Small business owners “nervous” about looming fiscal cliff

Eric Blinderman, who had to shut down his two upscale New York restaurants for a week in the aftermath of Hurricane Sandy, said the approaching fiscal cliff could mean a “double whammy” for his business heading into the busy holiday season.

With a package of $500 billion in tax increases and spending cuts set to come into effect on January 1 if President Obama and Congress fail to agree on an extension or reach an alternate deal, small business owners like Blinderman will be hit with additional costs that could seriously impact their bottom line and ability to grow.

“That uncertainty is what leaves me so nervous,” said Blinderman, who operates two restaurants, both named Mas, in Manhattan’s affluent West Village that employ about 100 people.

Blinderman relied on a pair of Small Business Administration (SBA) loans to open his restaurants and wants to launch a third location, but said some of the projected cuts to the SBA’s budget may derail that.

“If we don’t sidestep the fiscal cliff then I won’t be able to expand,” he said, referring to the $65 billion in federal spending cuts that will be automatically triggered as a result of the Budget Control Act – a last-minute deficit-reduction deal reached by Obama and the Republican-led Congress in August 2011.

“All of these SBA lending programs and related issues will be impacted negatively,” said Blinderman, adding: “if this had occurred in 2010 or 2004 I wouldn’t be a small business owner and neither of my restaurants would exist.”

Blinderman’s concerns are supported by the findings from a new national poll released this week by the Small Business Majority, a Washington, D.C.-based small business advocacy group. The telephone poll of 500 small business owners, conducted over a two-week period from September 27 to October 12, showed more than 60 percent of respondents are anxious about the potential impact of spending cuts on the SBA, military, infrastructure and government contractors.

“The vast majority of small business owners are familiar with the basic situation,” said SBM founder and CEO John Arrensmeyer. “The concern is how much of this is going to affect small businesses and job creation.”

Small business owners are most worried about the impact of tax increases on their employees and customers. A 2-percent payroll tax cut Obama negotiated with Congress in 2010 when the Bush-era tax cuts were extended is due to expire, ending what amounts to a $1,000 income boost to many middle class taxpayers.

Also beginning in 2013, 28 million Americans could be subjected to the alternative minimum tax (AMT), a levy initially created in 1969 as a “millionaire’s tax” but now would apply to people with incomes as low as $30,000.

The SMB poll showed 80 percent of small business owners are concerned about a potential increase in the number of households facing the AMT, which Arrensmeyer said would entail a loss of as much as $2,800 per household.

The survey also revealed 75 percent of respondents favored the elimination of tax loopholes that favor large corporations and nearly 60 percent supported raising capital gains tax to 20 percent for the wealthiest 2 percent, which includes people earning above $250,000 a year.

Arrensmeyer said that applied to less than 3 percent of the small business owners who participated in the poll, of which 47 percent identified themselves as Republicans, versus 35 percent Democrat, 8 percent independent and 10 percent who chose “other” or didn’t respond.

“My customers are squarely in the middle class,” said Mike Brey, owner of Fairfax, Virginia-based toy store chain Hobby Works. “We got crunched pretty hard during the recession. We don’t want to be looking at another ‘pothole’ here as we recover from what we just went through.”

Brey, who operates five stores in Virginia and Maryland that bring in about $5 million in annual revenues, is in the process of adding two more locations. He said political dithering over the deficit could derail his expansion plans as the amount of tax exemptions he can employ could be significantly reduced come January.

“It’s extraordinarily difficult when a major portion of your tax planning is up in the air,” confessed Brey, who added it impacts his ability to get bank loans. “If you’re expected to lose a significant portion of your ability to capitalize expenses in the first year, that definitely affects your projections and your planning for how you’re going to move forward.”

Most small business owners just want their political leaders to come to some sort of resolution. The SMB poll found 53 percent want Congress and the president to make job growth their top priority, as opposed to 42 percent who want them to focus on a plan to reduce the deficit.

Larry Lang, chief executive for Quorum, a Silicon Valley-based technology company that develops cloud-based software solutions for businesses, doesn’t anticipate there will be a resolution before the end-of-the-year deadline.

“Sadly politicians, like undisciplined school children, tend to leave their homework to the 11th hour,” said Lang, who nevertheless plans to grow Quorum’s 30-person staff by as much as “50 percent” in the next year.

“Sticking to our knitting, life goes on,” he added. “Small and medium-sized businesses need to do what they need to do.”

