Where the Freelance Economy Is Booming By Patrick Clark

0531-freelancer-630x420[1]There were 22.5 million U.S. businesses that didn’t have any paid employees in 2011, 1.7 percent more than in the year before, about 75 percent of total businesses. They reported $990 billion in total revenue, up 4.1 percent from 2010. About 18 million non-employer businesses, or about 80 percent of the total, reported receipts of less than $50,000. By non-employer businesses, we’re talking about a wide-ranging group, from freelance writers and fashion designers to real estate agents and taxi drivers who work for themselves—as well as necessity entrepreneurs who were pushed into self-employment by a rough job market in recent years. Those numbers are from the U.S. Census Bureau, which released its annual report on non-employer businesses yesterday. As for where they worked and what jobs they did, a couple of tidbits worth noting: • The number of non-employer businesses in North Dakota increased 4.3 percent, while the state’s non-employers’ sales increased 13.2 percent, to $2.3 billion. That’s the biggest sales increase nationwide. (Check out Kasia Klimasinska’s story on the complementary service businesses women are starting in North Dakota, sparked by the shale boom.) • Finance, insurance, and construction were the only industries nationwide to show fewer non-employers in 2011 than in 2010. • Fittingly, the fastest-growing sector in 2011 was what the Census Bureau lumps into “other services,” which includes auto repair, beauty salons, and dry cleaners. One reason the economy of non-employers might keep growing: The Affordable Care Act, the bulk of which takes effect next year, will make it easier for self-employed Americans to buy their own health insurance. To that end, the Robert Wood Johnson Foundation estimates that their ranks will swell by 1.5 million in 2014.

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Business Networking Tips to Kick Off 2013 by Kelly Price

Business Networking Tips to Kick Off 2013252452_2028804288676_1501150877_32211565_2435669_n

  1. Arrive time:  You want to make the most of an event?  Stay late.  Why? Not everyone arrives early or stays late. Arriving early and staying late gives you the opportunity to meet professionals with varying schedules and you have more time to get to know the people you just meet.
  2. Remember, business relationships are a two-way street:  It’s OK to talk about yourself but the best compliment is to ask a lot of questions about the person and their business.
  3. Ask open ended questions and listen: This highlights ways you can add value and meet needs other professionals might have. It’s like dating:  the more questions you ask the more the person feels a connection with you.
  4. Stand.  Why? Sitting signals that you are having a private conversation, or otherwise busy with your iPhone. Sitting should be reserved for serious conversations and follow up meetings. Don’t be a wall flower.
  5. Know your current perspective:  Connecting with like-minded professionals can give you inspiration, insight and the inside scoop on emerging trends and needs within your industry.
  6. Wear a nametag:  Why? Everyone attends a networking event to meet new people, so don’t be shy!  Say hello, mingle and introduce yourself. Make sure your nametag is written clearly with your name and business name for others to read.
  7. 50/50 rule: Spend an equal time with people you know and meeting new people.  The more people you meet the easier it get when you attend your next event.
  8. Pay it Forward: the best networker is a connector, someone that refers business to other people without thinking about themselves but thinking about helping others in networking. This will help you in the long run by getting more business and contacts in the future.
  9. Elevator Pitch: Have several Elevator pitches ready for your event.  This way, if someone already heard your last pitch they can hear another one which might help them find you more business and or know more about you and your business.
  10. Volunteer: The best way to meet everyone at an event is to volunteer at the front sign-in desk. This way you can meet the people you want to talk to and it will save you time.
  11. Share relevant news: Sometimes we all like to talk about ourselves but knowing about current events, business news and other relevant events will give you something to talk about.  By doing this, it will make you more memorable.
  12. Networking groups: A good way to grow your business is to join a Chamber, to increase your business and get your name out there. It’s just like customer service the more you have contact with your current and past clients the more likely they will refer more business your way.
  13. Network, network, network: Try to visit at least one event a week. The more you network the more business contacts you gain which will result in more business.  If you don’t network, your business won’t grow and no one will know about you and your business.
  14. No limp handshakes and eye contact: the worst thing you can do is to give a really bad handshake, remember you want to give a good first impression. Always have eye contact with the person you’re talking to, by not looking in their eyes it could show that you’re not telling the truth or hiding something.
  15. Have a professional looking business card: If you break out a business card, make sure it’s high quality. Don’t start a conversation by giving a person your card first, it’s really tacky.
I hope for some of you is to network more for 2013 and by reading this I hope you’ll be a more prepared networker for your next event. Networking is about spending time getting to know people and getting your name out there.

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How to Build a Business from Scratch by Nach Maravilla

