In all the nice-sounding rhetoric out of Washington about stimulus and economic recovery there has been deafening silence about the one historical reality which leads to the economic growth....jobs creation driven by small business.
We have heard about lowering barriers to access the Small Business Administration funding as evidence of real interest in small business. While the SBA loan program is a very important opportunity for some small businesses to access capital through the loan programs, the waiving of certain fees, deferred payments, and some loss carry-forward provisions, I would not view SBA and its programs as a comprehensive solution to ignite the jobs' creation engine called small business.
Here's history's answer to economic recovery. Small business has created more than 75% of all new jobs in the past 20-25 years. SBA is not a major ingredient in the solution to get small business growing and creating jobs.
Perhaps my view is overly simplistic, but I think I speak for a large number of people who are taking risks every month, entering into long term leases, hiring people with a promise of employment, paying health care benefits, and so on. I am part-owner of two service businesses with an employee headcount of just over 35 people. We have cut everywhere we can in hopes of making it through this period. The next cuts, if they are necessary, will be a radical change of our business model. We provide base salaries and health care benefits along with bonus opportunities which I would suggest are above industry standards.
More than 80% of the businesses in our region are "service-providing" and unlike "goods producing" do not have tangible assets. Our assets are the people and limited intellectual property. SBA is really not geared for service businesses. Further, I really don't need or want any stimulus money or a SBA loan.
I do, however, need my local community banker's partnership. For example, we have borrowed on a line of credit, which is guaranteed by the individual partners to operate one of our businesses. For the last year, I had been deeply concerned that the bank was going to call that loan or provide us with renewal terms which were onerous. As business owners we are personally guaranteeing those loans. We have worked hard to pay off the line of credit and we currently have no bank debt. If the bank had called the loan, it could have been devastating. Banking relationships have become unpredictable as the regulators have tightened scrutiny on the small banks forcing more stringent underwriting criteria. In one sense, that is good, but bankers seem terrified by the regulators' shadows.
For the last several years, we have worked hard to build up cash reserves in one of the businesses to stabilize the funds for daily operations. Because this business is an LLC, any moneys left in the company as reserves are taxed as individual income to the partners at the marginal rate. For example, if we try to build a cash reserve of $100,000 per year, we are now paying as individual owners an additional $32,000 plus in federal taxes which apparently is soon going to rise to $39,500. That is a heavy burden on a small business owner(s) to try to create a way to sustain a business and keep your talented employees in difficult times by having operating reserves.
It is good to know I am "rich" by the new standards, but I can tell you there are days when you ask yourself is the risk worth the reward? The combination of federal, state and local governments already take greater than 40%. Isn't that enough? To hear we are going to "tax the rich" really strikes at the heart of those who take the risks to create most of the new jobs.
What have you heard in all the rhetoric to help those who actually create the new jobs? You can hear a pin drop because of the silence.
You may be asking yourself "what can I do?" Write your congressman and senators asking them why there is no real help for small businesses.
Monday, November 16, 2009
Monday, November 2, 2009
Crime & Kids
Several years ago I was asked to chair the capital fund raising campaign for the Boys and Girls Clubs. At first I declined and was later persuaded to lead the effort. I agreed to this leadership role on two conditions which were at first resisted by the leadership and later agreed to when they realized I was not negotiable.
My two conditions were:
1) What is the scope of the problem with the 'at-risk' kids in our community? How many kids; where do they live; and what are their circumstances?
2) Who is doing something about the 'at-risk' kids and how many are being reached on a regular basis?
After several months of study and work, the results were reviewed on a zip code by zip code basis as follows:
1) Between the ages of 5-17, there are approximately 120,000 kids 'at risk'. I later did some further study and determined that in each year for the last ten years live births have been steady at 14,000-15,000 each year in Shelby County and approximately 60% of those children are born into situations and circumstances which place them 'at-risk'.
2) There are approximately 16-20 faith-based and secular organizations in Memphis which devote the focus of their daily mission to serve those children of our community. Boys & Girls Club would be among the leaders serving now almost 10,000 children. Among all the organizations, it is estimated that 40,000-50,000 'at risk' kids are weekly served in a meaningful way.
Further, it is factual based on Boys & Girls Club research that if a child is engaged in the daily program for five years the high school graduation rate of the Boys and Girls Club participants soars from city school's average of 60+/- percent to 95 per cent. Interestingly, I started checking around with the other organizations and found similar anecdotal information about graduation rates.
I later learned and confirmed several facts about the inmates in the Shelby County Jail at 201 Poplar. Approximately 90- 95% of the inmates are African Americans and do not have a high school education. Approximately 70% of those same inmates have some form of learning disability. If you study the school drop out rates among African American males there is a dramatic rise in the drop out rate in middle school where primarily young men get discouraged by their academic failures, have little or no parental support, encouragement, or engagement; and eventually they choose to drop out thereafter landing on the streets with a great likelihood of beginning multiple years inside gangs and interacting within the criminal justice system.
