Tuesday, March 31, 2009

Speaking, Perhaps ...

On Thursday, I'll be a panelist at the annual meeting of the Pasadena Playhouse District. The business group has asked me to contribute to a discussion on (what else?) the economy and how small businesses can survive the storm.

I have to add a provision here: I'll be a panelist in Pasadena Thursday morning ... IF I'm not downtown at Los Angeles Superior Court doing jury duty. I've been on hold all week with the threat of jury duty hanging over my head, vanishing only after my 5 p.m. call to the automated juror hotline.

So far, I've postponed (and re-called) three interviews, rescheduled a hospital visit to a dear friend undergoing cancer treatment at City of Hope and will have to leave the Playhouse District hanging until Wednesday after 5.

I thought for sure I'd be asked to report on Monday. Nope. Tuesday is Cesar Chavez day, a court holiday. I've already been told not to report on Wednesday. That means Thursday is my most-likely-to-serve day (many courtrooms do procedural motions on Fridays).

In the past, because I was self-employed and had young children at home, I was always able to send in my hardship excuse by mail. The rules changed a few years ago, and now even small business owners and the self-employed (who don't get paid for jury duty) have to report on their prescribed day.

The last time I was downtown, a judge presiding over a complex civil trial swore me in under oath and made me explain to the entire courtroom why I couldn't afford to take weeks away from earning a living. "Doesn't your husband work?" he demanded. "Can't you do your interviews after hours or on the weekends?"

In the end, the judge excused me and several others who testified that their livelihoods would be at risk. But his sneering demeanor was contemptuous, as if he were letting off a bunch of slackers who didn't appreciate the importance of American jurisprudence!

How about you? Have you done jury duty lately? If you're self-employed, did the court understand that it would be a hardship for you to serve?

Highlights of the Week

Remember the dot-com heydey, when garages were the preferred business venue and professionals slaved away for the promise of equity in vaunted startup ventures?

Those "roaring 90s" are long gone, but startup firms still offer equity in exchange for professional services. I answer a question about how to make such arrangements and whether they're always a good idea in my Smart Answers column today.

In this week's podcast, I talk to a family business expert. Unfortunately, he says, too many family-owned businesses are behind the times technologically and also lag in strategic planning. During good times, small companies can sometimes skate along with sloppy management, but in a recession they need to sharpen their strategy or risk failure.

Finally, BusinessWeek.com's Entrepreneur Journal is a fascinating first-hand account from a couple with a terrific idea (sole covers for athletic cleats) who struggled for years - and went through $100,000 - before they brought that idea to fruition.

The takeaway: Don't monkey around with amateurs. Hire pros who are experienced in the industry you're trying to break into if you want to succeed.

Monday, March 30, 2009

Politically Incorrect

The "small business owner" has become a neat and sympathetic jumping off point for nearly all praise - or criticism - of the policies being put into place during this economic crisis.

But just how much is the small business owner being affected - and how?

I looked at that question in my Smart Answers column last week, specifically focusing on the tax increases in the budget proposal President Obama has put forward.

Just broaching the topic of higher taxes with small business owners is like waving a red cape in front of a bull (as you'll see in the lively discussion following the column!)

But I was determined to get past the hype and find some good, non-partisan analysis of what the impact really will be on entrepreneurs. I was delighted to connect with the Tax Policy Center, which has done detailed analyses on the proposal and how it would impact individuals who have small business income and are in the top two tax brackets.

It's dense, but the conclusions are quite interesting. As a small business owner myself (this year marks my 20th year of self-employment), I'm grateful to get the scoop without the political verbiage.

Friday, March 27, 2009

To Intern or Not?

My Smart Answers column this week answers a question from a business student who wonders if an internship would help fulfill her entrepreneurial ambitions.

I always advise people thinking about starting a business to work in the industry first. The more familiar you are with business, the better your chances of succeeding. Even those who have great talent at a particular enterprise can benefit by learning how to monetize that endeavor.

Getting inside the business world and soaking up knowledge like a sponge can help immensely, particularly if you're also taking classes and under girding your experience with business theory.

A couple of bloggers added some interesting perspectives of their own to my column.

One commenter raised an eyebrow about how much interns really learn about the inner workings of a company. Given the right environment, and the right attitude, I think an enterprising intern can learn a lot. Of course, it depends on whether s/he is asking good questions and forming relationships with people willing to answer.

Another brought up the tricky question of whether business owners will hire individuals who might one day be competitors. My feeling is that this isn't a big concern at larger companies that are unlikely to be threatened by startups.

