The cover story in this month’s Forbes magazine showcases “America’s Best Small Companies in 2010” in the United States. I find it very encouraging that one of the major business magazines has generously decided to give so much space to the little guy.
After all, 75% of the businesses in the United States employ fewer than 10 people. That means that the overwhelming number of businesses in the US (around 4.5 million companies) finally gets a hearing. Any politician will tell you that they form the backbone of American business. The Ewing Marion Kauffman Foundation said, in a 2009 report (“Where Will the Jobs Come From” November 2009), that “…firms between the ages of one and five create the most net new jobs, dwarfing the other age classes. These firms also create the highest average number of jobs: roughly four jobs per year.
They concluded that “Still, virtually all of the attention among policymakers and the media has focused on the waiting game by larger firms, currently reluctant to take back employees they dismissed, and unwilling so far to begin hiring new employees again. The analysis here, however, suggests this attention is misplaced. The overwhelming source of new jobs is new firms. The key implication for policymakers concerned about restarting America’s job engine, therefore, is to begin paying more attention to removing roadblocks to entrepreneurs who will lead us out of our current (well-founded) pessimism about jobs and sustain economic expansion over the longer run. This much-needed shift in focus cannot come soon enough.”
So, thank you Forbes for exposing this problem so prominently.
What’s that you say? What were Forbes’ criteria for identifying these small companies?
Let me look…hmmm. Hey wait a minute. Could it be?
They looked for companies that were publicly traded for at least 2 years, had a stock price over $5, and had gross revenues less than $1 billion. There must be some disconnect here. I thought we were talking about SMALL companies.
Are we all on the same planet? Apparently not. The policymakers and the media, to which the Kauffmann report referred, love to play the “small business” card at their convenience. They rely on the fact that what the public defines as “small” is never compared to what they define as “small”. By bringing small companies into the conversation, they kill two birds with one stone: they mislead the public into thinking they’re talking about Main Street and, they tout programs that do nothing for the real small businesses but take credit for thinking of the “little” guy.
In fact, the Small Business Administration’s definition of small is 500 employees or less and covers about 1.483 million out of 6 million employers or 25%. That leaves the balance of employees with over 500 employees:
1-9 employees 4.500 million
10-499 1.483
500+ .017
Yes folks, 17,000 companies in this country employ greater than 500 employees. So, when a magazine like Forbes wants to sell magazines, their target market is only interested in 1.5 million employers…the ones who do not create permanent jobs.
Here’s a comment the Forbes article received from a reader:
“If they were to write an article on small businesses with 20 or less employees, how many of those companies would be publicly traded? As an investor, why would I care about companies that are not publicly traded? Now, if they wrote an article about small companies (regardless of headcount) that would be going through an IPO, then I would definitely be interested in reading that article.” (Posted by jimgzz | 10/28/10 03:13 PM EDT)
Just like most of our brilliant financial gurus, this guy simply doesn’t get it. With most of the companies that provide jobs being totally ignored (if not ridiculed) he actually thinks that everything will just go along it’s merry way, just like old times. It’s shortsighted attitudes like his that started this mess in the first place.
But, encouragingly, here’s another comment:
“Forbes obviously has a completely different definition of a "small" company. According to the US Census Bureau, Two-thirds of all US businesses have less than 10 employees.
In fact each of the "Small" businesses featured fit in the top 0.5% of US businesses. How does this even closely reflect the real US economy? How about an article about the top 20 best US "true" small businesses under 20 employees. Then we will finally have an article that reflects and inspires the real US Small Business market.” (Posted by jbmetrics | 10/27/10 05:11 AM EDT)
Thank you “jbmetrics” whoever you are.
Showing posts with label small business. Show all posts
Showing posts with label small business. Show all posts
Tuesday, November 2, 2010
Thursday, October 7, 2010
It's the Job Market, Stupid!
ATTENTION CORPORATE AMERICA:
Profitability is not in the best interests of your shareholders! Jobs are!
Heresy, you say? Let’s look at the facts.
The world economy is in a shambles, the likes of which we have never seen before. Sure, we had the Depression in the 1930s, but this calamity is worse. The world is exponentially more complex than it was 70 years ago. Economies are so intertwined with one another that it is sometimes impossible to sort them out. But, there’s one issue that rises above all the confusion … the need for jobs.
We need jobs, and we need tens of thousands of them, and we need them now. There are only two entities in this country that are large enough, wealthy enough and with broad enough reach to create that many jobs quickly: the federal government and large corporations.
After having gone through TARP and mini-TARP, the Feds are so deep in the hole that we’re up in arms about the almost unbelievable deficit. At the same time, people are screaming for lower taxes and more responsible federal spending. It is quite clear that expecting any major programs from the Feds, without printing more money, is ridiculous.
So, that leaves the other player … Fortune’s 500. The standard CEO answer to something he doesn’t want to do is “it’s not in the best interests of our shareholders.” Substitute “depositors” for shareholders, and you can include the banks. The statement implies some sort of carefully managed fiduciary responsibility by corporate management, when, in fact, it’s really how they keep their jobs and earn their bonuses. It conjures up images of focus groups with shareholders to determine what decisions would be in their “best interests.” And I just arrived from Mars.
The only shareholders that really matter in the stock market are the institutional investors. If CEOs think they’re making the correct strategic decisions, consider this: Our largest corporations (and banks) are accumulating obscene amounts of cash. Hundreds of billions. In order to maintain profitability, these companies have slashed operating overhead (i.e. jobs). Banks are borrowing from the Fed for practically nothing and earning interest with that money in overseas markets. Corporations have pulled back to such an extent that many of them spend as much effort managing their finances as they do creating their product. Shades of Scrooge McDuck.
