] I agree wholeheartedly, and I'm glad there's a positive name for my impatience and energy. Let the hypomania begin.
1. Are you willing to sacrifice your lifestyle for (potentially) many years?
2. Are you a self-starter?
I found the WSJ's report timely, because I have a friend who left a well-paying job to go into business for herself, thinking she would be highly profitable the very first year. After over a year in business, she is becoming discouraged by the fact she made only $20,000, mainly from activities unrelated to her core business. I wish my friend had read the WSJ report, which warns, "Entrepreneurs frequently won't pay themselves a livable salary in the early years...until their business is financially sound. That can take eight years or longer."
From my battle-tested perspective, I think my friend is doing very well if she made $20,000 her very first year; however, because she made $80,000 in her old salaried job, she feels frustrated. If you're founding a business, it will take two years to lay the groundwork to get a consistent book of business. I don't care if you're doing law or construction--it takes time and money to advertise and get clients to recommend you to their friends. Think about it--would you recommend someone who hasn't been around for at least two years? Here's my advice: if you want your business to succeed, you need to first save enough money to last at least two years. Then, you need to make sure you're comfortable with the idea of not making a dime until the third year.
But it's question #2--whether you're a self-starter--that really grabs my heart. I call this the Mariah Carey/Chumbawamba rule, after two great songs by the aforementioned artists--"Shake It Off," and "Tubthumping." Basically, my rule is this: The last person standing wins. Therefore, if you want to be a successful businessperson, you need to be able to shake off failure, get back up again, and keep going forward. If you're ultra-persistent, you'll probably succeed. For example, an ex-girlfriend once called me a George Foreman lawyer--I don't have much style, but I just keep coming at you. Unless I run into a Muhammad Ali, chances are, I'll be the last man standing.
The WSJ has a curious term for this attitude--"hypomania," taken from John Gartner's book, The Hypomaniac Edge. The book "theorizes that many well-known entrepreneurs have a temperament called hypomania. They're highly creative, energetic, impatient, and very persistent--trait that help them persevere even when others lose faith." [Emphasis added.] I agree wholeheartedly, and I'm glad there's a positive name for my impatience and energy. Let the hypomania begin.
Wednesday, November 26, 2008
Small Business Stats
These are some facts I received from the SBA's Office of Advocacy, which is sort of a BLS for small businesses, gathering lots of useful statistics:
http://www.sba.gov/advo/stats/sbfaq.pdf [PDF file]
1. "Since the mid-1990s, small businesses have created 60 to 80% of the net new jobs."
For more, go to http://www.sba.gov/advo/research/data.html#us
2. "Small businesses employ about half of U.S. workers."
3. "Two-thirds of new employer establishments survive at least two years, 44 percent survive at least four years, and 31 percent survive at least seven years, according to a recent study."
Well, so far, I'm in the top 44% so far.
4. "Very small firms with fewer than 20 employees annually spend 45 percent more per employee than larger firms to comply with federal regulations."
I have advocated that small businesses with fewer than five employees and a gross income of less than $550,000 annually should have no regulations other than those guaranteeing payment of wages to workers. (I still haven't figured out what the best number is for the gross annual income cutoff and chose 550K because if a company hired five employees and paid them 50K each and had gross receipts of 550K, it would probably net around $200K-$250K, which is not unreasonable.) Criminal laws are sufficient to keep small businesses in check. Beyond that, onerous civil regulations are a form of corporate welfare to larger corporations, who have the capital to hire in-house counsel to advise them, to keep up with ever-changing laws, and to have a litigation defense budget. Small businesses, on the other hand, sometimes don't even know a law until they get sued, because they've been too busy trying to survive in the real world instead of reading regulations and cases.
5. "Commercial banks and other depository institutions are the largest lenders of debt capital to small businesses. They accounted for almost 65 percent of total traditional credit to small businesses in 2003. (This includes credit lines and loans for nonresidential mortgages, vehicles, equipment, and leases.) Credit cards account for much of the growth in small business lending over the past few years."
This might be one factor in the credit crunch--the more small businesses fail, the more bad loans on the banks' books.
http://www.sba.gov/advo/stats/sbfaq.pdf [PDF file]
1. "Since the mid-1990s, small businesses have created 60 to 80% of the net new jobs."
For more, go to http://www.sba.gov/advo/research/data.html#us
2. "Small businesses employ about half of U.S. workers."
3. "Two-thirds of new employer establishments survive at least two years, 44 percent survive at least four years, and 31 percent survive at least seven years, according to a recent study."
Well, so far, I'm in the top 44% so far.
4. "Very small firms with fewer than 20 employees annually spend 45 percent more per employee than larger firms to comply with federal regulations."
