This afternoon, as I drove down a local road, I saw a sign on the side of a business that said, "Pray for Recovery". Now, I don't know about you, but prayer may not be the best method for getting the economy going again.
So at the risk of offending everyone who believes in the power of prayer, I would like to list some other things that will have a more imediate impact without divine intervention:
1. Get something fixed around your house that needs to be done. This past week, I hired a local handy man, Stu, to put in some more insulation in the attic and fix some leaky doors upstairs which was running up my heating bills. I have needed to do this for some time, but now made sense. He did the work in just a couple of days and was ready to get on it as soon as I called.
2. Refinance your home. Right now, 30 year fixed rates are the best they will ever be. Yes, you need to have some equity in your home and decent credit, but if you do, then you will add hundreds of dollars monthly to your wallet that can be used for things you need. Not to mention, everytime you refinance one of those loans, it is one less loan that is sitting bundled in with the toxic mortgages.
3. Provide a better service to your employer or client. Since we are in a national malaise, it is understandable that people aren't working at their fullest. Now is your time to shine. Focus on what you do and do it better than you ever have before. Think about it. The best and brightest never are in want.
4. If you are spending your money, spend it on services before imported goods. I am talking about consumer electronics mostly here. If given the choice between a $1,000 HDTV and $1,000 in services (get your will redone, have a room painted, have your car repaired, hire a shrink, get a massage, etc) then the money spent will go much further to help the economy. This is because on the TV most of that money is being sent overseas and thus is leaving your local economy.
Pray all you want, but the real way out of this recession is by collective action.
Saturday, January 31, 2009
Wednesday, January 28, 2009
Preparing for the downturn
By now, if you have not put your small business in a strong position for the economic slowdown, then you are likely having sleepless nights. We can all hope that the worst is over, but chances are that it is only beginning. Keeping in mind that the overall goal for you, the small business owner, is to come out of the recession with what you went into it with, then you may want to do some of the following:
1. Be sure you have plenty of cash. This means talking to your banker to be sure you have a line of credit to carry all the business expenses for 3 months. If you don't have this line set up already, get to work on it now.
2. Keep your receivables down. Everyone is feeling the pinch, so make sure you are collecting on all your invoices quickly. Anything that passes 30 days should be pursued with all your strength. The longer it goes, the worse it gets.
3. Make sure you aren't paying for deadwood. I know it seems heartless, but if you have employees that aren't performing, then you need to get rid of them before they pull your good employees and you down.
4. Get back to being a guerilla. Don't forget to beat the bushes for new business. Now is the time that all that great customer service you have been working on for years should pay off. Provide a needed and valuable service to your clients and they will use you. Call people and talk to them like people. You don't need to spend money to do this, just time.
5. Keep your employees informed on where you are and where you need to be. I never subscribe to the secret finanancial planning. If you need to hit a number in revenue to make things work, let everyone know. They won't ask for a raise, they may just rise to the occasion.
1. Be sure you have plenty of cash. This means talking to your banker to be sure you have a line of credit to carry all the business expenses for 3 months. If you don't have this line set up already, get to work on it now.
2. Keep your receivables down. Everyone is feeling the pinch, so make sure you are collecting on all your invoices quickly. Anything that passes 30 days should be pursued with all your strength. The longer it goes, the worse it gets.
3. Make sure you aren't paying for deadwood. I know it seems heartless, but if you have employees that aren't performing, then you need to get rid of them before they pull your good employees and you down.
4. Get back to being a guerilla. Don't forget to beat the bushes for new business. Now is the time that all that great customer service you have been working on for years should pay off. Provide a needed and valuable service to your clients and they will use you. Call people and talk to them like people. You don't need to spend money to do this, just time.
5. Keep your employees informed on where you are and where you need to be. I never subscribe to the secret finanancial planning. If you need to hit a number in revenue to make things work, let everyone know. They won't ask for a raise, they may just rise to the occasion.
Sunday, January 25, 2009
4Q GDP expected to be horrible
This coming Friday, we will see the US GDP number come out for the fourth quarter of 2008. The expected number is -5.1% annualized. That is pretty horrible.
Based upon a GDP of $14.4 Trillion that means we are looking at a loss of about $185 Billion in lost GDP for the fourth quarter alone. Since countries can only increase their GDP in two ways: increasing the number of workers or increasing the productivity of the workers, we are facing a serious productivity and employement situation.
Theoretically, if you increase the number of people on the job while keeping productivity the same, then you should have an increase in GDP. Likewise, increasing the productivity of workers while keeping the number of workers the same also increases GDP. In all cases, it is always a little of both. More workers and increasing productivity means more GDP.
