Archive for the ‘Small Business’ Category

Nums: Do big companies or small companies create more jobs?”

April 18, 2013

Bit of a trick question since the constant refrain is that small companies are the ones that generate job growth.

According to a Business Week analysis of ADP National Employment data …

Since the U.S. economic recovery began in june 2009, big employers have increased employment 7.5%, while small employers have boosted payrolls only 4.9%.

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Mark Zandi, chief economist of Moody’s Analytics, was on the McCain team in 2008 but has changed sides and now regularly advocates for the Administration of TV.

He says: that there are three explanations for why large employers (1,000 employees and up) grew faster than small ones (fewer than 50 workers).

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Bummer: Small biz optimism slides.

December 12, 2012

According to the most recent NFIB Survey of Small Businesses, the small business owners’ optimism index dropped 5.6 points to 87.5.

The NFIB says “apparently something happened in November to lessen optimism”.

Wild guess: they’re taking Obama’s obsession with jacking up their taxes personally …

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How do small businesses feel post-election?

December 4, 2012

Answer: Not very good.

Gallup’s Small Business Index has fallen 28 points since the votes were counted … and is now back in negative territory.

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And, the headline number only tells part of the story:

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BOOM: Ryan lands some direct hits…

August 31, 2012

Beyond his scapling of Obama’s record, I thought he made some points that likely to resonate with specific target groups: young voters, women and small businesses.

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“College graduates should not have to live out their twenties in their childhood bedrooms, staring at fading Obama posters and wondering when they can move out and get going with life.”

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“I said, I hope it’s not a deal-breaker Mitt, but my playlist starts with AC/DC, and ends with Zeppelin.”

 

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“My Mom started a small business, and I’ve seen what it takes …   She earned a new degree and learned new skills to start her small business.  It wasn’t just a new livelihood.  It was a new life.  And it transformed my Mom … Her work gave her hope.  It made our family proud.  And to this day, my Mom is my role model.”

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“Behind every small business, there’s a story worth knowing. 

They didn’t come out of nowhere …

And if small businesspeople say they made it on their own, all they are saying is that nobody else worked seven days a week in their place. 

Nobody showed up in their place to open the door at five in the morning. 

Nobody did their thinking, and worrying, and sweating for them. 

After all that work, and in a bad economy, it sure doesn’t help to hear from their president that government gets the credit.”

  Game on !

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Why Small Businesses Aren’t Hiring …

August 25, 2010

This is the first time I’ve seen somebody make the direct connection between the decline in housing prices and the high unemployment rate. 

Common knowledge: consumers are spending less because of the “wealth effect” .

Insightful twist: most small businesses serve the real estate market and many of them use their owners’ homes as collateral for their loans.

For my answer to the residential housing mess, see last week’s post:
https://kenhoma.wordpress.com/2010/08/18/instead-of-an-august-surprise-answer-for-getting-housing-on-track/

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According to AEI …

In the recoveries from the previous two recessions, small businesses led job creation. This time, however, small businesses aren’t hiring.

Here’s why.

The collapse in home prices is holding back small-business hiring. And unless we fix the residential real estate mess, we won’t see small business hiring anytime soon.

The weak residential real estate market is keeping small businesses from hiring in five ways:

1. Declining house prices have softened demand for small businesses’ products and services.

The 29.5 percent drop in home values from the first quarter of 2006 until the end of the first quarter of 2010 has led to a huge drop in household wealth, which has led to reduced consumer spending.

Studies show that consumption falls by about 8 cents for every dollar of decline in wealth.

2. Small businesses are overrepresented in the real estate-related industries that have been decimated by the residential housing market collapse.

Falling home prices have devastated employment in construction and real estate businesses, virtually all of which are small companies.

Prior to the recession, 10.4% of all people employed in small businesses worked in construction. Add another 2.5% who work in real estate and rental and leasing businesses, and we had more than one in eight U.S. small business workers in construction and real estate.

3. Small business owners use their homes to obtain business credit.

Business borrowing of almost one in four small business owners is tied to the value of their homes.

As home prices have fallen, small-business-owning homes have seen their personal balance sheets weaken.

As home values have fallen, small business owners whose business debt is linked to residential real estate have faced demand for more collateral by lenders.

The weakened balance sheets and demand for additional collateral has meant that fewer small business owners have been able to expand.

4. Banks have tightened lending standards in response to a rising share of non-performing real estate loans.

The banks with real-estate problems are among the biggest small business lenders.

These banks have tightened up their lending standards.

Tighter loan standards mean fewer small businesses can get capital for expansion that leads to hiring.

5. Small business owners were major customers of residential real estate loans during the boom, making them among the consumers hardest hit from the collapse in home prices.

Small business owners took on a lot of mortgage debt during the real estate bubble and are now suffering from the fall in residential real estate prices.

Tighter loan standards mean fewer small businesses can get capital for expansion that leads to hiring.

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We should acknowledge why small businesses aren’t leading job creation this time around and come up with solutions to the residential real estate problems that are holding them back.

If the residential real estate mess keeps the small business sector from hiring, it will be awfully difficult to reduce our unemployment rate to a reasonable level.

Excerpted from AEI: Why Small Businesses Aren’t Hiring, August 24, 2010
http://www.american.com/archive/2010/august/why-small-businesses-arent-hiring

Hey, Mr. Stimulus … What about small business?

February 17, 2009

Ken’s Take: I was surprised recently when — for a special occasion —  I attempted to make reservations at an Annapolis restaurant (Northwoods) that many locals propped as the the best in the city. It had closed after a couple of decades.  An article in the local newspaper listed it as a casualty of the economy.  Also, I got emails on the same day from a local painter — practically begging for work at any price, and from a local carpenter who was networking to land a job in web design (you read that right).  Since then, I’ve noticed the number of small businesses dying.  Bottom line: the stimulus package is giving more to ACORN than it is to small businesses in total.  That’s sad.

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Excerpted from Knowledge@Emory, “Will the 2009 Stimulus Act Fizzle?”, February 12, 2009

Have you heard anything about what Congress is providing for small businesses in the current economic stimulus package being debated in Washington?

Small businesses in particular are concerned that the stimulus package misses the boat. Small businesses are defined as companies with fewer than 10 employees, and they account for almost 80 percent of all U.S. companies, according to the National Federation of Independent Business (NFIB) lobbying group. Small businesses are credited with generating about 70 percent of all new jobs.

“Funding, not consumer spending, is the core issue for small businesses,” he says. “Right now lenders are hesitant to extend money to commercial borrowers even when they have a good track record, and in some cases are actually calling in loans that they have already funded.”

“The freeze in funding is hurting small businesses much more than the shortfall in sales is hurting them  … Without the necessary cash to grease the gears and keep the business going, companies have had no choice but to reduce costs. And that, unfortunately, results in a cutback on capital expenditures and a need to lay off workers. So cash, in the form of loans, is the mechanism that is most important, but the stimulus bill can do little to help in that regard.”

“Typically, the propensity for risk taking goes down in a weak economy … The typical rounds of early stage financing from friends and family and angel investors depends on excess capital. Reduced wealth means that these usual sources of early venture financing are unavailable to entrepreneurs … in the current environment, many banks are not willing or able to provide loans or lines of credit, leaving very few options for entrepreneurs.”

Increased SBA funding in the stimulus package could provide some rapid assistance to small businesses

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Full article:
http://knowledge.emory.edu/article.cfm?articleid=1218

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