Sad Reality

I've been incredibly fortunate to see my way through this horrid recession and most of my friends and loved ones (though not all) have similarly been able to stay afloat.

But not everyone has been so lucky, by any means. This week, I answer a question from a former small business owner who not only lost his bagel shop in Claremont (the long-time local favorite Tasty Bagel) but also pretty much his whole life in the past couple of years.

Interviewing people like this really bring home a few things: The tragedy of our economic downturn; the crushing damage that a sliver of greedy, short-sighted individuals unleashed on "the least of these" in society and how fortunate those of us who've escaped ruin really are.

Medicare For All

I am not an expert, but I have tried to follow the ongoing health care debate through all its twists and turns this year. Reform is crucial for small business owners, who consistently say that providing health care benefits for their employees is the most costly problem they face.

So while I'm not sure exactly what's in this newest Senate compromise plan (no one is sure because the details haven't been released, pending a cost analysis), I am intrigued by the idea of extending Medicare coverage to individuals 55 and older.

For years, as a retirement columnist, I wrote about efforts aimed at keeping middle-aged and older people in the job market. They could semi-retire and continue on a part-time basis at their jobs. Or they could retire outright but work as consultants, perhaps training employees for their previous employers. Many were encouraged to freelance a few days or weeks a month as a way to supplement their income and retain their expertise.

Why the focus on stopping or slowing retirement? Believe it or not, just a few years ago the worry was about too many seasoned employees leaving the workforce early. It's hard to believe in our current jobs crisis, but back then (early to mid-2000s) the experts were panicked about a potential lack of U.S. workers.

Baby boomers, the first of whom are now in their early 60s, are such a huge demographic that economists worried when they retired there would not be enough younger workers to replace them. And the numbers bear that fear out - Gen. X and Y'ers can never match the 78 million Boomers for sheer size and clout.

Of course, life is strange and now we have the exact opposite problem. Boomers who saw their retirement funds evaporate last year have stayed on at their jobs longer than anticipated and canceled plans for early retirement. In fact, while we have record youth unemployment, Boomers are the only demographic actually seeing job growth in this recession.

So where, you ask, does expanding Medicare come into this equation? I think that Boomers may revisit their ideas about retirement over the next couple of years as they see the economy begin to right itself. Already, stock portfolios are recouping losses. If reasonable medical coverage were available through buying into Medicare before 62 or 65, some of those Boomers might feel comfortable at least exchanging full-time jobs for part-time, or consulting.

And as the behemoth generation begins to back away from the workforce, that will open up slots for the younger employees who right now are in holding patterns, either in grad school or living in mom and dad's basement.

A perfect solution? Probably not, because they simply don't exist. But it's an idea that may have found its time.

Sunny Side Down

I went to hear journalist, author and all-around rabble-rouser Barbara Ehrenreich speak recently about her new book, "Bright-Sided: How the Relentless Promotion of Positive Thinking Undermined America."

Ehrenreich is probably best known for her 2001 book, "Nickel and Dimed," which recounts her undercover experiment trying to get by on the low-wage jobs that typically are done by this country's working poor.

The new book grew out of her diagnosis of breast cancer shortly after "Nickel and Dimed" was published. Immediately, Ehrenreich says, she was bombarded with "think positive" messages - something that grated on her as a natural pessimist.

"Bright-Sided" debunks the notion that positive thinking contributes to recovery from cancer or any other disease (studies show that cranky people recover just as often as perky people do) and also examines how the wave of positive thinking has affected the business world.

Ehrenreich shows how the banishing of bad news from the corporate board room contributed to last year's horrific financial meltdown. Top CEOs (who have no excuse for not knowing better) fell for the "we can do anything we try!" motivational mentality and kicked naysayers out of their ranks.

Risk managers - those "just say no" guys and gals who have usefully put the brakes on stupid risks and harebrained plans for years - were fired or shut down. They weren't positive enough, you see.

The same thing happens in all kinds of firms, when CEOs become so isolated or intimidating that no one on the staff dares to cross them, or warn that their new ideas aren't so great. In fact, it's the number one reason companies fail, according to Billion Dollar Lessons, by Paul B. Carroll and Chunka Mui (highly recommended).

This month's Atlantic cover story takes a similar theme, laying some of the meltdown at the feet of the evangelical "prosperity gospel" preachers and televangelists.

I'm such a natural optimist that I doubt I could think negative thoughts very long even if I tried. But I sympathize with those glass-half-empty folks who are made to believe that if their disease returns or they don't get that raise, it's their own fault. That's not positive at all - it's just plain cruel.

Save Money - And The Planet

My Los Angeles Times column today lists several ideas for an entrepreneur concerned about both the environment - and her budget.

