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Headlines aside I find the economic panic and ensuing bailout talk to be a tad dramatic. I’ve got no particular political ax to grind with that statement, I just think people get so caught up in the hype that they chuck reason.
Small business is the economic backbone of America and certainly the path to any economic bailout, yet nobody seems to acknowledge that fact.
While large businesses have lost more than 170,000 jobs over the last six months, small businesses are seeing their employment sector grow. Over 200,000 small business jobs have been created in that time. New data shows a continuation of this trend. Today, ADP released the September ADP National Employment Report® and ADP Small Business Report® which showed small business employment - defined as businesses with fewer than 50 workers – added 28,000 jobs during September.
The world is a far different place from the one that made up the backdrop of Steinbeck’s Grapes of Wrath. How small business makes money, who they serve, when and where they work has little to do with the Dow Jones Index - a fatally flawed gauge of just 30 companies.
Forget the Dow and focus on these numbers instead - lead generated, leads converted, average $ per transaction, average number of transactions per customer - and the turnaround will get underway.
Comments
This entry was posted on Wednesday, October 1st, 2008 at Oct 01, 08 | 1:31 pm and is filed under Referral Marketing. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.
You are so right here John. As a small business owner, those are the things that matter! As you know, in my work with leaders, they play an important role in this situation too - whether leader/owners, or leaders in larger organizations. Here was my take on the situation from that perspective this morning: http://www.kevineikenberry.com/blogs/2008/10/what-you-can-do-about-bailout.asp.
Thanks again for your great post with numbers to back up my belief!
Kevin
http://remarkable-leadership.com/brl
Spot on, John. Sadly, the current administration doesn’t seem to realize this. Did you know that Bush has cut the SBA budget in HALF over 8 years??? More than ANY other government agency!!!
But here’s some proof of what you say, John…
One of my clients, in an effort to promote awareness of the OTCBB as a viable platform for both investors and small issuers, maintains an index of 30 OTCBB stocks (none of them are the company’s clients) called the PCMC 30. Get this — YTD returns for 2008 is currently up 4.3%, while the S&P 500 is down more than 20% and the Russell 2000 down more than 12%. Last year, the index returned over 40% and the year before that, 50%.
Point is (besides me thinking those stocks are a good investment) — entrepreneurship continues to succeed in a bad economy!
Here’s another point…
According to the SBA, while small businesses employ about half of the private sector workforce, 60 to 80% of net new jobs over the past decade come from small business. In other words, small business drives economic growth — big business doesn’t.
There’s nothing to be scared of as a small business owner in the current economy. In fact, there’s a wealth of opportunity. Watch my blog later this week for some of the specific kinds of opportunities, as well as some stories of entrepreneurs who are taking advantage of them.
You make some excellent points, John. It doesn’t make sense to watch a few sectors with publicly traded, Fortune 100 companies when their are over 25 million small businesses in many more sectors — some of which have created their own — with ownership structures, even those w/ ESOPs, that allow them to be nimble during even times of extreme crisis (for them, credit options drying up) and focus on some aspect of their business that will help them stay afloat. For instance, I was reading in the latest Inc. magazine that restaurateur Danny Meyer has saved $200,000 in the past year by working with his GMs and chefs to negotiate food prices in groups vs. buying ingredients individually from all of his locations. He also said he is taking this time to hand-write thank-you notes to some of his regular customers. Those are both fantastic ideas that were able to be implemented faster, due to much less hierarchy then larger, publicly held firms. And I’m guessing in the process his stable margins have helped his vendors, too, further maintaining the economy from the bottom up.
Our nonprofit, Winning Workplaces, along with The Wall Street Journal will name 15 Top Small Workplaces on October 13 (see their special report that day), and I can tell you that one of the themes that separated the winners from the over 400 small firms that applied is their focus on employee engagement practices for the long term to help them survive AND thrive in both good and bad times. This year’s winners are small but growing at double-digit rates — a far cry from the turmoil most people associate with business today if you read only the stock ticker.
I’m going to have to check out that ADP small biz report. Thanks, John.
I’m so glad you blogged this. My dad and I have been trying to tell everyone we meet that Small Business will be the thing that turn this country around. If the local areas learn how to take care of themselves and small businesses can learn to thrive in these times without depending on large scale help, the nation as a whole will automatically pull itself together.