Our economic “pump” has stalled. It needs to be re-primed, and the only way to do that is with jobs. We need to get people back to work so money begins to re-circulate in the economy. Corporations should reopen shuttered factories and open new branches just to get people working. And what will they manufacture and sell? I don’t care. Use your imagination, get clever, use some Yankee ingenuity. Until we get people spending again, our economy will remain in gridlock. Shareholders want long-term stability, not short-term noise. We need to take a step back so we can take two forward. It is in the enlightened self-interest of corporate America to step forward and take the leadership role we will not allow the government to play (and rightfully so).
Where are all those Harvard MBAs when you need them?
Profitability is not in the best interests of your shareholders! Jobs are!
Heresy, you say? Let’s look at the facts.
The world economy is in a shambles, the likes of which we have never seen before. Sure, we had the Depression in the 1930s, but this calamity is worse. The world is exponentially more complex than it was 70 years ago. Economies are so intertwined with one another that it is sometimes impossible to sort them out. But, there’s one issue that rises above all the confusion … the need for jobs.
We need jobs, and we need tens of thousands of them, and we need them now. There are only two entities in this country that are large enough, wealthy enough and with broad enough reach to create that many jobs quickly: the federal government and large corporations.
After having gone through TARP and mini-TARP, the Feds are so deep in the hole that we’re up in arms about the almost unbelievable deficit. At the same time, people are screaming for lower taxes and more responsible federal spending. It is quite clear that expecting any major programs from the Feds, without printing more money, is ridiculous.
So, that leaves the other player … Fortune’s 500. The standard CEO answer to something he doesn’t want to do is “it’s not in the best interests of our shareholders.” Substitute “depositors” for shareholders, and you can include the banks. The statement implies some sort of carefully managed fiduciary responsibility by corporate management, when, in fact, it’s really how they keep their jobs and earn their bonuses. It conjures up images of focus groups with shareholders to determine what decisions would be in their “best interests.” And I just arrived from Mars.
The only shareholders that really matter in the stock market are the institutional investors. If CEOs think they’re making the correct strategic decisions, consider this: Our largest corporations (and banks) are accumulating obscene amounts of cash. Hundreds of billions. In order to maintain profitability, these companies have slashed operating overhead (i.e. jobs). Banks are borrowing from the Fed for practically nothing and earning interest with that money in overseas markets. Corporations have pulled back to such an extent that many of them spend as much effort managing their finances as they do creating their product. Shades of Scrooge McDuck.
Our economic “pump” has stalled. It needs to be re-primed, and the only way to do that is with jobs. We need to get people back to work so money begins to re-circulate in the economy. Corporations should reopen shuttered factories and open new branches just to get people working. And what will they manufacture and sell? I don’t care. Use your imagination, get clever, use some Yankee ingenuity. Until we get people spending again, our economy will remain in gridlock. Shareholders want long-term stability, not short-term noise. We need to take a step back so we can take two forward. It is in the enlightened self-interest of corporate America to step forward and take the leadership role we will not allow the government to play (and rightfully so).
Where are all those Harvard MBAs when you need them?
Monday, May 10, 2010
Remember the Good 'Ole Days of Banking?
Here’s a new definition of “chutzpah”. Part of the new financial reform legislation forbids domestic banks from trading in derivatives. Derivative trading (basically financial instruments that bet on other financial instruments) is a major source of revenue for the institutions that are currently posing as banks. The top five “banks” have spent upward of $6 million lobbying to have the prohibition deleted.
Their argument, now get this, is that if they are not allowed to play in the derivative market it will be left only to foreign banks AND FOREIGN BANKS ARE NOT REGULATED BY THE US GOVERNMENT.
Remember the story of the kid who murdered his parents and then pleaded with the court to give him a break because he was an orphan? This is even better than that! Who are these guys kidding?
They don’t want to stop playing the market because then they may be forced to try to make money being banks. If you look at the obscene profitability that banks are now reporting (and asking for an attaboy for recovering from last year’s meltdown) and then look at the source of the profits, a small fraction of it comes from normal banking activities. Interest arbitrage, derivative trading and the like represent the majority of the profits.
Remember the days when a bank took depositors’ money and loaned it to businesses so that the local and national economies would have a source of fluidity? Oops, that required exposure to risk and the careful analysis of financial statements and management activities. And, as we now know, most of the largest companies were lying (and their auditors were swearing to it) so who wants to be in the middle of that mess?
Besides, it’s much more sophisticated and fun to play with the big boys (and become one yourself) than it is to sit behind a roll top desk and serve customers.
How ‘ya gonna keep ‘em down on the farm after they seen Paree?
rjs
Their argument, now get this, is that if they are not allowed to play in the derivative market it will be left only to foreign banks AND FOREIGN BANKS ARE NOT REGULATED BY THE US GOVERNMENT.
Remember the story of the kid who murdered his parents and then pleaded with the court to give him a break because he was an orphan? This is even better than that! Who are these guys kidding?
They don’t want to stop playing the market because then they may be forced to try to make money being banks. If you look at the obscene profitability that banks are now reporting (and asking for an attaboy for recovering from last year’s meltdown) and then look at the source of the profits, a small fraction of it comes from normal banking activities. Interest arbitrage, derivative trading and the like represent the majority of the profits.
Remember the days when a bank took depositors’ money and loaned it to businesses so that the local and national economies would have a source of fluidity? Oops, that required exposure to risk and the careful analysis of financial statements and management activities. And, as we now know, most of the largest companies were lying (and their auditors were swearing to it) so who wants to be in the middle of that mess?
Besides, it’s much more sophisticated and fun to play with the big boys (and become one yourself) than it is to sit behind a roll top desk and serve customers.
How ‘ya gonna keep ‘em down on the farm after they seen Paree?
rjs
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