Experts: Poor Sales Worse Small Business News Than Lending

Gaebler.com Resources for Entrepeneurs ^ | 2/26/10

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Economists from J.P. Morgan believe that poor sales are more responsible for small business woes than a lack of available lending.

Economists Bruce Kasman and Robert Mellman of J.P. Morgan point to data from the U.S. Department of Labor that indicates small business cut losses in half in the second quarter of 2009 as a sign that small business concern may be misdirected, according to the Wall Street Journal.

In a report released this week, the National Federation of Independent Business indicates that their problems arise more from poor sales than anything else. An actor that Kasman and Mellman believe is more responsible for small business strife than anything else.

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The Obama economy is in a nose dive. Investment, inventories, and accounts receivable for non-financial U.S. companies have reduced more than since the end of World War II.

And now Democrats think that spending even more federal dollars will solve the problem. It won't. Federal spending HINDERS the economy, it does not boost the economy.

To fix the economy, you cut taxes, reduce government spending, and eliminate regulation. This is the lesson that was provided by Ronald Reagan, get government out of the way. Anybody who ignores it, will fail miserably.

Obama is ignoring the lesson. He is doing exactly the opposite of what needs to be done for the economy. His administration is a disaster.

[GeronL]

That is the worst headline grammar evah.

lol

BUMP

[razorback-bert]

Experts discover, no customers equals no income, stunning!

[parsifal]

Yeah, the headline is gobbledygook. But the issue is like “Duh!” Small businessmen confuse “cash flow” problems with “net income” problems. That’s how they end up with too much debt.

parsy

[NVDave]

To their detriment (and sometimes their credit), most small businessmen aren’t highly versed in accounting or finance. And so, they’re liable to making such mistakes.

I think I prefer this state of affairs, tho, to the mental masturbation accounting that was used to conceal the coming collapse of GM (for example) or the SIV’s that banks are using to lie to themselves even now.

[familyop]

"Economists from J.P. Morgan believe that poor sales are more responsible for small business woes than a lack of available lending."

I disagree very much. High flooring (rent/lease) costs are most often more of a problem. Too many established businesses use local governments against all potential new competition. Dump zoning laws against small manufacturing operations in rural areas, if you want the economy and general safety to have a chance in the future.

[raybbr]

Oh, no. According to the 'dear leader' if a business borrows money they are showing a profit.

THE PRESIDENT: The small businesses I talk to --- and I've been talking to a lot of them as I've been traveling around the country over the last several months -- their biggest problem is right now they can't get credit out of their banks so they're uncertain about that. And they're still uncertain about orders -- do they just have enough customers to justify them doing more.

It's looking better at this point. But that's not the rationale for people saying, I'm not hiring. Let me put it this way. Most small businesses right now, if they've got enough customers to make a profit and they can get the bank loans required to boost their payroll, boost their inventory, and sell to those customers, they will do so. Okay? From here.

[Erik Latranyi]

All you need to know is what is buried in the GDP numbers released yesterday (which I still think are manipulated)......2009 Full Year GDP was down 2.9%

[norge]

When I heard him say that, I shook my head in disbelief over his complete misunderstanding of the small business world.

I could care less about getting credit. I want business!

After 25 years of running a profitable business I had to let half my staff go last month, just to survive, after cutting myself from the payroll January 1.

If he thinks I’m going to borrow money to “boost my payroll”, he’s dumber than I thought. Put simply, I want more business, and that ain’t happenin’ because my clients are suffering too, and potential new clients simply aren’t spending.

Obama needs someone to tell him, that’s basic economics out here in real world.

[raybbr]

If he thinks I’m going to borrow money to “boost my payroll”, he’s dumber than I thought. Put simply, I want more business, and that ain’t happenin’ because my clients are suffering too, and potential new clients simply aren’t spending.

I don't know anymore if its ignorance or cupidity in his understanding of the economy.

He sees the economy, I have come to realize, from the standpoint of banking and banking only. He knows nothing of profit and loss. He knows nothing about overhead. He knows nothing about management.

His view of the economy is based on banks. He sees the federal govt. as a large bank. He sees the Treasury as a larger bank. He sees tax dollars as deposits. He sees our income as withdrawals. He sees banking profits as the profit of the federal govt.

He's never been said no to by a bank. He's never been said no to when he asked for money to "community organize". Heck, I bet on one's said "No!" to him in the last twenty years.

He's a spoiled, petulant narcissist who thinks all money belongs to the federal govt first.

That's why when Congressman Ryan of Wisconsin told him his plan was not workable from an economic standpoint all this man-child could do was give Ryan the finger...

I know there are two fingers up but the body language is clear.

[CRBDeuce]

Obama is ignoring the lesson. He is doing exactly the opposite of what needs to be done for the economy. His administration is a disaster.

Good conclusion (becoming more and more apparent every time he speaks). Neither headline 'cause' is the problem...UNCERTAINTY is the bane of business success. It stifles creativity, kills jobs, offers up more crises (for the Rahms to take advantage of). On and on...a stable government will be MIA for years. A really great solution for a failed government is a whole lot less of that government. No time like the present! We've gone from a Corrupt 2006 Congress to a Garbage 2008 Congress, it's time for a Take Out the Garbage 2010 Congress! The 2010 Congress can then work on cutting government in half like we shoulda done years ago with REagan's first attempt at deregulation. If Congress woulda cut spending AND taxes in the '80's we wouldn't have reached this death spiral so soon! It's spending and now uncertainty that have killed the goose. And now the golden egg has gone MIA.

