Job Creation – www.exkalibur.com

Small Businesses – Stop Worshiping Them?

Doesn’t a lot of this jawboning about job creation make your brain explode?

I’ve never read articles by Rex Nutting before, who writes for MarketWatch on the WSJ Digital network … but a banker friend of mine referred me to his “Time to stop worshiping small businesses” article.

I’m not sure where Rex gets his information but his conclusions about the limited job creation value of small businesses is generally unsupported. After arguing, in Clintonesqe fashion about “it depends on how small the definition of small is”, he goes on to claim that while “small businesses do create a lot of jobs, but they also destroy a lot.” Citing a Census Bureau study, he claims that “once they pass their first birthday, small companies, on average, lose more jobs than they create. Many fail within years.”

[pullquote]Who says tax rates don’t matter to job creation?[/pullquote]

A recent study by the Ewing Kaufman Foundation reported an entirely different result, concluding that “80% of the jobs created in the first year are still here after 5 years.” There’s not enough detail available to comprehensively compare these disparate reports, but to debunk the value of SMB job creation requires a little more factual support from Nutting.

He also claims that tax rates don’t matter (more…)

Uncertainty is killing business – NOT credit!

[pullquote] Double V - the deadly duo of Big Volatility and Little Visibility.[/pullquote] A recent WSJ opinion piece nicely summarizes the quagmire of uncertainty that plagues American business. I'm pretty tired of all of the "credit-starved businesses" stories presented like medieval alchemy ... fix this and you've found gold ...…

“There you go again” ….

I think that line is attributed to Ronald Reagan’s impressive debate performance against Jimmy Carter in 1980 … but just the same, it applies to the stream of recent articles about business lending in the middle market.

The WSJ discusses a report that banks have eased their credit standards in recent months. Of course, there’s no metrics to confirm that, or what it means … and you’ll waste a lot of energy finding middle market businesses that concur. More realistically, there is little demand for credit because businesses have little confidence in economic growth in the near term. (more…)

Start-Ups Create Lasting Jobs

A recent report from the Ewing Marion Kauffman Foundation entitled After Inception – How Enduring is Job Creation by Start-ups?”, uncovered several notable findings about the job creation power of start-ups:

The number of start-ups that flourish and create jobs balances the jobs lost by companies that close.
80% of the jobs created in the first year are still here after 5 years.
Companies that start during recessions general catch up in hiring after the recession ends.

So what? (more…)

“We’re not an eleemosynary institution!”

That’s the phrase one of my oldest and closest banker friends always used – he became the President of a major division of a major bank before he retired. You may not know that word – and it’s at least a “50-center”, maybe more, but he loved it and used it on me all the time.

… pause … have you looked it up yet or are you waiting for me to tell you? … come on ….

Yeah, that’s what I thought. Okay. It means charitable, as in “we’re not a charitable organization” … meaning we do have a few basic rules:

We expect to get paid … so we’d like to confirm that your projections provide sufficient free cash flow so you can actually pay us back.
We like to have some collateral in case something goes wrong.
We’d like to see some owners’ capital invested in the business so we know we’re in this together.
We’ll probably ask for your personal guaranty, too, to be sure you’re dedicated like the “bacon” and not just committed like the “egg”.
It would be nice if you had some kind of demonstrable track record and relevant management experience so we can assess whether you know what you’re doing in the business you’re in now.

Those are the basic rules … which is why I’m getting pretty tired of the endless news articles and blog posts about the lack of adequate capital for small business. (more…)

California still sharing space with whale pucky!

Like we need more bad news in or about California ... but the Chief Executive organization's survey of Best and Worst States for Business 2010 finds the Golden State's golden egg is actually something else that's been painted over ... if you catch my drift. We're not just last for…

White House Jabbing about Jobs

As I’ve said here before, I don’t think our elected servants in D.C. know much about creating jobs. Let’s remember that the stimulus program was always “too little, too late” and we harped here that the length of time over which those funds would be deployed was way too long … witness today that jobs officials say more than 50% is still in the pipeline over one year later. So, no surprise it hasn’t help as much as they would have you believe. Robb Mandelbaum writing in the NY Times also agrees that there is very little in President Obama’s most recent speeches flowing from the Jobs Summit last week.

What do you think of the ideas being floated about, the key ones of which are summarized here? Will any of them help your business? Are there other ideas that could work? Fire up those fingers and add your comments here.

For one thing, the Administration continues to talk about incentive programs to spur business lending. While that would also be welcome, it doesn’t get at the root cause of unemployment and jobs growth. I’ve reported here before that lending is NOT the biggest problem in the middle market … it’s demand and revenue growth. Companies are not going to borrow except to meet demand and if demonstrable demand is present, borrowing is usually easier anyway.

One idea is to eliminate the capital gains tax for small business investing. (more…)

Job Stimulus? Recession Over? Hornswoggle!

The reports are continuing on the woeful effects of the Obama job stimulus program, heralded as the American Recovery and Reinvestment Act. The $789 Billion package was to create or “save” 3 million jobs but here’s the thing.

You know how your spouse says she or he just “saved money” when they bought something on sale … but you can never really find or see those “savings”? That’s the same logic the Administration uses to claim it’s “saved jobs” as they seek to defend the success of the stimulus package.

Not only is job creation meager, but the costs are staggering. The White House’s Recovery Act site – shows, for example, that $660 million has been awarded to Bay Area transportation projects to create 997 jobs, which amounts to a staggering $661,986 per job. Last week, the site showed that California Congressional Districts 00 and 99 received millions of dollars in stimulus funding even though neither district exists. (more…)

Looking beneath the headlines … more danger?

In my last few posts, I've discussed the job creation efforts of the Obama Administration, which have had abysmal results.There are a lot of voices coming to the same conclusion. An editorial in today's NY Times chimed in about not only "underemployment", which takes the 10.2% unemployment figures to 17.5%…