FastUpFront

When it comes to the U.S. economy, sometimes it seems that everyone loves a good scapegoat- especially when the “everyone” is desperately trying to turn a blind eye to some ugly, fundamental problems…

 

As economic analysts try to make sense out of Wall Street’s recent nose dive, there are so far several suspects in the line up: the recent credit downgrade, the uncertainty over the national debt and any legislation or changes in government spending connected to it, the growing debt crisis in Europe, and a series of rather weak economic indicators in the US, including the current GDP.

The most recent survey of Small Business Optimism conducted by the National Federation of Independent Business (NFIB) suggests deeper, more fundamental issues are at work here. What is particularly telling is the significant (and seemingly widening) divide between Big Corporate America and Main Street America. Here are some of the highlights of the survey:

• Though the national labor reports released at the end of last week indicate that the unemployment rate has dipped ever so slightly, it seems that the same is not true among small businesses in particular: “Twelve percent (seasonally adjusted) reported unfilled job openings, down 3 points. Over the next three months, 10 percent plan to increase employment (down 1 point), and 11 percent plan to reduce their workforce (up 4 points), yielding a seasonally adjusted 2 percent of owners planning to create new jobs, 1 point lower than June, leaving the prospect for job creation bleak.”

 

• According to the survey, revenues among small businesses have continued their sluggish trend: “The net percent of all owners (seasonally adjusted) reporting higher nominal sales over the past 3 months lost 1 percentage point, falling to a net negative 8 percent. Currently, there are more firms with sales trending down than there are with sales trending up…”

 

• Likewise, the majority of small businesses report stagnant or diminishing sales: “Reports of positive earnings trends were unchanged at a net negative 24 percent of all owners… Corporate profits are at a record high level as a share of GDP, but these increased have not translated to Main Street, where even among the most optimistic of sectors, small manufacturing firms, only 23 percent reported higher earnings while 37 percent reported lower profits (not seasonally adjusted).”

 

• Investment in growth, expansion, including standard equipment and facility upgrades remains weak even among many financial incentives: “The frequency of reported capital outlays over the past six months was unchanged at 50 percent of all firms, [and] the percent of owners planning capital outlays in the next three to six months fell 1 point to 20 percent, a recession level reading that has typified the recovery to date…”

• With all of the above factors, it’s not surprising that optimism among small companies is not so high: “The net percent of owners expecting better business conditions in six months was a negative 15 percent, down 4 points and 25 percentage points lower than January.”

 

With unemployment still lingering at all-time high’s and consumer confidence still languishing, how are so many big corporations pulling in such record profits? The answer is that many of these businesses are cutting costs by letting go of “expensive” domestic workers, closing down stores and factories, and actively seeking cheaper, foreign labor as well as expanding operations in emerging foreign markets. Of course these tactics seem to be fueled by a desire among corporation owners and top management to keep their coffers full and make Wall Street happy

None of this helps the American economy much, and in fact it can be a big reason why the nascent “recovery” seems to have so quickly sputtered and stalled. Less people employed = less people to buy goods and services. Period. We can expect difficult times ahead until Big Corporations and Small Businesses are pretty much going in the same direction. As of yet, that gap is getting harder and harder to bridge.

Irregardless of which side of the political camp you place yourself, chances are the recent “agreement” to raise the debt ceiling probably brings little comfort, and with good reason. Analysis of the deal reveals that the proposed $2.4 trillion in deficit reduction over ten years is a mere drop in the bucket compared to the national debt which currently stands at $14.3 trillion.

 

But with such astronomical numbers it may be hard to relate to it all in a concrete way. So here is a collection of over 20 unbelievable facts about the national debt and the deficit culled from around the web:

What’s a Trillion, Anyway?

1. If you spend one dollar every second, in twelve days you’d spend 1 million dollars. But it would take you 32 years to spend a billion dollars and more than 31,500 years to spend a trillion. Or you could spend $10 million a day and it would take you a mere 273 years to spend that $1 trillion.

2. A trillion $10 bills, taped end to end, would wrap around the Earth more than 380 times.

3. How big is 14 trillion dollars? 14 trillion $1 bills, laid end to end, side to side, would pave every interstate, highway, and country road in America—twice

*Source: Defeat the Debt

Just Put It On the Tab… A Snapshot of the Yearly US Deficit.

4. According to the US Treasury, as of June 2011, the deficit for FY 2011 is holding at over $970 billion.

5. Projections for the total 2011 deficit peg it at $1.2 trillion dollars.

6. Obama’s most recently proposed budget includes approximately $5.08 trillion in deficits over the next five years

National Debt History 101

7. Before the first session of the U.S. Congress came to an end, the national debt stood at more than $75 million, and since that time it has never been completely paid off.