Going into business — whether home-based or not — is always inspired by our desire to be the boss, work at our own time, and of course, make more money. You start a business hoping that its profits will be greater than what you received while working for somebody else. Or maybe, you suddenly have this brilliant idea that you think could work and even become profitable. Sometimes, entrepreneurship becomes an option when you suddenly find yourself walking in the cement jungle looking for a job after your boss fires you. There might be other reasons for wanting to start a business. But whatever they are, going into business often means working it out from scratch. Businessman working on laptop, talking on phone.As an entrepreneur, the first thing you must have is GUTS. As the old adage says, “No guts, no glory.” To poker players, they say, “guts…to open”. With guts, a bright idea, a little start-up fund and lots of luck, who knows, you might be a winner. Follow your instincts but don’t forget to take notes as you go along. First, decide on what kind of business you will put up. If you plan a home-based business, you can save on the up-front rental and lease money. With a smaller overhead cost, you can plow more resources into building your business. On the other hand, if you intend to open a small store, observe the area of your desired location and see if the place could attract the kind of market that you envision for your business. Check the kinds of people who frequent the area and study its demographics. Note that the quality of the neighborhood could affect your business. Then conduct a simple survey of your market. Know the buying habits of your target market. The more you know about your market, the better you can tailor your product offerings for them. Let us consider a sample business, say a photo shop. Our reason is simple: everybody loves memories. Despite the advent of digital cameras, people still love to take pictures everywhere, day or night, either in color or black and white. To be a successful entrepreneur, it is imperative to understand what your business is all about. In the photo business, for example, you are not selling pictures or films; rather you are selling mementos and keepsakes of important events in people’s lives. You are not selling a product, butAQH4034.TIF you are selling the means to fulfill your customers’ needs. Knowing what it is that you are really doing can help you a lot in properly branding, marketing and selling your product. Location is everything in a brick-and-mortar business. You want to be in the middle of your market, not in some faraway place where dozens of your competitors can get to your customers first. For your photo business, you may want to find a store in a strip mall, near a school or a busy intersection. Once you have found the right location, negotiate your rental and the up-front fees with the landlord. Excellent negotiation skills are essential to any businessperson. Look for a soft spot in your landlord during negotiations. Somewhere, somehow, you might be able to convince him to give you a one-month free rent while you are starting-up. Landlords also need your business and most of them will consider giving you little incentives if you present your situation, honestly. At this point, you can negotiate by just asking to pay one month in advance and pay the security deposits and others in succeeding months. Remember, nothing is impossible; you just need to try. By now, you should have decided what name you should call your shop. Name your store with something that correlates your product with the words. The theory is to create a name that customers can easily visualize and relate to their needs. This is following the footsteps of products that has become by-words, like Colgate for toothpaste, Tide for laundry detergent, Coke or Pepsi for soda, Bud for beer, or Kodak for pictures. So, let’s call our photo shop “Color Mat.” Does the name signify something about photography? The word Color gives the idea of a rainbow and connotes a happy sound. Mat is a carpet. Color Mat therefore means a carpet with many colors. And photography is color. In business, creativity is crucial, particularly if you have little funds. If you do not have sufficient funds for your initial inventory, try talking to a competitor nearest your shop and borrow some of his stocks. You can tell him that you will buy your supplies and inventory from him if he gives you a little credit. To be more convincing, you can even tell him that you will give him your payment from your daily sales before he goes home at night. Take him to your store to give him the assurance that you are indeed serious, except you lack cash. Some entrepreneurs are more than willing to help out other start-ups. If you don’t succeed on this approach, you can put a little amount as a deposit where he can deduct the merchandise that you get every time. The guy has no reason not to help you out because your offer will increase his sales. When you are up and running and he notices that your sales is growing, he might even forget that you no longer have a deposit. Try to save as much as you can from the profits you make and pay your suppliers ahead of time to give you a good credit standing. You will need good credit references when you start negotiating for bigger volumes. Starting a business with little resources is like playing baseball with only you covering the whole field. You are the pitcher, the catcher, the first base, the runner and the umpire. Your store will start to grow, although at a snail-pace. Be prepared to face a lot of challenges, and patience and a lot of hard work will be your best allies. Most start-up entrepreneurs even find that they need to shift to a simpler lifestyle as all their resources are channeled into the business. Even your time for leisure will be dramatically cut. Be careful in protecting the trust and support that you have earned along the way. Total devotion to your business, honesty and sincerity to the people that you deal with, will take you to higher levels and allow you to branch out in a matter of time. There will be a lot temptations and pitfalls that you need to be prepared for. Starting a business is a complicated process. Hey, no one said success is easy!  

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When I Began My Networking Journey

When I began my networking journey, I attended any and all networking events as time permitted. Every event was fair game! Today I am much more strategic in my networking endeavors. I discovered which events and organizations gave me the best return on my investment of time as well as how to be an effective, caring networker.

In order to know where to begin you must first understand what networking is and why it is important to grow your business. Networking in its purest form is simply talking to people, making connections and developing rapport to grow our circle of influence. Business networking is essentially the same except that our primary objective in business networking is to help us grow our businesses. For most of us, building a network means meeting people we can do business with or who will do business with us, or refer people who will do business with us, are our ultimate goals.

In fact, some of the best networks are those created by people who own and run their own businesses. When you create valuable networking relationships, you build them on a foundation of mutual trust, sharing knowledge, experiences and resources to help one another grow your businesses by either referring one another or doing business directly with one another.

It works like this: If you do a good job, one customer might tell three to five of her colleagues, family and friends about you. Whereas, when you build a network of say 10 to 20 strong advocates, they may each tell only one person about your, however your “exposure” is now more than doubled – With the right network, the ultimate in “word of mouth” marketing takes place. You promote your network, and your network promotes you.

I host events – I started an event called Networking in Memphis more than 2 years ago at Jack Robinson Art Gallery. It is an intimate gathering of women and men of all different interest and wish to expand their own circles. Have you ever attended a BNI or Le Tip or other form of structured networking groups? Perhaps you are already a member of a similar group. If not, you might consider becoming involved in one to the fastest growing business networking concepts around. These groups invite business professionals to join on an exclusive basis. That means, that if you are a chiropractor and become a member of one of these groups, no other chiropractor will be invited or allowed to join.

These groups have regularly scheduled meetings (anywhere from monthly to weekly) with a list of rules and objectives to which you must abide. In some cases, a minimum number of referrals are required to participate. In others, simply doing business with one or more in the network is all that is asked of the members. However, keep in mind that for this type of networking to be worthwhile for all parties, each must make every effort to do business with other members of the group.