Entrepreneurs who hire interns would be wise to ask about an intern's future plans if they're worried about competition, and the ethical intern must answer truthfully if entrepreneurship is a goal. However, the most successful small business owners tend to worry less about competitors and focus more on strategic partnerships.

A bright and ambitious intern who wants to own her own company may someday figure into your succession planning. A non-compete agreement could be used so that the intern doesn't directly compete with your firm for several years. Or you could enjoy a terrific relationship and become a partner or board member of her company in future.

Thursday, March 26, 2009

No Shortcuts

I frequently hear from readers who want to solve the problem of small business start up with a magic bullet: "Isn't there some person who will advise me, direct me and make it easy for me to get up to speed on entrepreneurship - for free?" They're looking for a weekend course that will answer all their questions with 10 simple slogans.

This tendency - call it impatience, laziness or basic human nature - explains why so many would-be entrepreneurs fall for sloppy scams. If you live by the old saw about how there's "no free lunch" or you're a card-carrying Skeptic like me, you're pretty unlikely to be ripped off.

But there are a lot of people who just want to believe - and don't want to do the hard work of preparing for a successful business career. I tell these folks that it's difficult to start a business, but it's far, far easier than it used to be. With the amount of information, free advice and hands-on help available online these days, there's really no excuse for going into business half-assed.

When would-be small business owners take the time and make the effort to research and educate themselves, they can become really savvy by the time they go forward - if they're not scared off by the substantial reality check involved!

There's a lot to learn and there are no shortcuts, but if you're a wanna-be small business owner, do the hard work and educate yourself first. Understanding that there are no shortcuts is the first step to running a successful company.

Tuesday, March 24, 2009

My Sad Story

I learned a tough lesson - the hard way - during this economic blowout.

In September 2007, a year before my older son would start college, I called up my financial planner to ask about some money we had squirreled away in a mutual fund to be used for college costs and/or emergency needs.

A basic financial principle says you should extract money from stocks or mutual funds a year before they'll be needed and sequester them in CDs or savings accounts, thereby reducing the risk of loss that can't be recouped over time.

My (now ex-) planner, however, talked me out of selling the funds. Since we had enough money in 529 college funds to cover the first year or two of college, and we didn't know where the boys would attend, he said, we should leave the mutual fund alone. "We don't want to miss out on the upside returns of the market for the next year or two," he said.

Well, you know the rest of the story by now. By the time I did sell the funds in question early this year, they had lost more than half their 2007 value. Which means at least a years' tuition per kid had evaporated.

What did I learn from this tale of woe? 1) Sometimes you have to trust your gut, no matter what the "experts" say. 2) Even certified, educated, professionals got caught up in the bubble and believed the hype. 3) Those basic principles of finance may err on the side of caution, but they're worth following.

Saturday, March 21, 2009

Food Fetish

Last week, I made an embarrassing confession at a friend's food blog.

I like canned corned beef hash. I not only like it, I actually love it. If it wasn't so unhealthful, I would probably eat it a lot.

This was an embarrassing confession because a lot of people, like Desiree the food blogger, consider canned hash one half-step above Alpo.

I get the comparison, but what can I say? My parents grew up during the Depression, my mom cooked a lot of dishes from that era and I ate them happily. I might as well come completely clean and also admit that I like fried liver and onions (served with bacon and ketchup) and canned spinach.

Just don't make me eat Spam. Ugh.

Wow - I feel better getting these character flaws off my chest. How about you? 'Fess up: What hopelessly unfashionable foods are your secret delights?

Small Biz Loan Boosts

After weeks of bailouts for the huge financial firms that tanked the economy, last week President Obama announced some breaks for small business owners in the form of beefed-up SBA loan programs.

I wrote about whether the programs will work to unfreeze credit and got some advice for entrepreneurs who want to take advantage of them in my Smart Answers column.

Speaking of bailouts, who forgot to send the memo to Wall Street CEOs? I mean the memo that outlines the new zero tolerance policy, dictated by hopping mad taxpayers who now own their firms, toward million-dollar bonuses, lavish junkets and posh office makeovers.

Seriously, this stuff is not rocket science. Why do they not understand that these expenses won't be tolerated while people are losing jobs and families are struggling to keep their homes? Seeing how out-of-touch and tone deaf these knuckleheads are goes a long way toward explaining how they ran their firms into the ground.

But for a more detailed explanation, see Matt Taibbi's latest article in Rolling Stone. It's a keeper.

