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Consumer confidence (the term used by the Conference Board) and consumer sentiment (the label used by the University of Michigan) are not quite at their all-time lows, but they are very close to them.

This seems a little odd because two of the biggest elements of consumer attitudes, unemployment and inflation, are quite benign.

Unemployment, at 5.5 percent, is a hair below its long-run average (5.6 percent).  Inflation (all items) is 4.1 percent, only a little above its long-run average of 3.7 percent.

Why the doom and gloom? (more…)

              Thanks to Orin Zebest for permission to use this Photo.

When I was a small girl, my family would gather to watch The Art Linkletter Show, a television variety show which aired once a week.  

Although I have watched countless shows since that time, there is one particular segment which comes to mind when considering the many facets of starting and operating a small business.  During the segment, Art Linkletter introduced a juggler who proceeded to explain how we all are jugglers.  There are those who juggle as a profession; however, the analogy was applied to the rest of the population.  No matter your profession, age, or socio-economic status, we can all learn from the juggler’s lesson of “The Spinning Plates.” 

To offer a brief synopsis of the lesson, the juggler first began the process by placing a dowel rod on the floor and balancing a plate on top of the rod.  He gave the plate a spin with this hand and stood back to watch as the plate, balanced atop the dowel rod, would spin around and around.  As the first plate was spinning, the juggler would set up a second dowel rod and plate.  This process continued until the juggler had twelve sets of dowel rods and plates spinning.  In order to keep the plates from crashing to the ground, the juggler had to run from one to the next to keep the motion going.  Inevitably, he would be too slow to attend to all of the plates and one would crash to the ground with the plates shattering into pieces. Quickly, he would set up a replacement and run from one plate to the next spinning, spinning, running, spinning, running, spinning, and running again!  I was exhausted just watching the process.

The morale of the lesson is that no matter how wonderful you might be at spinning plates, you can only manage a certain number of plates effectively.  Add just one too many plates and they may all come crashing to the ground.  The same lesson is especially true for those of us who are business owners.

There are many aspects of your new business which will spin at the same time:  financial, marketing, sales, service, employer/employee relationships, customer relationships, deadlines, industry regulations, ordering supplies, overseeing production, submitting bids, and the list goes on!  With all of these responsibilities, it is no wonder that we find ourselves spinning and running just to keep all of our “plates” operating as they should.  New entrepreneurs are often overwhelmed with the magnitude of responsibilities created when they decided to start and operate a new business. Realizing that all of the different areas must be effectively operating at the same time can create quite a bit of stress for the new business owner.  To be successful, it is imperative that we understand our value to the new business.  The primary responsibility for the new business owner is to focus time and effort on actions which contribute the greatest value to a new business.  So what happens to the rest of the plates left spinning?  Ah, that is the portion which must be delegated to others.  In other words, the business owner should “spin” the value plates and delegate all activities that others can do.  To capitalize on entrepreneurial strengths, new business owners must learn to delegate in order to spend valuable time strategizing and leading rather than doing.  

Art Linkletter has been quoted as saying, “I’ve learned it is always better to have a small percentage of a big success, than a hundred percent of nothing.”  An entrepreneur himself, Linkletter learned early in his career that the quality of employees he hired was in direct correlation with the success of a venture.  Linkletter hired the most creative people he could find to assist with the production of his television shows, “House Party” and “The Art Linkletter Show.”  Then, he shared his success with the employees realizing that without creative employees, his ventures would not have yielded the same results.  If you were to ask the 96-year old entrepreneur his secret for success, he would tell you that he has learned not to spin more plates than he could comfortably handle.  Of the many books Linkletter wrote, it was the title of a book released in 1980 that states the fact entrepreneurs must remember, “I Didn’t Do it Alone!” 

As this article comes to a close, I hope that you also learn from the juggler’s lesson and realize that you can not possibly “spin all of the plates” found in your new small business.  Instead, learn to delegate responsibilities to others within your organization so that you can concentrate on that which brings your enterprise most value.  I’ll leave you with another bit of advice from Art Linkletter: “Things turn out best for the people who make the best of the way things turn out!” 