Actually, I discussed this a bit a couple weeks ago. http://www.thattalldude.com/main/2008/09/that-700-billio.html
Small business now faces a brighter future than it has in some time. With big biz faltering, having overextended themselves, the opportunity has presented itself for reliable, friendly, creative people to step in and fill the gap.
I have found a variety of articles about this survey today and you are the first one to take a level-headed approach. Like always, you do a great job of showing a different perspective.
Unfortunately, many small businesses exist to provide either:
1) Services or materials to large businesses.
2) Services or materials to employees of large businesses.
Think of a small company town when the company goes away…
Great comments John
The unsung heroes of most economies around the world are the small and medium business owners who often work harder than most , sometimes for little return.
Governments can be wooed into thinking that its all about the big boys in town when most of them rely in their supply chains on the little guys who help them make their world go round.
Great post on keeping your eye on YOUR ball and not listening to the noise around you! Lucky for me I stopped watching the news years ago! Some people might think to themselves “I have to watch the news! I need to know what’s going on!” Trust me, you will still be tapped into whats going on! Plenty of people around you are committed to their role as a “Walking USA Today”!
Small business will be the key to the economic turn around. Small business has the flexibility to adjust to the new conditions that large corporations just won’t be able to do.
A lot of people see a recession as a time when companies trim the fat and become lean and mean again. Well small business is already lean and mean and these conditions gives them tons of opportunities.
This post makes great points! It’s no longer an option to own a business. With US jobs being phased out in favor of technology and manufacturing and services being shipped overseas, everyone has to have at least one income stream that they control. And it’s not just about “small” business. The US Small Business Administration doesn’t define “small” businesses in a way that adequately addresses how millions of real businesses perform.
According to SBA standards, a “small” business can have multiple millions in annual revenue and still be considered “small,” so long as it has under a certain number of employees. It’s time for a new business category, the category of Indie Business, a term I coined to describe a subset of the larger category of “small” business owners. We are a sort of cross between consumers and business owners. We are consumer business owners if you will. And if Congress has its way, we will be regulated right out of existence.
For example, I am the president of the Indie Beauty Network, a trade organization of 700+ Indie cosmetics companies. I and several of my members were on Capitol Hill and at the FDA in August to lobby against a new draft law that would put thousands of tiny food and cosmetics businesses out of business by imposing huge fees (up to $12,000 a year!) and mountains of paperwork — even requiring these businesses to have at least two employees on staff. Larger companies are finding it challenging to compete online against these companies. After all, some companies need only have a good search engine optimization plan and competing against a mega-company becomes a piece of cake. I predict that, come January, no matter who takes office, regulation will be seen as the savior of our economy. And that means that the level playing field upon which we now compete is in grave danger.
Not only do we have to accept the fact that we are the engine that keeps the economy going, we have to be organized enough to fight and be able to maintain that position and the responsibility that comes along with it. The current draft of the bail out law bears this out. It contains a provision allowing the Secretary of the Treasury to, at his discretion, waive laws that prevent the diversion of federal small business contracts to large companies who have found a way to skirt around the definition of “small.”
This is only the beginning. Food and cosmetics today, everything else tomorrow.
Entrepreneurship is the next great civil and equal rights issue of our time. Now is the time to rise up and ensure that our children and their children are able to start businesses of their own. If we don’t, future generations, no matter how hard or smart they work to build a lasting business legacy, will see those legacies constantly at risk of being demolished at worst and undercut at best, by the very government that is duty-bound to protect, defend and support them.
indeed. one hopes though that the current financial crisis won’t lead to loss of credit available to small businesses. or if such a contraction of credit occurs, that small businesses will find that they don’t need loans in order to grow their firms.
Great points. I do believe we ( small business owners ) will be at the center of the recovery. Where we will be challenged has nothing to do with the Dow, but the credit crunch. We may not be able to find the capital we need to expand as rapidly as we would like, but with good planning, we will be around when the economy turns around.
Exactly. A place that shows only jobs from company’s own websites is LINKUP.COM also demonstrates there are plenty of jobs available. Most of the LINKUP jobs are NEVER advertised.
Small businesses and especially small businesses on the internet have the ability to run at such low costs that they require little if any credit. I think you are spot on by pointing out that the economic disaster we are facing is best solved by small business.
Wall Street is like a soap opera for guys. It’s time to change the channel back to reality.
Good insight John. Thanks for the post man.
Great article. Just what I needed to hear. Now if I could just read it aloud to others…Thanks John!