If this form of structured networking isn’t for you, there are other options for finding potential networking venues and partners. Here are some ideas to help you on your way to networking success.

a. Develop a joiner’s mentality. By that I mean, don’t just sign up to get our name on a roster. REALLY JOIN. Get involved. Participate in discussions, events and BE VISIBLE. The saying “out of sight, is out of mind,” holds true when it comes to networking. I have been involved in groups and decided to take a hiatus from attending for 2 to 3 months (and sometimes more) only to have people come up to me and tell me they forgot the name of my business so they had to find someone else either through a friend or through the local phone book. BUMMER!

b. Get involved in a community service groups.

c. Volunteer with a non-profit organization, whose mission you are passionate about and believe in. People who have similar passions will want to do business with you.

d. Look for ways to cross-promote with businesses that complement yours. For instance, a spa might join with a health food store or restaurant and promote their products and services for staying healthy. A salon might join a florist to promote weddings or proms and a realtor might join with a mortgage broker to promote a “one-stop” experience for home buyers. At networking events you can look for people who can help you with that.

e. Interview others. A great way for me to network is to interview people for projects I am working on. Since most people are flattered when you ask their opinion about something or experiences in life, this has been a great means of increasing my own circle for various reasons. I might interview a woman or a man about an article or book I am writing, or a seminar I am developing. People love to share their stories.

Make it a point of attending one networking event a month; make a list of the people you know, the organizations you have heard and read about and the companies who currently do business with you. The best networking begins with planning and taking action. Being strategic in your planning is important to your ultimate success as an effective, caring networker.

by Kelly D. Price

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The Big Banks’ Reputations

Big banks’ reputations have taken a hit over the last few years, starting with the financial crisis and culminating with the Occupy Wall Street protests. Meanwhile, small businesses have been cast as the economy’s earnest underdogs, generating rhetorical support from Congress to the campaign trail to Wall Street. So it’s no surprise that Bank of America, Chase, Citibank and Wells Fargo were eager to release seemingly impressive small-business lending figures for 2011. Problem is, many of those loans may be going to businesses that aren’t that small.

For lending purposes, the nation’s four biggest banks define small businesses as those with annual revenues up to $20 million, an amount far higher than many businesses on Main Street will ever reach. This could explain the ongoing disconnect between big banks’ upbeat lending reports and the 61 percent of small-business owners who say it’s harder to get loans now than four years ago, according to a study released in January of 2012 by the American Sustainable Business Council, Small Business Majority and Main Street Alliance.

Sarwan “Rimpy” Singh, owner of seven Taco Time restaurants in the Portland, the area experienced disconnect when two big banks rejected his application for a $300,000 loan to buy property he is leasing. One bank told Singh it doesn’t give loans to restaurants because they’re high-risk, though Singh has been in business for 16 years, has excellent credit, a sizable down payment and has been a longtime bank customer. Earning $2.5 million to $3 million in 2011 revenue, Singh said he wonders whether he’s at the wrong end of the revenue spectrum when it comes to borrowing. “There are a lot of mixed messages from the big banks,” he said. “That definition is completely wrong. They have no clue what a small business is.”

In other words, big bank loans to so-called small businesses may very well be going to businesses closer to the $20 million end of the revenue spectrum. Without more transparency, it remains unknown. “The big banks make their small-business lending numbers look as good as possible by stretching the limits as far as possible,” said Ami Kassar, founder and CEO of Philadelphia-based MultiFunding, which helps small businesses find the best loans available to them. “They include companies with up to $20 million of revenue. These companies are less risky, and less complicated to lend to. They also require larger loans that make the big banks’ total small-business lending numbers look much better.” Big banks’ definition of small business also differs from that of government agencies that monitor small-business lending. These agencies tend to adopt the Federal Deposit Insurance Corp. call reports definition of small-business lending — business loans in the amount of $1 million or less. Based on this definition, the Small Business Administration Office of Advocacy reported that total outstanding small-business loans fell 1.2 percent to $599.7 billion in the third quarter last year, from $606.9 billion in the second quarter, while small-business loans by the big banks were nearly flat for the same period. The Federal Reserve and the Office of the Comptroller of the Currency have also adopted this inter-agency definition, though the Senior Loan Officer Opinion Survey published by the Fed defines small businesses as those with sales of $50 million or less. The Treasury Department does not have a definition of small businesses or small-business loans, but adheres to specific parameters for its two small-business lending programs, the State Small Business Credit Initiative, which targets borrowers with 500 employees or less with loan amounts not exceeding $5 million, and the Small Business Lending Fund, which offers business loans of $10 million or less to businesses with revenues up to $50 million.

Even small banks use a narrower definition of small businesses than the big banks. Umpqua Bank, a community bank serving Oregon, Washington, Northern California and Northern Nevada, defines small businesses as those with $1 million or less in annual revenue. Umpqua lent more than $328 million in 2011 to these small businesses.

To put the “small business” population in some perspective, of the 27,486,691 total businesses that filed taxes with the IRS in 2003, the most recent year for which statistics are available, 26,226,922 or more than 95 percent and less than $1 million in total revenues.

by Kelly D. Price

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Where’s Our Stimulus? Did it create jobs for Shelby County and Memphis?

The U.S. government has pumped billions of dollars into the economy to stabilize the banking system and keep money flowing, but not much is trickling down to small-business owners. It can and  does get a little frustrating when we have seen the big banks, the corporations and the automakers that have made horrible, horrible choices get bailed out, while those of us who work 12 to 14 hours a day, six to seven days a week, we can’t get any help. A survey released by the National Federation of Independent Business Research Foundation revealed that only 40 percent of small-business owners who attempted to borrow money last year had all of their credit needs met. That compares to a 90 percent success rate in the mid-2000s.