Wednesday, March 18, 2009

Don't Be So Naive

One of the most influential columns I've ever written is "The Myth of Free Government Money." Posted way back in 2000, it's still cited, linked to and quoted frequently in small biz circles.

My aim was to strongly refute the scammers and con artists who fleece would-be small business owners by the thousands every year, selling them the preposterous idea that the government hands out "free money" to start up entrepreneurs.

The problem, of course, (paraphrasing Bacon) is that it's much easier to believe outlandish claims when we want them to be true.

This mixture of naivete and greed delivers up willing victims to fraudsters. And the only remedy is education.

I aim to do a little more educating in this week's Smart Answers column on the latest fashion in scams, and in my podcast on how small retailers can jump on affinity marketing just like the big boys are doing.

Monday, March 16, 2009

A Shocking Survey

A new study by MetLife paints a disturbing portrait of Americans' financial health: Half of the respondents reported that they would be unable to pay their bills a month after losing their jobs. Upwards of a quarter said they couldn't survive financially for more than two weeks without their paychecks.

Here's the worst of it: Nearly a third of those making more than $100,000 annually said they wouldn’t be able to meet their financial obligations for more than one month following a job loss.

My single mother raised three kids living paycheck-to-paycheck, so I know how difficult it is for individuals working low-paying jobs to save money, let alone amass a comfortable financial cushion.

But making more than $100,000 and having no savings to fall back on? Shame on you. That shows either a woeful lack of planning or irresponsible, out-of-control spending. Or maybe both.

If you don't have a rainy-day fund and you're still working, start setting aside as much as you can per month in a basic savings account that you can access any time. Experts recommend that you save enough to cover nine months' worth of basic expenses, but if you can cover three to four months' worth, that's a good start.

Of course, you should also be contributing to a retirement plan and saving for your kids' college expenses (if applicable) as well. Americans are terrible at that also, according to all the stats I've read.

This economic climate may be changing our ways, however. The MetLife study also found that for the first time in the history of the survey, nearly half of respondents said they have all the possessions they need, up from 34 percent in November 2006. And three-quarters no longer agree that the pressure to buy more and better material possessions is greater than ever.

Is cutting back on spending bad for the economy at this moment? Probably. But becoming more financially responsible, and teaching our children to do the same, will be better for Americans' futures.

Sunday, March 15, 2009

The Week in SmallBiz

I was so busy writing last week that I had no time to blog. I realized that as the subject matter complexity has increased during this economic turmoil, I'm working longer hours in 2009 although I'm producing fewer weekly columns.

Hmmm ... working harder but making less money. Something's wrong with that picture!

All that hard work paid off on the BusinessWeek.com SmallBiz page, however. My colleagues and I put up some terrific content, including my podcast on hiring and supervising freelancers online.

BW Staffer John Tozzi and I wrote companion pieces about entrepreneurship after layoffs, a topic that the New York Times tackled on its front page the next day. (After all these years, I still love beating the competition!)

For extra measure, freelance columnist and tech consultant Gene Marks posted a piece on bellwethers of recovery. Watching tangible economic metrics for the beginning of the end is much smarter than reading tea leaves. Gene argues, however, that when the cable chatter shifts, we'll know the end is near. I'll be on the look out.

Tuesday, March 10, 2009

Bounty of the Earth

There's nothing more fun for me than researching a column and coming up with a treasure trove of resources for my readers. So I had a great time delving into community-supported agriculture startups for today's Smart Answers column. By the time I was done, I was ready to start a garden business myself!

In fact, I have been a happy customer of such enterprises a couple of times in the past decade. Now I make weekly trips to our local farmer's market where I get better selection, but the convenience of having a box of farm-fresh fruits and veggies delivered to the doorstep is really wonderful.

By this summer, I hope to have quite a backyard crop myself. While my college student son was home for winter break, he rototilled my side yard (see above), previously the site of our aboveground pool. Then my high school senior helped me dig up some beds and amend the soil with compost, leaves and organic fertilizer. When it's time for summer vegetables, I'm hoping this garden will be bursting with organic produce.

I don't think I'll be getting into the CSA business, though. I'm more likely to give away excess goodies to friends and neighbors.

Monday, March 9, 2009

Recession Haiku

Yesterday, the New York Times published some short poems that readers submitted summarizing their reactions to the economic downturn.

They're all worth reading, but I found poet Paul Stafford's (of Pasadena!) and Barbara Roston's entries particularly poignant. I can certainly relate - can you?