Right now, it is pretty obvious what is happening. People are being laid off (less workers) and those that are still employed are producing less (lower productivity).
Normally, we could blame all this on consumer demand. But this time it is different. Over the past year or so, credit has tightened. As a result, projects and investments have been put off. Since people could not borrow the money to say, build a new office building, then that translates into lower GDP.
Way back in October, we saw then Treasury Secretary Henry Paulson make the case for the TARP (Toxic Asset Recovery Program). The idea made sense, buy up the bad assets held by banks and get the banks back in the business of lending. The original plan did not happen because of a problem with pricing the assets. So instead, the banks were given money in exchange for stock warrants. Thus partially nationalizing the banks.
Today, we have a new administration. I call on them to get back to the original TARP idea which is to take the bad assets off the books of the banks. If this is done, then the good loans can be pulled out and the bad loans can be renegotiated.
I don't expect anyone to listen to me, but it feels good to say so.
Based upon a GDP of $14.4 Trillion that means we are looking at a loss of about $185 Billion in lost GDP for the fourth quarter alone. Since countries can only increase their GDP in two ways: increasing the number of workers or increasing the productivity of the workers, we are facing a serious productivity and employement situation.
Theoretically, if you increase the number of people on the job while keeping productivity the same, then you should have an increase in GDP. Likewise, increasing the productivity of workers while keeping the number of workers the same also increases GDP. In all cases, it is always a little of both. More workers and increasing productivity means more GDP.
Right now, it is pretty obvious what is happening. People are being laid off (less workers) and those that are still employed are producing less (lower productivity).
Normally, we could blame all this on consumer demand. But this time it is different. Over the past year or so, credit has tightened. As a result, projects and investments have been put off. Since people could not borrow the money to say, build a new office building, then that translates into lower GDP.
Way back in October, we saw then Treasury Secretary Henry Paulson make the case for the TARP (Toxic Asset Recovery Program). The idea made sense, buy up the bad assets held by banks and get the banks back in the business of lending. The original plan did not happen because of a problem with pricing the assets. So instead, the banks were given money in exchange for stock warrants. Thus partially nationalizing the banks.
Today, we have a new administration. I call on them to get back to the original TARP idea which is to take the bad assets off the books of the banks. If this is done, then the good loans can be pulled out and the bad loans can be renegotiated.
I don't expect anyone to listen to me, but it feels good to say so.
Saturday, January 24, 2009
Recession Rules
Okay, so we are in a recession. That feeling that we had in the Fall of 2007 when people began to talk about the failings of the economy, the upcoming burst of the housing bubble and the eventual slowdown that would soon follow has now turned into the worst downturn since the Great Depression.
So what is a small business owner to do? Well, first you want to remember that a drop in overall GDP will affect your business, but it likely won't eliminate your business. A drop in revenue of 20% while bad, should not destroy a healthy business.
The main goal is to come out of the recession with what you went in with. In other words, you want to keep your net worth the same. That means your assetts should remain stable as should your debt. Just keep it together and weather the storm. This is easier said than done.
Rule 1: cut out all dead wood early and quickly. If you have an employee who is not productive and will likely never be productive, stop carrying them along. The livelyhood of your good employees are at stake when you keep around a lousy one. Just cut your losses and drop them. They will have to adapt and become productive on their own dime, not yours.
Rule 2: Review every expenditure. Look for monthly recurring bills that can be eliminated. Ship things ground instead of over night. Turn down the heat. Cut off lights. Put off purchases until you really need them. (Never cut corners when it comes to serving your clients.)
Rule 3: Invest your time in revenue growth. Now is the time to reach out and get more business. Any idiot can make money in an up economy, but your prove your worth in a down one.
Rule 4: Stay up on the economic news. You want to know when the Fed meets and what they are likely to do. Pay attention to your interest rates and where they are heading. Pay off the high interest rates first.
Rule 5: Talk with your banker at least twice a month. Let them know good and bad news. Be sure they know what you know. Your banker likes knowing who you are and what you are doing. Right now, you need them and they need you.
Rule 6: Be honest with yourself. Don't fudge your income statement. Take and honest assessment of the business and how it is truly doing. Look at cash flow and pay attention to the little things.
You can and will survive this downturn. Like most small businesses, you are a dreamer and a doer. Lot's of people are counting on your success, not the least of which are your family, employees and clients. Just remember you need tough times to make it great.
So what is a small business owner to do? Well, first you want to remember that a drop in overall GDP will affect your business, but it likely won't eliminate your business. A drop in revenue of 20% while bad, should not destroy a healthy business.