 As part of the 2009 American Recovery and Reinvestment Act (signed Feb 17, 2009), the United States Government has allocated SBA backed funds for viable small businesses in the United States. Business must have qualifying business loans and must be experiencing immediate financial hardship. Qualifying recipients of the America’s Recovery Capital (ARC) Loan Program may receive up to $35,000 in short-term relief. Each small business is limited to one ARC loan. ARC loans can be used to make payments of principal and interest, in full or in part, on one or more existing, qualifying small business loans for up to six months. ARC loans are intended to provide immediate capital to small businesses to make payments (principal and interest) on existing debt and thus allow business owners to sustain and retain jobs. ARC loans are interest-free to the borrower and carry a 100% guarantee from the SBA. Loan proceeds are provided over a six-month period. Repayment of the ARC loan principal is deferred for 12 months after the last disbursement (18 months from the first disbursement), followed by a repayment period of five years. Good candidates for ARC loans are small businesses that can show a profitable past, but are currently struggling to make loan payments or are just beginning to miss loan payments due to financial hardship. ARC loans are made by participating commercial SBA lenders. The SBA will pay these banks a monthly interest rate throughout the term of the loan. ARC loans will be offered by some SBA lenders for as long as funding is available or until September 30, 2010, whichever comes first. When President Obama signed the 840 billion dollar American recovery and reinvestment act into law in 2009 Memphis received a total of nearly 640 million dollars. “Community health centers, monies went to the Memphis Health Center, and the Christ Community Health Center, we’ve had money go to all kinds of women’s shelters, any federal program has been effected,” says 9th District Representative Steve Cohen.  “The stimulus has helped keep us from a deep recession and get us to where are coming out of it now.” Critics say hundreds of millions of our tax dollars were spent and unemployment in the Bluff City dipped only slightly from a staggering 12-percent in January of 2010 to 10-percent in May of this year. Conservative talk show host Andrew Clarksenior calls the stimulus package a bust, “It has brought needed funds to needed projects, but it has not been the panacea that the good congressman would make you think…by and large, the majority of that money was wasted, and misapplied.” Clarksenior points a few projects that were well meaning, but questions if they deserved funding. The Memphis Orchestral Society, the Center for Southern Folklore and the Beale Street Caravan received a total of a $125-thousand dollars to keep jobs that might have been lost because of the recession. Nearly a half million dollars went to the University of Memphis Math Department to create better traffic patterns. “It was a big lie.  Not just here but all over the country.  The “pork-u-lus bill, however you want to call it was terribly misspent,” says Clarksenior. In Memphis, the stimulus money was intended to create jobs, but millions was spent to help a social network already under stress.  More than 10 Million dollars used on housing for the poor and people diagnosed with AIDS/HIV.  Nearly 4-million dollars spent to improve emergency shelters in case of an emergency, almost 108 million dollars on public education in Shelby and Memphis even though teachers were laid off.  All that money spent and exactly how many jobs were created?   It had been estimated 68-hundred would be created, no one knows for sure.  The federal, state and local governments can’t give a total. When will we wake up as a community? by Kelly D. Price

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Turning Jobs Into Public Work by Harry C. Boyte