My source, green business writer Kim Carlson, has lots of additional tips that I didn't have room to include in the column. Here are a few:

*Use plants to do double duty bringing nature indoors while cleaning the air. Put them near copiers, faxes and other machines that emit ozone.

*Re-use one-sided, discarded copy paper for printing out notes and rough drafts. I do this all the time and go through very little paper, despite the fact that I still print out a lot of items (I just like having a hard copy, what can I say?). Re-using paper can reduce your paper cost by 20% to 35%, Kim says.

*Put recycling containers at every workstation, along with wastebaskets. Provide receptacles for recycling cardboard, plastic bottles and cans as well as paper.

*If you move your business, locate an existing office building or repurposed warehouse space rather than building a new structure.

*Deconstruct outdated square footage rather than tearing it down using a demolition crew. "Selling or donating used construction materials cuts down on waste and keeps old building components in use," Kim says.

In the mid-80s we lived in a neighborhood with a lot of historic bungalows. One of our favorite activities was scavenging tear-down sites for old architectural and design treasures. We salvaged some brass fireplace andirons from one place that we still have. And we picked up some lovely glass-paned French doors that we used in a home addition.

Down, But Not Out

As the recession drags on - "green shoots" notwithstanding - a lot of entrepreneurs are becoming very discouraged.

I answer a question from one of them in today's Smart Answers column.

Maybe things aren't quite as bad as he thinks.

Getting Desperate?

Many small business owners are hitting the desperation button about now.

They've used up their reserves, lowered their prices and beat the bushes for new customers.

But those revenues just aren't rolling in and their credit lines are being cancelled. Things have gotten so bad, even the New York Times is noticing.

I hope that entrepreneurs are not so strapped that they're falling for unethical - and potentially illegal - schemes like "shelf corporations."

Never heard of them? Neither had I. But I write about them in this week's Smart Answers column.

Failing to Deal

When his father's small business closed its doors after many years, Dean Shepherd was devastated.

But that was nothing compared to how his father felt, Shepherd says in this week's Smart Answers podcast.

With so many small businesses shutting down these days, it's important to find coping skills for failure, Shepherd says.

Many entrepreneurs must have learned that lesson. I remember several years ago coming across a study that showed that the most successful entrepreneurs have failed early on in their careers and come back to try again, getting it right the second - or third - time.

Back to Work

Right now, the job market is as tight as it's been for a long, long time. It must be terribly discouraging for this spring's college grads.

Even my older son, who just finished his first year at college, has been unable to find a summer job. The best he's been able to do is work a few weekends for a local restaurant owner who takes a booth to special events. He worked eight hours yesterday at an American Idol tryout and was grateful to be squeezing lemons and making fries!

He also signed up with a temp agency, but so far has not gotten any assignments.

A friend's college son filled out an application for a graveyard shift job as a retail store shelf-stocker. He was hopeful, until he was told that 27 others had already applied!

Here's a website that is "helping put Americans back to work" with a series of national job fairs.

Check out one if you're on the market.

The Daily Freebie

Last night, we stood in line and got free chicken and tortillas at El Pollo Loco for dinner. Apparently they were responding to a free chicken giveaway by KFC a day earlier.

Tonight, we paid $1.86 for six scoops of ice cream at Baskin-Robbins (.31 cents per scoop) during an anniversary special.

Apparently, if we'd known about it, we could have gone downtown and had breakfast at The Original Pantry (one of my Dad's absolute favorite places) for .85 cents.

I know restaurants are hurting and all, but how many more of them can afford to give away free food!?

What's the word on the next freebie?

Buying A WorkOut

Business turnaround experts call struggling firms that still have potential "workouts."

Not surprisingly, this is a terrific time to acquire a floundering company and turn it around. Anyone who attempts this, however, must have a strong stomach and a strong grounding both in the industry and in entrepreneurship.

One expert told me that anyone aquiring a workout should have an "MBA." Not a master's of business administration, but a "massive bank account"!

See what some other experts have to say in my most recent Smart Answers column.

I Will Not Worry, I Will Not Worry ...

We've all said it: "There but for the grace of [insert personal deity/non-deity of choice], go I."

But it's scary to contemplate those words when the topic is losing a job.

Good to know that there are practical ways to help job-seekers, or to ask for help yourself, if you lose some big clients or a full-time job. The New York Times last month listed some things you can do in an easy checklist format.

Meanwhile, we all need to take deep breaths and try not to worry so much. The Times also had a story last week about how recession stress is on the rise.

It's difficult not to contemplate financial ruin and wig out about it (especially if you're a journalist married to a journalist!) but worrying is time-consuming and unproductive.

Just keep repeating that to yourself. I'll do the same.

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.

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.

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.

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.

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.

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.

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.

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.