I have advocated that small businesses with fewer than five employees and a gross income of less than $550,000 annually should have no regulations other than those guaranteeing payment of wages to workers. (I still haven't figured out what the best number is for the gross annual income cutoff and chose 550K because if a company hired five employees and paid them 50K each and had gross receipts of 550K, it would probably net around $200K-$250K, which is not unreasonable.) Criminal laws are sufficient to keep small businesses in check. Beyond that, onerous civil regulations are a form of corporate welfare to larger corporations, who have the capital to hire in-house counsel to advise them, to keep up with ever-changing laws, and to have a litigation defense budget. Small businesses, on the other hand, sometimes don't even know a law until they get sued, because they've been too busy trying to survive in the real world instead of reading regulations and cases.
5. "Commercial banks and other depository institutions are the largest lenders of debt capital to small businesses. They accounted for almost 65 percent of total traditional credit to small businesses in 2003. (This includes credit lines and loans for nonresidential mortgages, vehicles, equipment, and leases.) Credit cards account for much of the growth in small business lending over the past few years."
This might be one factor in the credit crunch--the more small businesses fail, the more bad loans on the banks' books.
Thursday, July 31, 2008
Small Business Bankruptcies Increased
Barry Ritholtz writes about small businesses getting the shaft:
http://bigpicture.typepad.com/comments/2008/07/what-do-bankrup.html
Small businesses in California and elsewhere are being overlooked as Congress and state legislators rely more on corporate donations. We need strong legislators who can help small businesses and who also have the skills to balance the interests of employers and employees. Without predictable regulations and more assistance to small businesses, the path to the American Dream will become limited to the slow hierarchy structure of your nearest mega-corporation. Clark Gable's character famously justified his profession as a freelance horse wrangler by saying, "Better than wages"--but at least he had a choice.
http://bigpicture.typepad.com/comments/2008/07/what-do-bankrup.html
Small businesses in California and elsewhere are being overlooked as Congress and state legislators rely more on corporate donations. We need strong legislators who can help small businesses and who also have the skills to balance the interests of employers and employees. Without predictable regulations and more assistance to small businesses, the path to the American Dream will become limited to the slow hierarchy structure of your nearest mega-corporation. Clark Gable's character famously justified his profession as a freelance horse wrangler by saying, "Better than wages"--but at least he had a choice.
Wednesday, July 30, 2008
Mark Cuban as Small Business Savior
Sometimes, I imagine I am Mark Cuban's twin, and we were separated at birth. I attract controversy, I'm iconoclastic in my views, and always believe I'm right--and like Mr. Cuban, I usually am. I just need a few billion dollars and an NBA team, and I'd be *right there*. Here is Mr. Cuban's blog post on small businesses, which mirrors my views:
"No taxes of any kind on small businesses with 25 or fewer employees. No employer payroll tax. No state or local taxes. No taxes on earnings. Nada. The business owners will pay income taxes on their personal income they pay themselves, but not corporate earnings."
http://www.blogmaverick.com/2008/07/28/how-to-jumpstart-the-economy-tax-free-small-businesses/
I blogged on a related tangent myself in April:
http://willworkforjustice.blogspot.com/2008/04/does-overpopulation-cause-declining.html
I advocated for the "elimination of all civil laws except for wage and contract laws relating to businesses with fewer than six non-family employees and/or gross revenue of less than 575,000 dollars per year (thereby encouraging entrepreneurs and small businesses)." Mr. Cuban doesn't include the cost of complying with unpredictable laws and judges, which is a form of taxation for a small business. Other than farmers, I have not heard of a single state legislator talk about protecting small businesses in California for years. It's disgraceful.
Mr. Cuban, you and I had to be twins in another life. Just let me know when I can shoot hoops with Dirk, and I'll be there. I predict I'll score at least 4 points in a game up to 15, by ones.
"No taxes of any kind on small businesses with 25 or fewer employees. No employer payroll tax. No state or local taxes. No taxes on earnings. Nada. The business owners will pay income taxes on their personal income they pay themselves, but not corporate earnings."
http://www.blogmaverick.com/2008/07/28/how-to-jumpstart-the-economy-tax-free-small-businesses/
I blogged on a related tangent myself in April:
http://willworkforjustice.blogspot.com/2008/04/does-overpopulation-cause-declining.html
I advocated for the "elimination of all civil laws except for wage and contract laws relating to businesses with fewer than six non-family employees and/or gross revenue of less than 575,000 dollars per year (thereby encouraging entrepreneurs and small businesses)." Mr. Cuban doesn't include the cost of complying with unpredictable laws and judges, which is a form of taxation for a small business. Other than farmers, I have not heard of a single state legislator talk about protecting small businesses in California for years. It's disgraceful.
Mr. Cuban, you and I had to be twins in another life. Just let me know when I can shoot hoops with Dirk, and I'll be there. I predict I'll score at least 4 points in a game up to 15, by ones.
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