David Kirkpatrick

February 16, 2010

January 14, 2010

How to really start cutting small business costs

Overall this is a decent case study article on controlling costs at a small business, and a lot of the advice and actions are sound — things like renegotiating with a major supplier to get a better price.

But this particular step to cut costs for a gourmet ice cream maker seems a bit over the top:

… We also advised them to put an end to the “Do It Yourself” Sundae offered in the stores. Customers were making lavish use of sprinkles and whipped cream, and it was killing the profit on each item sold.

Wow. Those must have been some super-premium sprinkles and whipped cream to significantly put a dent in the bottom line.

October 19, 2009

Risk-taking and Wall Street

This BusinessWeek article is actually about the demise of risk-taking in Silicon Valley, and it does a great job of identifying some of the players who’ve collectively killed risk in the one-time land of starry-eyed entrepreneurs.

The final culprit — Wall Street — and the indictment against it is interesting, true and really applies across the spectrum of business sectors as a succinct reminder of the myriad problems facing the Street and what has become business as usual. Particularly the point about Sarbox and why entrepreneurs might shy away from IPOs.

From the first link:

WALL STREET

Wall Street hasn’t played as direct a role in Silicon Valley since the late 1990s, when analysts like Mary Meeker and bankers like Frank Quattrone knew as much about new startups in the Valley as the VCs did. That’s part of the problem.

Startups have to want to go public in order to go for the home run. And most entrepreneurs today just don’t. Blame it on bankers and analysts who no longer care about a company with a sub-$500 million capitalization; blame it on Sarbanes-Oxley; blame it on activist hedge funds who don’t give CEOs the leash to innovate; blame it on scars from companies going public in the 1990s that had no business going public and paid the price.

But too many great entrepreneurs sell early not because they’re lazy, not because they want a quick buck, but because the idea of running a company all the while trying to meet quarter-by-quarter Wall Street estimates is antithetical to risk-taking.

Verdict: There’s got to be a reward for all that risk, and until the public markets become a place great entrepreneurs aspire to get to, that risk-reward equation is hopelessly lopsided.

August 12, 2009

Repeal the “health-care tax” for the self-employed

Now this is a great idea, of course I have a vested interest in the issue because I’ve been self-employed for years. This is just the sort of pro-small business action I fully expected Bush and the GOP controlled Congress to make happen. I gave up on that pipe dream early in Bush 43’s first term. I don’t expect Obama to do anything about the tax either, I’ll just not be nearly as disappointed. 

From the link:

By a quirk in the tax code, self-employed workers who buy their own health insurance essentially pay an extra tax on their premiums. They’re the only taxpayers in the system who pay taxes on premiums, which count as a business expense for corporations and pretax income for employees. Because self-employed workers have no corporate employers to match their payroll tax contributions to Social Security and Medicare, they pay double the rate of wage and salary workers in a levy known as the self-employment tax equal to 15.3% of their net earnings. That’s on top of regular state and federal income taxes, and the income they spend on health premiums is not exempt.

The nation’s 9 million self-employed—sole proprietors with few or no employees, contract workers, and freelancers—constitute about 8% of the total U.S. labor force, according to the Bureau of Labor Statistics. (The Census Bureau counts 22 million sole-proprietors, but it’s not clear how many of those may be payroll workers as well.) “You correct this, think of the widespread health benefit you would give to so many people,” says Kristie Arslan, executive director of the lobbying group National Association for the Self-Employed(NASE), which represents the self-employed in Washington.

July 9, 2009

Home equity credit crunch hurts entrepreneurs

Many small business have been relying on home equity loans as opposed to Small Business Adminstration loans or lines of credit based solely on the business. This avenue of funding has proven to be very, very volitile in today’s financial market. As home value drops, banks are very quick on the draw to freeze home equity credit. Just one more obstacle in the path of Main Street business.

From the link:

As home equity lines vanish, other avenues of small business financing are also running dry. More than 40% of small business owners polled in April by the National Small Business Association said the limits on their credit cards had been cut in the past year, and 63% said their interest rates went up. Bank lending is in freefall. Even with stimulus incentives, the SBA backed 30% fewer bank loans to small businesses last quarter than it did a year earlier. The agency’s lending volume has dropped to less than half what it was before the recession set in at the end of 2007.

The allure of home equity loans is their liquidity: Business owners can tap cash without submitting detailed business plans. But easy access can be a double-edged sword.

“Used properly, home equity lines of credit are great and get the job done. But a business that isn’t self-sustaining can’t pay it back, and that’s where the problem lies,” says Norm Bour, a debt management strategist and founder of BusinessCashFlowPros.com in Laguna Niguel, Calif.

July 2, 2009

Small business and health care reform

Here’s two stories on Main Street and the health care debate.