Keep the plates spinning, 

Penny Joyner Waddell
Small Business Management Instructor
Ashworth University

 
          Thanks to Rob West for permission to use this Photo.

Our new Ashworth University Discussion Forum has been sparking some lively debate.  If you haven’t checked out the forum yet, what are you waiting for?—get engaged with your student community!

Ashworth University Business Student, Frederick F, states: 

I recently completed the Macroeconomics course, and all the negative things about Keynes were wrong!

I do agree with government intervention to get the economy out of recession and depression as a better solution by lowering interest rates and major government projects to get people employed and spending money.

However… I wrote projects, not programs. Programs that are started to help people don’t usually work, just enough to keep people employed and create more red tape.

As for supply and demand side economics, I side with Jean-Baptiste Say whom said “Demand creates it’s own supply”

Keynes basically said that excessive saving can lead to recession or depression, True, but today we are experiencing excessive greed which is causing our current recession. (High gas prices and the mortgage crisis.)

Ashworth University Technical Services Supervisor And Resident Economist, John Ash, responds:

Well, Keynes’ ideas look dynamite on paper, but they suffer from the minute flaw of not actually holding up in the real world. I know, I know, we should ignore that and just let the beauty of his carefully constructed theories suffer no detractors, but those of us who are actually studying economics to understand the world better and use that knowledge to improve our own lives (i.e., make more money) can’t allow such intricate economic fallacies to remain unmolested.

Keynes’ theories were gospel for the economic advisors of the 60s and 70s, and it is generally believed (among economists anyway) that strict adherence to his policy recommendations led to the stagflation of those decades (stagflation is when the economy is in a recession but inflation is increasing, two things which are supposed to be mutually exclusive by Keynesian standards). Keynes is a good starting point for understanding economics, but modern post-industrial economies are far too complex to be modeled with it. Don’t fall into the trap of trying to find one unifying principle which will explain everything; it’s never going to happen. There are a lot of variables, and usually no single one is going to accurately predict the movement of the economy. (more…)

While the “experts” continue to debate whether our economy is in a recession, the rest of us working in the real world have already determined that the semantic definition of this crisis is the least of our concerns.  In the following podcast interview, Dale Collie, a former corporate executive and elite U.S. Army Ranger shares the lessons he has learned throughout his life on how to cope with the stress caused by difficult circumstances.  Although focusing primarily on how the business manager of today can effectively lead, inspire, and provide stability to workers during times of economic hardship; this podcast also offers some “big picture” perspectives that anyone can apply in their personal lives as well.  I think you’ll enjoy this podcast. Please share your thoughts in the comments section of this post.  I’d also like to thank Bill Conerly for conducting this outstanding interview. Thanks…

Ryan Rode
Interactive Services Manager
Ashworth University  

 
           Thanks to Rashida Simmons for permission to use this Photo.

OK, I know what you are all thinking!  It’s spring; the daffodils are blooming; the cherry trees are in full blossom; the birds are singing their happy springtime songs; the sweaters have been packed away; love is in the air; so, what is the problem?  Why would someone begrudgingly say, “It’s THAT time of year, again?”  What could possibly be the problem with spring? 

April 15^th is upon us and this is a date which strikes fear into the fiercest of hearts!  It is a time when the good citizens of our country must file their income tax returns.  “The National Bureau of Economic Research has concluded that the combined federal, state, and local government average marginal tax rate for most workers to be about 40% of income” (Wikipedia, 2008).   According to Brigham and Houston (2000), that figure could reach about 50% for some taxpayers (p. 61). What does this mean for all of us?  It means that a large portion of your total earnings are due in the form of tax payments.  In other words, you must work from January through April or May to pay your tax debt. 

Those of you who have been working for several years understand this concept more than some who have not yet held a job or filed their first income tax return.  For the entrepreneur, this concept takes on an additional meaning.  Not only will you have to file income tax returns for your own personal income, but you will also be responsible for filing corporate tax returns.  This is the reason why folks, who are about to start their own small business, need the services of a qualified tax accountant. 