Saturday, March 7, 2009

Buying the Store

Proof that entrepreneurship soldiers on even in the face of recession: My Smart Answers column yesterday gave detailed advice to a reader interested in buying the company where he works as business manager.

As the expert I interviewed points out, finding a qualified, enthusiastic buyer under their noses is quite a boon for the sellers. Someone who manages the firm, and is familiar with its financial situation from the inside out, is an ideal buyer for the current business owners. The expert advises the buyer to use his position as leverage for a good deal on the sale.

Earlier in the week, I wrote about government resources for entrepreneurs. All too often, programs for entrepreneurs are "best kept secrets," while scams, ploys and outright frauds (the "free money" myth) get loads of publicity.

Thursday, March 5, 2009

Funny Business

The guys at Comedy Central were at the top of their games last night, proving that they have no trouble mixing hilarity with spot-on social criticism, even post-W.

Jon Stewart's utterly devastating smackdown of CNBC for its reportorial failures leading up to the financial collapse must be seen to be believed.

And Stephen Colbert's parody of the out-of-control doomsday scenarios emanating from cable TV-land was a crack up.

I'm going to do some research on the effect of these worst-case-scenario predictions I've been hearing recently (and they're not just on Fox News). Given how much the economy is affected by collective psychology, this fear-mongering can't be helping and it seems to me it's getting pretty ridiculous. Stay tuned.

Where's The Money?

A reader asks a great question: "What happened to the money?"

What does he mean? Well, we're immersed in a global economic downturn. And because of that, most of us have lost money. The money that we thought we had - in home equity, saved for retirement, etc. - has dried up.

But where did it go? Overseas? To outsourcers? The big oil companies? Big pharma? Seems like a mystery, doesn't it?

Actually, it's not mysterious at all. Not if you're following Planet Money, the NPR blog and podcast that's doing a bang-up job of explanatory journalism during this economic freefall.

I subscribe to the Planet Money podcast and occasionally catch the reports the team does on This American Life. I highly recommend that you do the same. Think that all the macro-economic jargon is hopelessly over your head? So did I, but they're explaining this stuff in terms that even an English major (c'est moi) can follow.

So what's the answer to the question? Well, says Planet Money, you're asking the wrong question.

Let's turn it around: When you buy a home and it goes up in value (ah, the good old days!) you have more money than you used to. But you don't generally ask, "Where'd this money come from?" You simply understand that your net worth has increased because your asset (the house) has appreciated.

So in a nutshell, it's not "money" that's been lost, it's value. Our homes, our pension accounts, our stocks or mutual funds have all declined in value. Of course, that loss in value doesn't translate into actual dollars lost unless we sell during this market downturn. (Which is why your financial adviser is probably telling your to 'stay the course' with your retirement funds.)

Does that make sense? If not, listen to Planet Money for a while and it will. I promise.

Wednesday, March 4, 2009

No Wiggle Room

In a flush economy, startup entrepreneurs can sometimes scrap and scrape their way into profitability even as they learn on the job and make rookie mistakes.

But in today's climate, a small business owner has to obsess about every penny spent. One of the areas with the greatest potential for hidden costs is inventory, says Bill Harrison, the guest on my Smart Answers podcast this week.

As a former small business owner himself, Bill has some great advice not only on inventory control but on pricing and customer service as well. Check it out.

Tuesday, March 3, 2009

Help From The Feds

My Smart Answers column today outlines some ways that government is reaching out to small business owners during this tough time.

Another must-read on Businessweek.com's Small Biz page today is Jason Calacanis's essay on failing startups. It's a long but riveting account of the tough choices an entrepreneur must make when a business is teetering on the edge. Calacanis - founder of the Silicon Alley Reporter - details the nitty-gritty with the verve and black humor that only a small business owner could love.

Stimulating Tax Impact

When is it possible to use "stimulating" and "tax" in the same post header? When I'm pointing to two recent columns discussing the effects of the fiscal stimulus legislation on small business taxes - that's when!

Both this week's Los Angeles Times "In Box" column and one of last month's Smart Answers columns discuss the small business provisions in the stimulus law. It's esoteric stuff, but important for entrepreneurs to understand if they file their own taxes (or ask their accountants about if they leave that complicated job to the pros).

Monday, March 2, 2009

Retail Center Blues

What happens to a mom-and-pop dry cleaner or frozen yogurt store when the Circuit City that anchors their shopping center goes out of business?

They don't have to just sweat bullets or chew fingernails: There are proactive steps that can be taken.

my Smart Answers column to find out what they are.