8. When World War II ended, the debt equaled 122 percent of GDP, or the entire output of the U.S. Economy. In the 1950s and 1960s the economy grew at an average rate of 4.3 percent a year and the debt gradually declined to 38 percent of GDP in 1970. Total US government debt as a percentage of GDP was 94 percent in 2010.

9. When Ronald Reagan took office, the U.S. national debt was only $997 billion. When he left office 8 years later it was $2.6 trillion. During those years, the US went from being the world’s largest international creditor to the largest debtor.

10. Since 1938, the national debt has increased at an average annual rate of 8.5 percent. The only exceptions to the constant annual increase over the last 62 years were the presidencies of Clinton and Johnson. During the Clinton Presidency, debt growth was almost zero

11. With the exception of fiscal years 1998-2001, from 1969 to today, Congress has spent more money than it collected in revenue.

12. The U.S. national debt has more than doubled since the year 2000.

13. Under President Bush: at the end of calendar year 2000, the debt stood at $5.629 trillion. Eight years later, the federal debt stood at $9.986 trillion.

14. Under President Obama: The debt started at $9.986 trillion and escalated to $13.7 trillion, a 38 percent increase over two years.

Anatomy of a Debt Disaster

15. The current National Debt is over $14.3 trillion dollars.

16. Since 2006, the U.S. government’s debt ceiling has been raised six times.

17. The estimated population of the United States is 311,044,622, so each citizen’s share of this debt is $46,152.45 (or about $122,029 per taxpayer)

18. Since September 2007, the U.S. national debt rises at an average of approximately $3.8 billion per day and borrows approximately $5 billion every business day.

19. In 2010, the U.S. government issued almost as much new debt as the rest of the governments of the world combined.

20. The U.S. government has such so much debt to unload that the rest of the world doesn’t have enough money to lend. So, the Federal Reserve is buying most U.S. debt, and don’t think that’s too hard. It’s got a ready supply of cash… straight off the mint’s printing presses!

21. The largest lender to the U.S. government is the American people. We currently own about 42.1 percent of the national debt in the form of Treasury bills and the next largest lender is the government itself with 4.6 trillion or about a third of the total debt.

22. The U.S. government has to borrow 41 cents of every dollar that it currently spends.

According to a recent Wells Fargo Business Insights survey, poor cash flow continues to be a major worry point for small business owners across the nation. These findings come as no surprise given the overall decrease in consumer spending and consumer confidence coupled with inflationary pressures and high rates of unemployment.

 

But as more American workers succumb to debt-related stress and illnesses, small business owners in particular may be struggling to both hold on to their talented, experienced workers while keeping them motivated on the job. The problem: these days, money has become a big motivating factor, even as the owners of many smaller businesses are looking for low-cost ways to encourage their workers without having to offer them a raise they just can’t afford.

So how can you as a small business owner break out of this cycle- especially if you are struggling with your daily cash flow? One answer to this predicament is to offer performance-based pay increases, and the more that you can align your employee performance measures with the company’s overall bottom line, the better. Some examples of this in action: giving employees a cut of the revenues from all new accounts that they help to set up, offering a bonus for coming up with ways to improve quality or efficiency, offering bonuses for high customer satisfaction scores.

Why does this stand a good chance of working? If employee goals are in line with company goals, then your compensation methods can be a simultaneous call to action- as this entrepreneur discovered. Employees will be motivated to give it their best, to help both themselves and the company as a whole, and this could just be the boost your business needs to successfully ride out these difficult economic times.

With all the buzz being generated around Google’s new social networking and information sharing tool, Google+, you could be planning to add this service to your web content in the form of the Google+ button (if you haven’t already). But, as the title to this post suggests, you may want to wait it out a bit.

 

Google+ is Google’s latest and, as many argue, perhaps its greatest, most solid attempt at building a social network. Several of the service’s early users who have been invited to try out the new tool have been quick to point out its amazing content sharing capabilities… and potential. Then there are those nifty social circles and the video chat “hangouts,” two features which seem both useful and, well, natural at the same time.

All very compelling… But before you jump on the Google+ bandwagon, keep the following points in mind:

• Google is still working out the kinks. Officially, Google+ is still in beta mode, and that means there are plenty of wrinkles to iron out while the service is being tested. Some of the issues that have come up include: a temperamental blocking feature that sometimes works… and sometimes doesn’t; a significant slow down to a site’s load time when the Google+1 button is added; and finally a male-dominated trial group. Though Google says it is working hard to fix the performance issues, and eventually the service will be open to all Google users, it may certainly pay to wait for those things to happen.