An old story has new relevance. Two bricklayers are asked what they are doing.  One says, “Building a wall.” The other says, “Building a cathedral. Mitt Romney has been attacking the Obama’s campaign defense of Sesame Street’s Big Bird as “small thinking” in the face of the nation’s “big problems.” In fact the former governor is like the first bricklayer — thinking small, when we need to think big. The Romney campaign’s smallness of thought is illustrated by his attacks on the Obama administration’s “Green Jobs.” Critics focus on Romney’s inaccuracies. In the debate on October 4, Romney charged that half of the companies funded by the stimulus program have gone bankrupt. The real figure, as Brad Plumer reported in the Washington Post, “is less than 1 percent.” But there is a bigger problem in Romney’s attack, evident  in the campaigns on both sides to date. What kind of jobs — their larger impact — has remained unmentioned. In the specific case of energy, Romney’s “big thoughts” would cut back on renewable energy and increase reliance on oil and coal, reversing the greening of America which has been the work of generations. Romney forgets the nation’s first “Green Jobs” program, the Civilian Conservation Corps, and its role in America’s flourishing. In her forthcoming study, The Politics and Civics of National Service (Brookings, 2012), Melissa Bass explores the civic impact of the Civilian Conservation Corps of the 1930s and 1940s. The CCC was part of an array of New Deal public works programs also including the Public Works Administration and the Works Progress Administration, which left a remarkable legacy of infrastructure – from 78,000 bridges and more than 125,000 buildings to the Hoover Dam and the Golden Gate Bridge. Nearly three million young men were employed in the Civilian Conservation Corps from 1933 to 1942, living in work camps. They planted more than two billion trees, erected 3,470 fire towers, built 97,000 miles of truck roads, logged 4,135,500 man days in fighting fires, and stopped soil erosion on more than 20 million acres of land. They created parks and recreational facilities still in wide use today. Less visibly but no less important, the CCC helped to school the”civic generation,” which faced down the Great Depression and the fascists in World War II. After the war, they became the best educated workforce in the world thanks to the GI Bill. They also helped to birth the modern civil rights movement. Participants in the CCC acted out of practical self-interests, not high ideals. They wanted jobs. But their work also developed larger civic and public meaning.  As Al Hammer put it, “The CCC got people like me out into the public. It gave me a chance to meet and work with people different than me from all over the country — farm boys, city boys, mountain boys, all worked together.” Scott Leavitt of the Forest Service explained that “there has come to the boys of the Corps a dawning understanding of the inspiring and satisfying fact that they are taking an integral and indispensable part in a great program vitally essential to the welfare, possibly even to the ultimate existence, of this country.” The CCC also helped the nation to regain a view of government as an empowering partner — not simply “for” the people, delivering services, but “of” the people and “by” the people,” in Lincoln’s terms. Bass observes that the CCC deepened “the sense that together participants and the government could address the nation’s severe challenges.”  As CCC worker Allen Cook put it, the CCC “was not only a chance to help support my family but to do something bigger – to help on to success the President’s daring new plan to down Old Man Depression.”  When Nan Kari and I interviewed CCC veterans for Building America, our own study of the history of public work, we heard repeatedly from former participants, across all partisan lines that they saw  “government as working for the people.” As people made a commonwealth of public goods, they became a commonwealth of citizens. There is widespread hunger for similar public experiences in work, not only in environmental jobs. When Joe Klein did a road trip across the nation this year for Time magazine, he found the desire for something like the CCC common across partisan divides. “Too many people just live our lives in contact with a narrow sliver of people,” said I.C. Smith, a retired FBI investigator in Virginia. “We can’t bring back the draft. But some form of mandatory national service that throws people from different parts of the country together might help.” The public work qualities of the CCC — bringing diverse people together, infusing work with larger public purposes, teaching civic skills, habits, and values, reconnecting citizens and government — can be developed in many settings, not only national service. Thus the Rust to Green movement which I recently described gains its power from the collaboration of people on a common task — regional revitalization – across many differences, in which government is a partner, neither the solution nor the problem. A recent study by MTV found the desire among Millennials, those born after 1980, for meaningful work to be especially strong.  Senior vice president of research at Nick Shore says “the quest for meaningful work that makes a difference” is at the center of Millennial aspirations. A silver lining in this acrid campaign year could be the birth of a new movement  to turn jobs of all kinds into public work — to build cathedrals for our future, not remain content with walls which limit our imaginations. Government can help to catalyze such a movement through support of efforts like green jobs. But there are many settings where it is beginning to take root. For instance, as I will describe in later blog posts, community colleges — widely touted these days as the key to 21st century “workforce preparation” — turn out to be fertile ground for education about the potential public impact of jobs. Turning jobs into public work is the task of the nation. Harry C. Boyte, Director of the Center for Democracy and Citizenship at Augsburg College and a Senior Fellow at the Humphrey School of Public Affairs, is co-author of Building America — The Democratic Promise of Public Work, with Nan Kari.

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New Poll of Micro Businesses: Who They Are and What They Do for the Economy by John Arensmeyer

They’ve been in the spotlight for months, and the attention small businesses got during the first presidential debate sent them into the stratosphere in terms of media coverage. So let’s try to answer the question a lot of people are asking: who are these small business owners everyone’s talking about? Despite being one of the most respected constituencies in the country, small businesses are a group that many people understand little about — the very smallest ones, especially. An opinion poll released Tuesday by Small Business Majority, the National Association for the Self-Employed and Association for Enterprise Opportunity, sheds light on the true nature of these businesses and reveals their important role in our economy and its recovery. In showing who our nation’s very-small-business owners really are, the poll of micro businesses — businesses with 10 or fewer employees — helps counter a number of misconceptions pervading the airwaves. Recent reports, many by organizations polling their membership, have portrayed small business owners as practically devoid of optimism about the economy. But we used a scientific, random sample of small business owners and found just the opposite. A majority of the 470 micro business owners we surveyed are confident about the future of their business and the economy. Specifically, seven in 10 believe their business will be faring well over the next couple of years and an overwhelming 81 percent of respondents under 40 feel the same way. Another mistruth floating around is that small businesses aren’t our chief job creators. Despite a lagging economic recovery, micro businesses have been growing and show strong signs they’ll continue to: a 54 percent majority have employed a contractor or 1099 employee in the past year and nearly a third have hired a full-time employee. Fully half of them plan to hire within two years. Small businesses’ appetite and capacity for growth is supported by employment data. Automatic Data Processing, Inc. calculates monthly job figures and breaks them down by company size. According to ADP, small businesses, as traditionally defined, continue to create the vast majority of new jobs — upwards of 90 percent in 2012. Where has the most notable growth been? The smallest companies, those with 1-49 employees, have been responsible for about 50 percent of added jobs overall. So where do micro businesses fit into the picture?  As it happens, a sweeping 95 percent of all businesses have fewer than 10 employees–meaning micro businesses basically are the picture. Even when counting only the firms that currently employ people besides their owner, those with fewer than 10 employees still represent a whopping 80 percent of employer firms. So all things considered, it’s safe to say small and micro businesses have a thing or two to do with job creation. Another point of confusion this poll helps clarify is the perception that micro businesses are merely hobbyists selling tchotchkes on the Internet. Rather, nearly three-quarters report their micro business as their sole source of income and 57 percent have been in business 10 years or longer. Micro businesses are clearly real businesses providing a real living for their owners, employees and their families. As misunderstood as they often are, micro businesses are vital contributors to the economic recovery ahead. They’ve been doing well and growing. This proven success, coupled with their undeniable air of optimism about the future, helps underscore the importance of creating conditions for micro businesses to thrive. Oftentimes, their ability to expand is tied to their ability to access working capital. However, 58 percent of the ones who are in need of that credit to grow and hire say getting it is a serious problem. Just this week the Small Business Administration announced it supported more than $30 billion in loan volume this year — the second largest total ever. That’s great news. Getting capital into small business owners’ hands is one way we’ll dig ourselves out of this recession. But as our poll shows, more needs to be done. Among other small business issues, access to capital is one we hope to see addressed in the remaining debates. It’s great to see the focus being placed on our 28 million small firms. We just hope it translates into some real good being done for this vital community.  