If the thought of deciphering tax laws makes you a little crazy, do not worry!  According to Eugene Brigham and Joel Houston (2000), authors of Fundamentals of Financial Management,  “Taxes are so complicated that university law schools offer master’s degrees in taxation to lawyers, many of whom are also CPAs” (p. 61). The good news?  We don’t have to know all of the tax laws to own and operate our own businesses and to be successful; we just have to hire the right CPA.   

As an entrepreneur, you should be aware of the following taxes: Payroll taxes, Corporate, State, Local, Government, Income, Sales, and Property taxes. To emphasize the importance of understanding the objectives of taxation, let’s take a closer look at just one form: payroll taxes. 

Payroll taxes include Social Security and Medicare tax.   Employees are required to pay taxes on all wages and salaries from their place of employment; however, individuals must also pay taxes on investment income and on profits which are generated by proprietorships or partnerships.  The Social Security tax, listed as FICA on your paycheck stub, is a 6.2% tax of the income generated by the employee and matched by the employer. How does this affect the small business owner?  You actually have to pay double tax on your earned income to the tune of 12.4% because you are the employee AND the employer.  One piece of good news, this tax is not applicable to income which has not been earned (i.e., income from interest, dividends, or royalties). (more…)

Photo courtesy of Hussein Alazaat

The Small Business Trends blog has an interesting article, Four Mistakes Entrepreneurs Make in a Recession (the title of which I’ve modified for the title of this post, for SEO reasons).

I’m going to add another mistake, but first let’s review Scott Shane’s four mistakes:

1.  Failing to take advantage of decreasing costs.  [good point; I made this in Businomics]
2.  Thinking the only way to increase demand is to cut price [also a good point]
3.  Failing to recognize increased competition.  [sometimes true, especially across normal industry lines; for instance, residential contractors may move into non-residential work when their sector weakens.] (more…)

                Thanks to Len Peralta for permission to use this Photo. 

As the deadline for completing 2007 tax returns approaches, more and more people are filing returns each and every day. Once the headaches of making sure all your information is accurate and all your paperwork has been submitted, you should know in advance if you can expect a tax refund this year. As with any income, it’s a good idea to think about what you’re going to do in advance and make a plan for how you will use it. We always quote the saying that “no plan is a plan to fail,” and it seems true that many of the worst financial decisions are those made compulsively. Since tax refunds are getting turned around more quickly than ever these days, take the time in between when you file and when you receive your refund to really think about what you’ll do with the money you get back. 

Here are seven ideas we at 22Dollars brainstormed to help get the wheels turning when it comes to your 2007 tax refund: 

* Deposit it in your savings account to help you meet your savings goals.

* Spend it on something you’ve needed to buy for a while and that will help save you money in the long run – like a fuel efficient car for example.

* Invest it in your retirement fund or in stocks you’ve researched.

* Pay it toward debts you have such as school loans or credit card debt to help yourself avoid spending additional money on interest payments. (more…)

                         Image courtesy of Sztanko Demeter. 

I just came across this troubling report about dramatic job losses in February.  Now, I consider myself a pretty optimistic person, but I must admit that it’s becoming more and more difficult for me to believe that our economy is not in a recession.  The politicians tell us different stories every day and I’ve basically stopped listening.  What’s the point?  The numbers don’t seem to lie in this case.  By the third paragraph of this article, I knew where the latest Department of Labor report was headed: down!

From The Associated Press:

 WASHINGTON - Employers slashed 63,000 jobs in February, the most in five years and the starkest sign yet that the country is heading dangerously toward recession or is in one already.

The Labor Department’s report, released Friday, also indicated that the nation’s unemployment rate dipped to 4.8 percent as hundreds of thousands of people — perhaps discouraged by their prospects — left the civilian labor force.  The jobless rate was 4.9 percent in January.