First up is entrepreneurship and opposition to public plan health care:

The so-called “public option,” backed by President Obama and many Congressional Democrats, would set up a government-backed health insurance plan that would compete with private plans. Though details remain fuzzy, the proposal already has critics on both sides of the aisle decrying “government-run health care.” The American Medical Association and private insurers oppose any public option.

Also resisting is the National Federation of Independent Businesses, the nation’s largest and most influential small business group. A fierce critic of the Clinton administration’s health care reform efforts a decade ago, the NFIB now considers universal health care to be one of its top legislative priorities. But it wants to see that care and coverage come from the private sector.

“Our members, who are entrepreneurs and risk takers, really do fundamentally at the end of the day want lower costs and competition, but they are going to be very skeptical of something that has a lot of government involvement,” says Michelle Dimarob, the federation’s legislative policy manager. The NFIB is instead pushing for a reform plan that would provide universal coverage and cut costs by increasing competition among private insurers, likely through the creation of government-mediated insurance pools.

And batting second is a NYT blog post underscoring a range of small biz attitudes toward the debate:

Oddly, the public plan is also one of the battle lines for organizations that claim to represent small business. The National Federation of Independent Business and the U.S. Chamber of Commerce staunchly oppose a public plan; the Small Business Majority appears (pdf) to support it; while the National Small Business Association insists that if there is a public plan, it should be constrained by the same rules as private insurance.

 The legislators who will decide the issue are the handful of moderates in both parties. The conventional wisdom is that the House will pass the public plan, and its fate will rest in the hands of maybe 10 senators. But it may prove a battle in the House, too: The conservative Democratic Blue Dog Coalition supports only a drastically curtailed (pdf) government option, and its 49 members could tip the balance. So the question is, how will these moderates vote in the end?

May 8, 2009

Small business credit crunch

Filed under: Business — Tags: , , , — David Kirkpatrick @ 3:55 pm

Tight, or no, credit for small business continues. Here’s some tough advice from Doug Tatum, co-founder and chairman emeritus of Tatum, an Atlanta-based consulting and executive search firm that specializes in helping growing companies with finance issues. Tatum is the author of ”No Man’s Land: What to Do When Your Company Is Too Big to Be Small and Too Small to Be Big” (Portfolio, 2007).

From the link:

Q.What’s your advice for businesses looking to borrow money these days?

 

A. Quit trying. The credit markets are tougher than I’ve ever seen them, aside from the Carter years.

Q.But it takes money to make money, right?

A. Entrepreneurs have a limited amount of bandwidth, and they have to quit wasting their time chasing the impossible. They need to think about how they can change their business model to become profitable. That’s where the capital to grow will come from. I just spent some time with a health care consulting company that pulls in $6 million in [annual] revenue with plans to grow to $10 million. They are just bobbing, weaving and growing despite how hard it is out there.

Q.Why hasn’t the government been able to open up the credit markets?

A. Banks have become cautious about what they have on their balance sheets. They still don’t know what their portfolios are worth. That means they’re waiting for the next shoe to drop, which could be the commercial markets. I talked to the C.E.O. of a community bank who told me that they have the regulators telling them when and where they can lend money. So while you might have politicians saying, ‘Lend, lend, lend,’ the regulators are holding the banks back.

April 17, 2009

Ten tips for angel dollars

Filed under: Business — Tags: , , — David Kirkpatrick @ 4:44 pm

Looking for venture capital investment? Here’s ten hints to get the money.

Tip number one from the link:

Show your passion
“The entrepreneur is the Pied Piper of a company,” says Chip Hazard, general partner at Boston-based Flybridge Capital Partners. “We want an articulate, passionate CEO who can excite others – employees, customers, business partners.”Flybridge joined the syndicate that backed Goby Technologies, a Boston-based search startup that provides comprehensive leisure and travel information in a single site – first with a seed round to build a prototype, then with a multimillion-dollar Series A round to fund longer-term operations.

March 14, 2009

Health insurance and entrepreneurship

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 3:26 pm

Not certain if I completely buy this concept, but I have to admit it’s very interesting and may well have merit. I’m of mixed-mind in terms of any version of “universal” health-care. The current system is not working. Insurance as an industry is not truly serving its customers and far too many people are without health insurance.

For the next few weeks I’m included in that number, and over my career as a freelancer I’ve rarely been covered. When I have been it’s been on the coattails of my spouse.

From the link:

Even younger startup owners who are relatively healthy and have insurance are just a half-step from disaster. The insurance industry is in the business of not paying claims whenever possible, after all, and health insurers are working hardest to find ways not to cover people who might get sick even as they deny as many claims as possible from people who’ve been paying premiums.

The day we have national health care is the day that we unleash a wave of entrepreneurship the likes of which we’ve never seen before. That’s one of the best reasons for moving toward such a system.