[CRBDeuce]

I disagree very much. High flooring (rent/lease) costs are most often more of a problem.

Absolutely...Floorplan was the first casualty of the economy going over the cliff. Took CIT with it. The death of Banking woulda been the death of floorplan. Part of the reason for 'saving Banking first'. I agree with your second point as well, which will require a Repeal of many laws to make right.

[CRBDeuce]

He was having an Elkhart (Ind) moment ... his first townhall last year. Elkhart (and many other towns and cities) have been devastated by ‘floorplan’ credit problems....until inventories are worked off in those industries (RV’s, boating, auto, hardware, etc), the only thing keeping payroll going is credit. Someday customers will return, til then, no credit, no jobs.

[RipSawyer]

Some things about running a small business don’t require a lot of financial education. Income must exceed outgo is fairly simple but apparently is too simple for some people to deal with. Debt is not income is another simple concept that seems to be too much for some. Spending money just so you can write it off on taxes is not smart, another simple concept that some cannot master. Hiring lazy, shiftless fools because they will work for a lower wage is another.

Now when you move up into the bigger business category you begin to see some really stupid actions like buying out Colonel Sanders and changing the product that made the business successful so that you wanted to buy it in the first place or coming out with “New” Coke. Then there are things like paying consultants a fortune to tell you what anyone with an ounce of brains already knew, it would be much less expensive in many cases to just ask a fifth grader.

I will mercifully terminate this rant now, I could go on and on.

[NVDave]

Your words should be engraved onto a suitably large stone and the stone lobbed onto the steps of the White House.

In particular, many “financial experts” (most of them goddamn academics) need to pay attention to these words of yours:

“I could care less about getting credit. I want business!”

Right there is the nut of the problem. Right there is also the nut of the problem with the proposed GOP ideas of solving this through mere tax cuts.

We have to do two things in order to solve the problem in the economy right now:

1. Consumers (and many businesses) need to pay down the unsustainable mountain of debt which they racked up in the last 10 years.

2. Household spending power needs to be grown organically - ie, we can’t create more buying power again by offering more lending on increasingly dubious terms to households. Consumers need to see their household disposable income go up from actual increases in wages.

Since (2) isn’t happening (thanks to the “free trade” movement who is in a pell-mell rush to outsource wealth creation overseas, and the “cheap labor” movement among American business, who are hell bent on getting as much cheap immigrant labor into the US labor market), making (1) can happen only with a commensurate reduction in discretionary spending, making money available to pay down debt. This is, in fact, what we are seeing consumers do right now.

[NVDave]

It is institutional ignorance.

One thing I’ve noticed in this financial melt-down is the incredible stupidity on the part of most anyone with a degree from Harvard. Bush, Summers, Paulson, Obama, Frank are all world-class business idiots from the political sphere.

When we look in the business sphere, we see more world-class morons from Harvard - Chris Cox at the SEC was a prize-winning moron. Wagoner, who ran GM into the ground, is another prize-winning moron from Harvard.

The list goes on and on and on. Obama isn’t unique or special. He’s just another inDUHvidual in a long line of similarly stupid people from Harvard.

[mo]

70% of the economy is disposable income.

More regulation=higher prices = less disposable income
More taxation=less disposable income
No job=less disposable income
More debt=less disposable income

Lets see here..regulation=power to the government
taxation =power to the goverment
debt=power to gov’mt
unemplyment=power to gov’mt

Our disposable income will dwindle..and power will acrue to the Feds as long as the status qou remains...which will go on as long as We the People let it...

the same minds making the problem, haven’t the solution.

[parsifal]

Its all kinda the same thing. I was an accountant in a previous life. They get over-financed-—they blame it on cash flow which leads to more imbalance—they neglect the nuts and bolts of EARNINGS-—the CPAs who prepare their books give them crap “Charts of Account” which don’t provide management tools——business owner starts committing various crimes ansd frauds to stay ahead-—the business owner becomes unable psychologically to trust others or rely upon their good advice or input-—the owner tries to live a lifestyle way beyond the earnings-—and, one day it all falls down.

parsy, who could write a book, and maybe will one day

[investigateworld]

Your post described 90% of the problems I saw when I was a big chief with a certain state's regulatory agency.

The actions weren't criminal per se, just typical of guys trying to stay afloat.

I'm certain every .gov department dealing with contractors has seen similar :^(

[parsifal]

Its sad. Sometimes bankruptcy and taking a realistic view of the facts would have saved them. Sometimes, just firing family members out of the business. I have read of a few prosecuted for fraud, usually on loan documents, but you can almost tell from the stories in the paper they really weren’t trying to rip off anybody. Plus some of these guys have an ego problem where they think they can pull anything off.

I usually tried to do more than simple books and present charts and graphs to flesh out the picture. Most ignored anything like this.

parsy, who got so frustrated, he evolved into a higher life form