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Why Some Entrepreneurs Undermine Their Own Success by Martin Zwilling

In working with entrepreneurs and other business people over the years, I often hear stories of entrepreneurs who were so close to success, but somehow let it slip through their fingers. They could always give a rational excuse, like the market changed, but somehow it seemed that they were actually afraid of success, so they subtly undermined their own efforts. I couldn’t really believe that anyone would be afraid of success, until I recently finished a self-help book by Patrick Daniel, “Finding Your Road to Success.” This is billed as a must-read for any entrepreneur who needs a shot of optimism. Relative to my suspected entrepreneur fear of success, Patrick outlines six rationales that my positive-thinking mind would never even consider:
  1. Success will lead to loneliness. Some entrepreneurs believe that success will mean working long hours, neglecting their spouse and children, which in turn could result in divorce. Women, in particular, sometimes believe that success will make them unlovable and intimidating to men.
  2. Success will lead to envy. Many people want what others have, and the more success a person achieves, the more envious are that person’s friends, neighbors, and colleagues. This is a reality that some entrepreneurs don’t want to deal with, and some apparently undermine their own success to avoid it.
  3. I’m not good enough for success. This belief can result from many things, such as having negative parents and not having a college degree. With this belief often comes “I don’t deserve success,” so they sabotage their own efforts in that direction. If this resonates with you, I don’t recommend the entrepreneur lifestyle.
  4. Success will change my lifestyle. Some entrepreneurs fear that the changes that come with success will actually make life less enjoyable. They believe that will have less time to, for example, enjoy sports, surf the Internet, spend time with their family, or relish the excitement of building the business. My logical mind would assume just the opposite.
  5. Success is too expensive. There is a cost to everything, and success is not an exception. Sometimes, to make money you have to spend money, and some entrepreneurs just can’t face the risk of making that initial investment. Certainly I know many people who would never put other’s people’s money at risk to start their business.
  6. I won’t be able to control everything that happens. If you fear all the things you can’t control, you should never step into the entrepreneur lifestyle. Startups have to deal with many factors outside their control, so this fear can cause an unhealthy stress and worry. Successful entrepreneurs usually relish their ability to control at least one thing that no one else has managed to figure out.
Ironically, these “fear of success” rationales are often restated by entrepreneurs as a somewhat less embarrassing, equally deadly, “fear of failure.” Fear of failure in generally recognized as one of the strongest forces holding entrepreneurs back. Yet failing in a startup is practically a rite of passage, according to investors, as well as successful entrepreneurs. Overall, I would suggest that if you let your fears control your actions, you probably have a hard and unhappy road ahead as an entrepreneur. Most successful entrepreneurs are not fearless, but they know how to transform these fears into positive actions rather than negative ones, and they take every failure as a positive learning experience. I assure you that no entrepreneurs are born successful. Every smart entrepreneur has a fear of the unknowns in their new business initiative. Only those with the passion and conviction to start anyway will have any chance of success (you can’t succeed if you don’t start). Likewise, you can’t succeed if you give up too early, or sabotage your own efforts due to a fear of success. Make sure you don’t let fear paralyze you at any stage of your startup.

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The Truth About Bain: Inside The House That Mitt Built