 

• Leave some time for the new network to “catch on.” Before the full potential of Google+ can be realized there has to be a critical mass of followers/users. Though the number of users of the service promises to explode once it is open to the general public, as of yet it is only in a limited trial run with a trial group that may not be representative of the eventual user pool.

 

• Have you asked yourself: “Do I need to use this?” If you plan on doing more than merely adding the +1 button to your site, then realize that like any social network, the benefits of being on Google+ will be a function of the amount of time and energy you invest into it. Do you have that time and energy available? Though Google has said that it will roll out a business sites function that will be integrated into the network, you need to determine if it will be worth your while.

 

All in all, Google+ shows a lot of potential as a business networking and collaboration tool in a way that outdoes several of the current top dog social networks, such as Facebook and Twitter. But, it definitely pays to wait a bit till both the service and your business are ready.

According to recent reports, such as this one from the National Federation of Independent Businesses (NFIB), many small businesses have finally begun to consider a price hike. It was to be expected as the increased cost of commodities, confirmed inflationary pressures, and year-over-year of sluggish consumer spending have whittled away profit margins at a time when economic and legislative uncertainty reigns supreme.

 

But choosing to raise prices versus maintaining them is a delicate balance. Here are five things to consider before altering the cost of your products or services:
1. How long have you been in business? To maximize your price increase you should aware that timing plays a significant role. Ideally, if you have been in business for a few years and have built up a loyal customer base, a modest price increase on key products or services will not drive away too many customers. Increasing prices may be a bit difficult, however, if your business is relatively new.

2. Have you considered legitimate cost-cutting? Before raising your prices, have you looked into ways to decrease your expenses and free up cash flow, by for example, improving your inventory management or debt collection processes?

3. How will the price increase affect your brand? The price associated with a product or service is a key contributor in conveying the perception of value and status. Usually, this idea is brought up when talking about price discounting, but it also applies to price increases. Make sure that your price increase is in line with the product or service’s overall value.

4. Can you raise prices on a group of products and services in a trial run? To test out the possible customer response to a price increase you may want to increase the cost of only a small group of items or services. You could also try offering a different cost structure to different groups of customers such as loyal, repeat customers versus new ones, or those physically closer to your business versus those further away. A little experimentation could give you a lot of valuable feedback.

5. Are you promoting the value or status of the product/service? It is a good idea to accompany a price increase with a marketing campaign that emphasizes the product or service’s value, uniqueness, or status. People will often be more willing to spend on those things that either give them a lot of bang for their buck or, as in the case of luxury items, on those things that serve as a status symbol.

When the group discount site Groupon first appeared on the Internet radar in 2008, it seemed like a bane for small business owners looking for a way to pump up sluggish sales and attract new customers. It’s daily deals are known to attract hordes of interested, deal seeking consumers.

 

But as other deal sites have set up shop, and numerous businesses have bought into the group buying model enough to try it out, an unmistakeable backlash has evolved, with many being quick to point out that the actual benefit of participating in Groupon to small businesses and their communities seem small. So does that mean you should throw in the towel, avoiding Groupon and the like altogether?

My answer: not necessarily. But for your Groupon experience to be successful you need to know how to use the service properly. Here are three things to keep in mind:

1. Know what you are getting into. Make sure that you understand the nature of “a Groupon” and the kinds of customers it attracts. The people who will be coming to your business are doing so in order to take advantage of your offer. They are not necessarily looking for a new restaurant or store to start frequenting, and they may be less willing then other walk-in customers to spend more than they need to. It is up to you to convince them otherwise. If you don’t think that you can do that, then don’t offer a Groupon in the first place.

2. Choose your deal carefully. While you want your Groupon offer to be alluring enough to attract customers you don’t want to break the bank doing it either. Either choose a lower wholesale cost or overhead item, or one that would naturally lead to other purchases like a buy-one-get-one-free or buy one and get a heavy discount on the second purchase. You may also use Groupon successfully to promote a new product or service.

3. Prepare your business and your employees. Make sure that your business is both adequately equipped and stocked to handle the extra traffic and that your employees know how to handle the Groupon customers. Again, as I mentioned above, your approach to these people will be a bit different, not only may you need to work harder to provide a good experience, but you may also need to give these people a further incentive to come back. One method: make them aware of the perks of your customer loyalty program if you have one.

In short, Groupon may bring a lot of business and attention to your company, but like most things in life, you need to know how to use it properly.