The main goal is to come out of the recession with what you went in with. In other words, you want to keep your net worth the same. That means your assetts should remain stable as should your debt. Just keep it together and weather the storm. This is easier said than done.
Rule 1: cut out all dead wood early and quickly. If you have an employee who is not productive and will likely never be productive, stop carrying them along. The livelyhood of your good employees are at stake when you keep around a lousy one. Just cut your losses and drop them. They will have to adapt and become productive on their own dime, not yours.
Rule 2: Review every expenditure. Look for monthly recurring bills that can be eliminated. Ship things ground instead of over night. Turn down the heat. Cut off lights. Put off purchases until you really need them. (Never cut corners when it comes to serving your clients.)
Rule 3: Invest your time in revenue growth. Now is the time to reach out and get more business. Any idiot can make money in an up economy, but your prove your worth in a down one.
Rule 4: Stay up on the economic news. You want to know when the Fed meets and what they are likely to do. Pay attention to your interest rates and where they are heading. Pay off the high interest rates first.
Rule 5: Talk with your banker at least twice a month. Let them know good and bad news. Be sure they know what you know. Your banker likes knowing who you are and what you are doing. Right now, you need them and they need you.
Rule 6: Be honest with yourself. Don't fudge your income statement. Take and honest assessment of the business and how it is truly doing. Look at cash flow and pay attention to the little things.
You can and will survive this downturn. Like most small businesses, you are a dreamer and a doer. Lot's of people are counting on your success, not the least of which are your family, employees and clients. Just remember you need tough times to make it great.
Tuesday, January 20, 2009
It is great to be an American
Today is a great day to be an American. We all just whitnessed the peaceful transfer of power from one President to the next. Regardless of your feelings on either of them, you have to admit that our system, while flawed, is still very impressive.
Since I am a former Marine, you would expect me to be fairly patriotic. But nothing moves me as much as what we have had today and during the past few months. If you have kids, be sure to point this out to them so they understand: America is great because of our laws.
Hoo Rah!
Since I am a former Marine, you would expect me to be fairly patriotic. But nothing moves me as much as what we have had today and during the past few months. If you have kids, be sure to point this out to them so they understand: America is great because of our laws.
Hoo Rah!
Tuesday, January 13, 2009
How We Can Fix It
Over the past several months, the news about the economy is getting worse. Some people would look at this and blame it on a so-called "media bias" who is just talking about the bad news. But if you have lost your job, or know someone who has lost their job then things are quite so theoretical. Reality become very real.
The problems with the economy are huge. These are big problems that are being handled by the big people. The greatest economists, financiers and political leaders are hard at work on a solution. Right?
Does that mean we little people have no ability to fix things? Or is our only role in this as consumers who must go shopping?
My answer is that we "little people" have lots of power. Collectively we are the ones who control the economy anyway. Last year, the United States produced $14.4 Trillion. Most of that money was produced not by the big time investment bankers, but instead by small business. Don't believe me? Look around for all the big companies in your neighborhood. Now ignore them and look at all the little companies. You can do this in a phone book too.
Sure, Walmart is there. But so is S&K Mini Escavating and DDR Engineering. Most of the buildings in an average city (not NYC or Chicago) are owned by private investors. Do you think there is an equivalent to Walmart in the architectural field, or dentistry, or title company? Nope, they are all little guys doing big things.
So while you hear about all these big companies failing and costing the tax payers big money, just remember that the little guys are holding in there. They are the ones who can fix the economy by simply doing what they already do: thrive regardless of the economy.
The problems with the economy are huge. These are big problems that are being handled by the big people. The greatest economists, financiers and political leaders are hard at work on a solution. Right?
Does that mean we little people have no ability to fix things? Or is our only role in this as consumers who must go shopping?
My answer is that we "little people" have lots of power. Collectively we are the ones who control the economy anyway. Last year, the United States produced $14.4 Trillion. Most of that money was produced not by the big time investment bankers, but instead by small business. Don't believe me? Look around for all the big companies in your neighborhood. Now ignore them and look at all the little companies. You can do this in a phone book too.
Sure, Walmart is there. But so is S&K Mini Escavating and DDR Engineering. Most of the buildings in an average city (not NYC or Chicago) are owned by private investors. Do you think there is an equivalent to Walmart in the architectural field, or dentistry, or title company? Nope, they are all little guys doing big things.
So while you hear about all these big companies failing and costing the tax payers big money, just remember that the little guys are holding in there. They are the ones who can fix the economy by simply doing what they already do: thrive regardless of the economy.
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