Among the private equity deals of this century, HCA stands among the very best. Bain Capital partnered with KKR and Merrill Lynch to buy the hospital chain for $33 billion in November 2006. Bain invested $1.2 billion for a 25% stake and recovered almost all its money with a trio of special dividends in 2010. The Boston firm pulled out another $457 million when HCA went public again in March 2011 and still owns shares worth almost $3 billion. Despite the financial crisis and periodic whiffs of scandal swirling around the for-profit hospital chain, HCA is worth 26% more today than it was seven years ago, and Bain investors have more than tripled their money. If only they could all turn out like HCA. But they haven’t. Not even close. Actually, few of Bain’s biggest deals since buying HCA have panned out so far, leaving it with a decidedly middling recent investment record far outstripped by its mythology. Bain Capital has endured more dissection, debate and criticism this year than any firm in the half-century-old history of private equity, owing to its founder, GOP presidential candidate Mitt Romney, who launched the firm in 1984. Yet even after all this it remains among the least understood, due to its insular nature and distracting history. While both the White House and Romney himself focus on Bain’s job-creation record, no one has gauged the firm using industry-standard metrics to see how well it has performed in its core mission: making money for its partners and investors. An exclusive analysis of the firm’s returns conducted by FORBES reveals that despite the hype surrounding Bain, investors in the firm’s biggest funds, raised in 2006 and 2008, would have been better off in a simple stock index fund. And while Bain churned out serious returns for partners and investors alike during Romney’s tenure, it’s that reputation, rather than results, that has carried Bain for the past decade. Stephen Pagliuca, a managing director of Bain Capital, defends the firm’s recent record: “We are in the business of being long-term right.” Good thing, because it could take a while. Over the past three months FORBES dug into the financial performance of every company Bain has invested in for the past decade, as well as the returns of Bain funds that raised some $42 billion in capital and commitments since Romney stopped working there in 1999. We also talked to some of Bain’s competitors and analysts, to understand how the firm does business. What we found: While funds raised through 2004 maintained the upper-quartile performance typical of Bain during the Romney years, returns for later funds  their biggest–have lagged as the company engineered multibillion-dollar buyouts of fragile consumer-dependent companies like Toys “R” Us, Burlington Coat Factory and Guitar Center at the peak of the 2005-08 private bubble. Those investments may yet recover, but they speak to a culture where reverent faith in decades-old techniques, rooted in consulting, have not kept pace with a new age of dealmaking. Bain exemplifies a worrisome trend for private equity as a whole. Megashops like Bain, with tens of billions to deploy and an insatiable need to buy, make profitable exits increasingly difficult. Mix in the meltdown and the tepid recovery, and you’ve got a toxic brew for investors, which include some of the nation’s largest pension funds. Clear Channel Communications epitomizes all three of these issues. Bain and buyout firm Thomas H. Lee Partners bought the nation’s largest group of radio stations for $24 billion in July 2008, including $2.1 billion in equity, just in time to watch the advertising market collapse along with the U.S. economy. Loaded with $21 billion in debt and a $1.5 billion annual interest tab, Clear Channel barely earns enough to cover its interest payments and capital expenditures. And even giving it an Ebitda multiple akin to the far more profitable Disney, for example, the company is worth perhaps 70% of what Bain paid for it. “It’s extremely, extremely levered–it was one of the last deals done during the bubble,” says Karen Klapper, a debt analyst with CreditSights. Her appraisal of Bain is the ultimate backhanded compliment: “They’re doing a good job managing their balance sheet and pushing out maturities so they don’t go into bankruptcy.” Avoiding bankruptcy wasn’t the goal when 37-year-old Romney established Bain Capital in 1984. With the encouragement of Bill Bain himself, Romney and two other Bain & Co. consultants set out to apply his mentor’s philosophy to private equity, making companies more valuable by increasing efficiency and finding new markets. Until his departure, Romney reportedly held all of Bain Capital’s stock and made a fortune by participating in the firm’s deals. “It was eye-opening, the techniques they were using to grow businesses and make business get better,” says Pagliuca, whom Romney hired as a summer associate at Bain & Co. in 1981. “The rationale was, this consulting work that worked so well with companies could be used for investments, too.” Romney built a team of dealmakers who mostly resembled him–young, many of them Harvard Business School graduates–who focused on rigorous analysis instead of investment-banking tricks like loading a target with debt so it could spit out a quick dividend (“Getting your bait back,” in private equity lingo, though Bain is not immune to this). For two decades it worked, spectacularly well. Bain Capital backed Staples, for example, after executives there determined that small businesses would patronize large stores carrying all their office supplies in one place. Staples returned 5.75 times Bain’s investment. Bain’s exits logged a staggering 173% annual internal rate of return through the end of 1999, when Romney stopped his day-to-day work to head the struggling Winter Olympics in Salt Lake City. Romney agreed to sell his stake in the firm to his partners in 2000, in a complicated agreement that gave him a declining share of firm profits over the next 10 years. He successfully ran for Massachusetts governor in 2002.   His presidential campaign has revealed Bain still provides a lucrative annual income stream from deals he invested in, which has caused political headaches aplenty. The biggest asset he bequeathed, in retrospect: a track record that turned Bain Capital into a fundraising machine, as pension funds, endowments and rich families sought to capture some of those dazzling returns. With management of the firm passed on to a committee of nine long-serving partners, Bain raised ever larger 10- and then 11-digit funds with the regularity of a congressional campaign. In 2004 it launched the $3.5 billion Bain Capital Fund VIII; in 2006, the $8 billion Fund IX; in 2008, the $10.7 billion Fund X. On some of these funds Bain has reportedly had the moxie to demand–and get–a 30% slice of profits after a minimum annual return to investors, rather than the standard 20%. Bain’s Fund VII, a quaint $2.5 billion, which started in 2001 just before Romney’s formal exit, was Bain’s only true success of the decade, returning $4.4 billion to investors for a solid 29% internal rate of return so far, according to PitchBook, a private equity monitoring service. The three giant post-Romney funds, however, would be considered failures if liquidated right now, all succumbing to the same traps too many other firms fell into: The huge sums raised made generating returns difficult and forced them to chase deals at nearly any cost, creating an asset bubble in the process. Fund VIII has generated an 11% IRR since 2004, placing it in the lower half of funds PitchBook tracks. Fund IX has returned 2.6%: in the upper half, according to PitchBook, but badly trailing the S&P 500. And then there’s giant Fund X, which has invested $7 billion of the $10 billion-plus raised. It’s actually lost money, according to PitchBook: specifically, -2% compared to a 14% return in the S&P over the same period. Even against private equity peers, Fund X ranks in the bottom quartile. (Some sophisticated investors disagree with this analysis. Matching cash flows