All valid points and I believe that you are correct on all points. However, we will have to watch what it does to capital for small business as that has spurred a lot of small business transactions lately.
But what it will do is cause people to spend their money a little more wisely. Better planning will be required. I would expect Marketing Plan Pro to be in great demand right now. Ideal Client, Core Market, etc. has never been as important as it is now.
A better post, a calming statement from a professional in the eye of the storm could not be written. Now if we could get your take on the bailout plans!
unfortunatly all small businesses rely on banks
I respectfully disagree with the notion that the “economic panic” is a bit dramatic. The real issue is not the Dow or the equity markets - these are merely a symptom of the underlying problems - but rather the much larger credit markets that trickle down to affect all of us small business owners. In mid-September, the spreads between the Fed funds rate and the rate banks were willing to lend to each other reached panic proportions, and even went so far that the yield on treasuries actually meant that investors were purchasing a “known loss” rather than wait for an even worse unknown. Thankfully, most of us will never know how close we were to the abyss last month, and I hope all of the commenters are correct in that small business will lead us out of this.
I agree that small business can and will be critical to an economic turnaround. I’d like to see some incentives in place for more people to start a business — I like Mark Cuban’s idea of Tax Free Small Businesses. As a small business owner myself, I can see how lifting some burden would stimulate growth.
Thanks the post. This “little ray sunshine” is something that more folks need to know about. I’ll be passing it onto all my e-zine subscribers…
Michael Long posted this comment:
Unfortunately, many small businesses exist to provide either:
1) Services or materials to large businesses.
2) Services or materials to employees of large businesses.
Think of a small company town when the company goes away…
Michael, my experience tells me small business does not need to overly worry about a decline in big business demand. Just be sure not to have full reliance on big business as a revenue source. My company, Instructional Solutions, trains and coaches business people to write better, and we’ve been at it for ten years. In the early years, 95% of our business was from large corporations and 5% from individuals or small groups. The past few years has seen a big swell in smaller groups and individuals - they’re small businesses like mine, training to keep competitive.
Small businesses need services, and there are many, many more small business than large corporations.
I so agree with this post, and the many insightful comments. I concur that small business and entrepreneurship will be the driver of our recovery. Thanks for the grounding comments in the midst of media frenzy.
i asked this question the other day on LinkedIn: What is the single thing you are going to change in your business because of the past week’s economic picture?
I received several great responses such as the ones above than I received this one: “I closed.” Pretty sobering remark to find in my in box. It brings a reminder to me that sometimes all things are not what they appear to be. Small business is tough and fortunately we are an optimistic group, the ones still talking.
I encourage us, since we are mostly marketers, in tough times to be more frugal and smarter in our efforts. Let’s show some creativity in our marketing approach.
I couldn’t agree more with your post. I know for me the thing that keeps me up at night more than anything is where to put the money I’m making for retirement, etc. At this point, I guess the only thing one can do is continue to trust in traditional investments (401k, IRA, etc) and hope that over time things work out.
Nice one John - small business is also where the spark of new business concepts often ignites. How many of us have several ventures on the boil - ventures that must do or die on their own mertits because we don’t have large funds to support them. While the big guys crumble and scramble to protect their leveraged lifestyles, it will be the little guys that see the opportunities - we are the grass roots.
Small business is certainly where the creativity is coming from these days. Recent events just show how bloated the large corporations are and surprisingly, it wasn’t too many years ago that many of these same companies were small businesses, with a creative idea, themselves! Luckily,when it comes to small businesses, there will always be more of us than there are of them. Millions of small businesses = millions of new ideas!
Here is Obama’s small business rescure plan… i think it’s definitly worth reading!
http://obama.3cdn.net/d14eb1b3649c4d6745_0evzmv02w.pdf
P.S.
I agree that small business is the solution to the economic crisis and sustaining our economy, but one thing to remember when quoting SBA stats… they consider small businesses to be any company with less that 500 employees.
I couldn’t agree more! Network marketing businesses - which are usually individually owned small businesses - are not hurting. I got a new customer just today. In fact, from what I’m reading, network marketing, or other types of home-based businesses, are growing as more and more people seek to bring in extra income. And, I actually haven’t been too worried because at this time on the globe, too many people in too many industries and countries have too much invested in time, money and effort to allow any kind of horrific economic crash. Will there be changes? Yes. Will there be lost jobs? There already are. But over all, just as your post points out, the small business world - which encompasses a huge dollar factor - is a good place to be.