 Job losses were widespread, with hefty cuts coming from construction, manufacturing, retailing, financial services and a variety of professional and business services. Those losses swamped gains elsewhere, including education and health care, leisure and hospitality and the government.

Not exactly inspiring stuff, right?  However; I meant what I said earlier about being an optimist and I can still see some silver lining on a personal level.  The fact that I just earned my college degree, an Associate’s degree in Business Management, gives me the confidence to do what I need to do in order to compete in this job market.  With just a high school diploma, I feel like I’ve always been forced to accept jobs that seem to pay a lot less than they used to?  I’m not an economist, but I can tell when something just isn’t adding up.  I was working longer hours for less money.  Something had to give.  I actually landed my first “good job” before I even graduated.  No one would call me rich, but I feel comfortable with the fact that I can support myself and my family no matter what happens with my current employer (knock on wood).  Even if this job didn’t work out for whatever reason, I know I’ve got marketable skills that will land me on my feet somewhere. 

I don’t mean to sound like I’m preaching to anyone, but based on the little bit I’ve seen of the good life since graduating, I can tell you that the only way to get ahead and stay ahead is through hard work and education.  Don’t wait around for the economy to rebound.  No one realistically even knows how long this recession is going to last.  And what if the economy does improve?  Will it really make a big difference in your life?  The job market is still going to be more competitive than ever.  I encourage you to take control of your own situation and future.  Otherwise, you’re just going to be waiting around for an opportunity to appear out of the blue.  The chances of that happening are honestly not that good, but that doesn’t make me worry anymore.  I’d rather make that opportunity happen for myself.  I hope I can inspire a few of my fellow students out there with this message.  I hope to meet some of you at the graduation ceremony! 

Ray Wheatley
Ashworth University Class of 2008    

              Thanks to Luis Ramirez for permission to use this Photo.

It isn’t adequate to say ‘I am a long-term investor’ and I don’t need to pay attention to the impending financial turbulence.

But how do we deal with this? How do we respond to as well as anticipate market action? How do we preserve our capital during market corrections while being able to maximize our exposure to equities during market bull runs?

After many years of investing (I actually purchased my first stock as a 13 year old back in 1967), I have come to believe that a strategy is possible to accomplish this if you are willing to be disciplined and observant of your own stocks and of the market overall.

First of all, try to identify a universe of stocks that you believe are ‘investable’. I have my own criteria of consistent revenue growth, earnings growth, free cash flow, stable shares, and a solid balance sheet. But my criteria may not be yours. You might develop a list of stocks that exhibit good value, that exercise responsible stewardship of the earth, or whatever your particular preference might be. It doesn’t really matter. But stay consistent.

Next of all, decide what the size of portfolio would be ideal for you. I initially settled on 25 different stocks. Currently I have switched to a 20 position portfolio as a maximum number of stocks I wish to own. It doesn’t matter what the size will be. But pick your maximum and stick to it.

Now bear with me as I go through this strategy. It makes sense to me and I think you will understand my thinking as we review this.

Let us assume that our investment posture will vary with our ‘exposure’ to stocks. That being fully invested is ideal in a strong market (20 positions). And being minimally invested is best in a weak investment environment (5 positions). And I vary my investment exposure based on the market’s effects on my own holdings. That is when my own portfolio is acting ‘healthy’ I am moving from cash towards equities and when my own portfolio is acting ‘ill’ I shift from equities towards cash. (more…)

                  Thanks to Mattia for permission to use this Photo.

We’ve been fortunate enough to share the insightful perspectives of economist and entrepreneur Bill Conerly with our student community since this blog first launched in 2007.  Mr. Conerly is not only a contributing blogger, but someone we consider a friend of the greater Ashworth University community as well.  He was recently interviewed on the Small Business Advocate Radio Show on the topic of business planning after the recession.  The issues covered are of vital importance to anyone one with small business aspirations, so I highly recommend listening to this very informative podcast interview.  You can also visit Bill’s Businomics Blog to show your appreciation for his efforts on behalf of our Ashworth Blogspot readers.  Thanks everyone.

Ryan Rode
Ashworth University