Strassel: Big Business Sells Out Small Business – WSJ.com


Here’s a great column from the WSJ about how Big Business has sold you out.

Strassel: Big Business Sells Out Small Business – WSJ.com.

I’ll have an update soon about how you can properly prepare your business for the fiscal cliff.

 

 

Starting a Small Business – Crowdfunding


Quickly, Congress passed the JOBS Act this year with a provision allowing companies to solicit investments from “unsophisticated” investors.  Previously, solicitations could only be made to high net worth investors.  The provisions were to become effective on January 1, 2013 pending rules to be written by the SEC.

The SEC has not written the rules yet and probably won’t by January 1.  (I don’t know if that is a permanent link.)  This delays everyone and everything related to crowdfunding.  DISCLOSURE – I plan both selling crowdfunded investments and providing consulting to businesses wanting crowdfunding.  I believe it will help boost the economy.

PROS:  Small businesses requiring up to $1,000,000 in capital will have a new source for funds.  Owners can cash out of companies without having to sell their entire interest.  Ordinary investors can find new revenue streams and investment opportunities.

CONS:  There will probably be a lot of con-men involved in crowdfunding.  Most business ventures fail and ordinary investors may not be able to handle the failure and loss of investment.  Congress will probably overturn the law once some crying Grandma appears on 60 Minutes with a sob story about losing her life savings.

Obviously, I’m in support of the law.  I signed a petition here in support of it.  I live in a depressed area that could use a capital infusion.  I’m sure there are plenty of local businesses that would get a boost from crowdfunding.  There are also plenty of local investors looking for a better rate of return than CDs and Money Market accounts.  There will be plenty of hucksters (see .com bust and real estate bust).  More importantly, there are plenty of good businesses and good business ideas that will benefit from this law.

 

Right to Work for Starting a Small Business


This is not a political post.  As I’ve said before, unions are great, as long as you already have a job.  The recent change in Michigan to a right to work state will not hurt the private sector unions in the short-term and may help them in the long-term.  This is a decent description of right to work.  Basically, the law means that you don’t have to join a union to be eligible for a job.  Michigan’s economy could use a boost.  See ratings here.  They also have one of the highest unemployment rates in the country (right behind my beloved CT.)

Right to work protection will help Michigan attract more business investment.  Unions are one more hassle for a business to consider when choosing a location.  My personal experience with unions is mixed.  Some unions understand the need for flexibility while others shoot themselves in the foot, thigh and waist by being inflexible.  But, in general, capital tends to flow to businesses that aren’t unionized.    This means that investors will view Michigan’s business climate as more friendly.  Companies involved in the auto industry may consider relocating closer to their customers in Michigan.  Business may also move out of non-right to work states like Illinois and Ohio and into Michigan.  Indiana and Wisconsin have had some success in poaching businesses from Illinois.

Increased business in Michigan will be good for both union and non-union employees.  Union shops can stay union and continue to collectively bargain for wages, benefits, work rules, etc.  Non-union shops can start or expand without the threat of the additional time and expense of negotiating with unions.

The result will be measured by a decrease in the unemployment rate in Michigan and increase in its’ GDP.  As the law is effective on April 1, 2003, it may take until Spring 2015 to demonstrate any success or failure.

 

 

Starting a small business – Social Entrepreneur


“I want to make the world a better place.”  “I only buy Fair Trade products.”  “I want to contribute X amount of my profits to XYZ charity.”  I am a newbie to these kinds of businesses.  As a misanthropic curmudgeon, I try to maintain an open, however skeptical, mind to these business models.

If you’re interested in this business model, check out lifeoutofthebox.  This is a young couple in Nicaragua selling handmade goods and suing some of their profits to supports schools in the country.  They are very passionate about their mission and I wish them the best.  I’m hoping that they start selling belts soon.

Listen, businesses run on capital (which can be synonymous with cash).  No capital means out of business.  I like to believe that every business, in its own way, is trying to make the world a better place.  But you MUST make a profit to stay in business (or you’re just a private foundation giving all your money away). Profit is just an addition to capital measured over time – like a space time continuum.  Profits are not bad or evil.  They are only a measure of success for your business.

Businesses must be run in perpetuity and you must plan for that perpetuity.  Just because you had a profit in March doesn’t mean you’ll have a profit in April or ever again.  That’s why profits are important.  They guarantee the continuity of your enterprise.

At some point, I’ll do a post on not-for-profits and how they are generally a bad idea.  I believe it is far better to generate a profit through hard work and then freely give that profit, or a portion of it, to a charity.  I’ll call this the Carnegie method.  So, by all means create your social entrepreneurship but run it like a business and plan on making a profit.  Add a line for charity in your budget and hold yourself to it.  Or, amass as much wealth as possible and give it all away like Andrew Carnegie did.

 

 

Starting a small business – Marijuana


A few more states legalized possession of marijuana.  Check out this map – I can’t verify the information.  But it looks like legalization is gaining momentum.  Does this mean that you could start a marijuana business?

Farming sucks.  You need arable land, water, seed, fertilization, a strong back, hanging barns and security.  (I’m basing this on local knowledge of tobacco farms.)  You need to know what you’re doing and do it everyday.  Once, you grow it, how would you distribute it – straight to consumers, through dispensaries, etc?  Farming sucks – 20 hours a day of work and you can’t tell anyone about it.

Manufacture supplies and peripherals?  Do you know anything about making paper, blowing glass or making pottery?  It might not be enough to make a profitable go.  You’ll find too much competition on paper unless you can make organic, bleach free, etc paper.  How will you distribute the products?  Potentially, you could start a web based store for peripherals but you’ll find lots of competition.

Regulation will eventually kill you.  Shortly after legalization will come regulation.  (If it makes money, tax it.  If it keeps making money, regulate it.)  We have a huge, permanent bureaucracy in this country that is always looking to expand.  Do you think the FDA and ATFE and related agencies won’t get involved?  Do you want to compete against Pfizer or Monsanto (probably not)?

How about downstream?  Could there be pot specific munchies that you can make and distribute, especially with Hostess’ demise.  How about providing a safe place for people to consume their product?  You could teach how-to classes for wannabes and newbies.

I don’t see it as a winner unless you find a niche.  As it becomes more mainstream, the Big Boys will enter and crush you.  Good luck.

 

Strategy for innovation – Society and Culture – AEI


Strategy for innovation – Society and Culture – AEI.

I think this is all crap.  Innovation shouldn’t be affected by government.  While I agree that government should get out of the way, I believe that innovation needs more private capital.

Let’s go outside the box.  Let’s introduce a 3% annual wealth tax on all accumulated wealth over $10 million.  At the same time introduce a new R&D wealth tax credit that offsets the new wealth tax dollar for dollar with each dollar invested in R&D, software development excluded.

Private capital has been misallocated for decades now.  Job growth and real GDP growth will depend on actual, tangible production.

 

Free Business Plan Review Offer


I must be crazy.  On April 16th, I posted an offer on Craigslist for a free business plan review.  I wouldn’t write it for you but give you creative criticism from the point of view of a potential investor or loan officer while also testing the feasibility of the plan.  There were NO takers.  I didn’t promote it and Northwest CT doesn’t get much traffic.

So, as part of my goal to help 1000 businesses in 2013, I’m reopening my offer to review your business plan for free.  I will sign any confidentiality agreement that you’d like.  I will review it for both feasibility – do the numbers make sense – and the likelihood of getting funding for your business.

This isn’t an offer to write a plan.  It isn’t an offer for funding.  I just want to help you be successful.  I won’t try yo sell you anything.  Email me at 2013smbizsuccess@gmail.com for more info.