It is a startling fact to realize the State of Connecticut estimates and projects its need for prison beds based on the literacy rate in the fourth grade. There is a correlation with literacy (or lack thereof) with engagement in the criminal justice system.
Is there a solution to crime in Memphis? Education is obviously a key determinant of escaping a life of crime. However, I think we have overlooked another key opportunity to deter crime. I believe a huge step could be taken if we as a community should have the will and develop a community strategy to scale up the existing works of the organizations and agencies which daily touch the lives of ‘at risk’ kids in our town who need a regular opportunity to enter a loving, caring, and encouraging environment which is offered today and everyday in existing organizations such as Boys & Girls Club, Streets, Emmanuel Episcopal Center, Bridges, Memphis Athletic Ministries, Neighborhood Christian Centers and so on.
What is the secret of the success of these organizations? It is clearly evident to me there is a clear correlation between a high school education and avoiding a life of crime. However, what is the secret of these organizations' success? How are these people and organizations, who are not directly educators, able to get kids from the 60% to 90+% high school graduation? I would submit these committed people and organizations they represent become mentors and substitute parents by providing the vision, the encouragement, and accountability for 'at-risk' kids and their families.
My friend, Robie Williams, who is active in Boy Scouts with core city kids emphatically says, 'Boy Scouts don't go to jail!' and apparently neither do many of our core city children who have the opportunity to be engaged in ministries and agencies who care and love them on a regular basis.
My two conditions were:
1) What is the scope of the problem with the 'at-risk' kids in our community? How many kids; where do they live; and what are their circumstances?
2) Who is doing something about the 'at-risk' kids and how many are being reached on a regular basis?
After several months of study and work, the results were reviewed on a zip code by zip code basis as follows:
1) Between the ages of 5-17, there are approximately 120,000 kids 'at risk'. I later did some further study and determined that in each year for the last ten years live births have been steady at 14,000-15,000 each year in Shelby County and approximately 60% of those children are born into situations and circumstances which place them 'at-risk'.
2) There are approximately 16-20 faith-based and secular organizations in Memphis which devote the focus of their daily mission to serve those children of our community. Boys & Girls Club would be among the leaders serving now almost 10,000 children. Among all the organizations, it is estimated that 40,000-50,000 'at risk' kids are weekly served in a meaningful way.
Further, it is factual based on Boys & Girls Club research that if a child is engaged in the daily program for five years the high school graduation rate of the Boys and Girls Club participants soars from city school's average of 60+/- percent to 95 per cent. Interestingly, I started checking around with the other organizations and found similar anecdotal information about graduation rates.
I later learned and confirmed several facts about the inmates in the Shelby County Jail at 201 Poplar. Approximately 90- 95% of the inmates are African Americans and do not have a high school education. Approximately 70% of those same inmates have some form of learning disability. If you study the school drop out rates among African American males there is a dramatic rise in the drop out rate in middle school where primarily young men get discouraged by their academic failures, have little or no parental support, encouragement, or engagement; and eventually they choose to drop out thereafter landing on the streets with a great likelihood of beginning multiple years inside gangs and interacting within the criminal justice system.
It is a startling fact to realize the State of Connecticut estimates and projects its need for prison beds based on the literacy rate in the fourth grade. There is a correlation with literacy (or lack thereof) with engagement in the criminal justice system.
Is there a solution to crime in Memphis? Education is obviously a key determinant of escaping a life of crime. However, I think we have overlooked another key opportunity to deter crime. I believe a huge step could be taken if we as a community should have the will and develop a community strategy to scale up the existing works of the organizations and agencies which daily touch the lives of ‘at risk’ kids in our town who need a regular opportunity to enter a loving, caring, and encouraging environment which is offered today and everyday in existing organizations such as Boys & Girls Club, Streets, Emmanuel Episcopal Center, Bridges, Memphis Athletic Ministries, Neighborhood Christian Centers and so on.
What is the secret of the success of these organizations? It is clearly evident to me there is a clear correlation between a high school education and avoiding a life of crime. However, what is the secret of these organizations' success? How are these people and organizations, who are not directly educators, able to get kids from the 60% to 90+% high school graduation? I would submit these committed people and organizations they represent become mentors and substitute parents by providing the vision, the encouragement, and accountability for 'at-risk' kids and their families.
My friend, Robie Williams, who is active in Boy Scouts with core city kids emphatically says, 'Boy Scouts don't go to jail!' and apparently neither do many of our core city children who have the opportunity to be engaged in ministries and agencies who care and love them on a regular basis.
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