into and out of Bain funds with identical movements into and out of the S&P 500, the Bain funds would have outperformed the S&P by 950 basis points, according to calculations obtained by Forbes. This so-called “cash on cash” return is higher because investors would have had their money with Bain during some of the market’s steepest declines, when PE tends to outperform, partly because its investments aren’t marked to market as often. However, other investors might look at the total invested in PE over the period and compare it with an equivalent buy-and-hold investment in the S&P. Under those conditions the S&P, including reinvested dividends, comes out far ahead.) Bain’s model hasn’t changed. As in the Romney years, Bain assigns teams of analysts to study potential acquisitions, often for months, before mounting a takeover bid. If Bain wins, it has an internal group of some 70 consultants who take to the field to advise portfolio companies on everything from upgrading their computer systems to calculating the profitability of a two-for-one special on fast food. The problem is that the rest of the industry has caught up to Bain: Blackstone, Carlyle and nearly every other large firm now deploy internal consultants to effect change among their acquisitions. “Bain Capital was very different 10 to 15 years ago, but other firms over time have copied that,” says Steven N. Kaplan, a professor specializing in private equity at the University of Chicago’s Booth School of Business. “The reason they were able to raise so much money in 2006, 2007, 2008 was because they performed so well in the past.” “What they started to do was believe a bit too much in their ability to fix companies, and they started paying more,” adds a partner at a competing private equity firm who praises Bain’s management skills but says it couldn’t overcome high prices paid for companies like Clear Channel, Guitar Center and Gymboree. “Those improvements don’t yield a lot of profit in a downturn.” Bain Capital’s partners can obviously do the math. They’ve reportedly lowered their profit share back to 20%. And while they’ve been almost uniformly silent this year, mutely watching as their firm’s brand has been made synonymous with greed. Pagliuca and John Connaughton, another managing partner and a close pal of Romney’s, agreed to discuss their track record with FORBES, deal by deal. In the big picture, the two partners argue, their bubble-era purchases may have declined in value from the peak, but they will still generate solid returns for investors over time. Clear Channel. Bain’s financial moves have drawn a lawsuit from disgruntled investors who accuse Clear Channel of extracting a $650 million loan from its 89%-owned outdoor advertising business at a “sweetheart” rate of 9.5% (Clear Channel bonds are currently trading with over a 20% yield, according to Bloomberg) and loading the unit with $2 billion in debt so it could upstream a dividend to its cash-strapped parent. Bain executives declined to comment on pending litigation. But Connaughton says Clear Channel will pay off eventually because the company is gaining market share at the expense of its smaller competitors. Bain has guided Clear Channel to add digital screens to its billboards and start an online broadcasting service, iHeartRadio, to expand the marketing reach of its 866 domestic radio stations. Revenue climbed to $6.2 billion in 2011 from $5.6 billion in 2009, and the company swung from a $3.7 billion loss to a $1.1 billion operating profit. “We’ve been growing the profit line for the last three to four years quite successfully” despite a flat ad market, says Connaughton, who joined the firm in 1989 and like Romney is a former Bain & Co. consultant and Harvard Business School grad. “Like any cyclical asset that goes through a down cycle, you have to ask yourself, ‘Is it a better asset than when you bought it?’ Clear Channel is.” HD Supply is not. Bain and two other private equity firms bought Home Depot’s wholesale supply business for $8.5 billion in 2007, just as the housing market imploded. Sales fell 22% from 2009 to 2011, and the company expects to burn through $200 million in cash this year. At eight times cash flow it’s worth $4.5 billion. Bain plunged into retail because the firm’s executives think they understand it better than most, thanks to their early success with Staples. The firm also likes restaurants, having quadrupled its money on the $1.5 billion buyout of Burger King in 2002. Now Bain owns Bloomin’ Brands, operator of Outback Steakhouse, Carrabba’s Italian Grill and other chains. It’s worth more than the $3.1 billion Bain paid in 2007, and Bain holds $1 billion in stock, a paper profit on its $874 million investment. Connaughton said a team of Bain executives spent more than a year studying their latest restaurant acquisition, the Skylark chain in Japan, which they bought for $2.1 billion last year. Bain figured it could use strategies it honed at Domino’s Pizza, Burger King and Dunkin’ Donuts to upgrade Skylark’s marketing as well as an electronic tracking system that helps management improve the quality of the food and service. Bain executives will push Skylark to adopt some of the aggressive discounts and advertising campaigns Bain used to increase sales at its Domino’s Pizza operation in Japan. “One of the best things we’ve done with a lot of the restaurant companies is drive differential growth through promotion,” Connaughton says. For every billion-dollar dud like Gymboree and Guitar Center you bring up to Pagliuca and Connaughton, they counter with something like Sensata Technologies, a maker of electronic sensors and controls Bain bought from Texas Instruments for $3 billion in 2006. The timing couldn’t have been worse: Three years later two of its biggest customers, GM and Chrysler, were in bankruptcy, and auto sales plunged. But Connaughton says Bain’s consulting model of private equity worked: They thought it could invest in new technology that increased the share of the electronics it put in each car. “We could put more controls and sensors in the cars,” he says, even if the overall market was flat. Bain took Sensata public in March 2010 and since then has sold stock for $1.4 billion, more than returning the $985 million in equity it put in. It still holds shares worth $2.8 billion, and the company is worth $5.4 billion. Bain loyalists also reject the charge that the firm has made money by slashing employment and paying itself debt-fueled dividends. Indeed, with these recent investments, there is little evidence it has. A close examination of the 40-odd companies it still holds a stake in, many of which file their financial statements with the SEC, reveals that most have maintained or increased capital expenditures–even as they took on much higher levels of debt. Pagliuca says he’s used to the intense scrutiny his firm is getting because of its famous founder: “The good news is this isn’t the first time one of our people has gone into public service,” says Pagliuca, who ran for U.S. Senate in Massachusetts as a Democrat in 2009 and is a principal owner of the Boston Celtics. And he acknowledges Bain could have bought some of its companies at a better time. But again he retreats to a low-bar defense: Almost all have made it through without defaulting. “You would have thought that if we had something like 1929, PE portfolios would have been wiped out,” he says. “But we expect our companies will deliver strong returns to our investors.” Bain Capital remains very much in the game. The talent is not fleeing for the exits, even after the election scrutiny. And they can still raise money, as evidenced by this year’s $2.3 billion Asian fund. But will Bain’s recent investors, who bought into the Romney-era track record and hype, earn more by owning companies like Clear Channel, Burlington Coat Factory and Toys “R” Us over the next five years rather than just riding the S&P? Especially once Bain’s fees are accounted for? Probably not. by Daniel Fisher, Forbes Staff

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