Article source :http://uk.reuters.com

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us On Facebook

Loans, optimism scarce for most small businesses

For entrepreneur Maurice Lopes, the plight of today’s small business owner is epitomized by a cartoon that depicts a bunch of people staring through the window of a bank, while a policeman swings a club to try to get them to disperse.

Lopes said the punch line read: “What’s the matter? Never seen somebody get a loan before?”

All joking aside, Lopes confessed it’s not a pretty picture for startups and small firms trying to raise what he called “gap funding” of less than $500,000 in the current economy.

Earlier this year Lopes, a serial entrepreneur who also runs catering and dog-walking businesses, launched EarlyShares.com crowdfunding platform to try to fill the funding void. The site stemmed from his own frustration with being turned down for a $500,000 loan to expand his three-year-old Miami-area catering company – Kiddie Catering – because his bank needed him to show two years of consecutive profits.

“Banks are not lending to small businesses to start or expand,” said Lopes, whose catering business employs 25 people and is on track to pull in revenues of $400,000 this year. “A lot of commercial real estate transactions are getting SBA (Small Business Administration) loans, but not to small businesses for working capital.”

EarlyShares is similar to Kickstarter, but with one major difference. “We don’t have projects, we have companies,” said Lopes, who has signed up 1,500 small businesses and more than 30,000 investors since President Barrack Obama had the crowdfunding portion of his Jobs Act legislation approved last spring.

The Securities and Exchange Commission (SEC) still has to finalize the regulations around it, which Lopes expects to be done by the end of March. Until that time, Lopes said they are blocked by “a Chinese wall,” because his company is “not allowed to show general unaccredited investors investment opportunities.”

EarlyShares acts like a funding matchmaker, pairing companies seeking between $100,000 to $500,000 with investors, who can lend them as little as $100 in return for a 5 or 6 percent dividend.

For the purposes of getting more bang for their buck, Lopes encourages investors to spread the money around in small increments. “Don’t put $2,000 in one company, put $100 in 20 companies, because 50 percent of them might fail and you want to be able to have a return.”

While funding remains scarce at the lower levels, SBA lending for the top 13 U.S. banks grew by $11 billion from September 2011 to September 2012.

Wells Fargo & Company (NYSE:WFC), the country’s largest lender of SBA 7(a) loans, last month reported the bank topped the $1 billion total for the second-straight year – the first time it has ever done so.

While it acknowledged most of those loans were for “rent replacement” as small business owners borrowed money to buy the buildings that house their companies, Wells Fargo’s SBA lending head Dave Rader said the average loan size was $391,000.

Rader also said he’s seeing “savvy borrowers with better financial statements.”

However it’s not all roses. A new Wells Fargo poll showed small business owners are feeling extremely uncertain about the economy in the wake of the impending fiscal cliff and Obama’s election win, according to the bank’s head of small business lending Marc Bernstein.

“The striking change has occurred in the future expectations index, where we’ve seen the biggest decline in years,” admitted Bernstein. “That’s primarily related to people’s anxiety about the whole fiscal cliff issue and the uncertainty around Washington right now.”

The Wells Fargo/Gallup Small Business Index fell 28 points, from a positive reading of 17 to negative 11 in the post-election survey of 607 small business owners conducted November 12-16.

Bernstein said the survey results could also have been negatively impacted by the stock market slump that accompanied the election results, but described the quarter-to-quarter drop as “dramatic.”

One of the most concerning areas of the poll was in regards to the hiring expectations of small business owners over the next 12 months. About 20 percent of respondents said they intended to decrease the number of jobs at their companies in the next year – the largest percentage in the survey’s nine-year history.

Additionally, nearly 30 percent of business owners expect lower revenues in 2013, up 11 points from the prior reading and the highest percentage of small businesses expecting decreasing revenues since 2009.

Bernstein said if the debt-deal talks in Washington continue unresolved and fiscal fears spillover into the New Year, then Wells Fargo could start to see a reduction in the number of small business loans.

“If the decline in revenues occurs that people worried about in here, I would expect to see some poor performance.”

Article source :http://uk.reuters.com

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us On Facebook

Entrepreneur, VC offers shortcuts to help startups be more successful

Suggesting there are shortcuts entrepreneurs can take to improve their chances of success would appear to refute Malcolm Gladwell’s popular “10,000 hours” theory.

But instead of picking a fight with the “Outliers” author, entrepreneur and fund manager Mark Hopkins is just trying to be provocative to get people to pick up his own book: “Shortcut to Prosperity: 10 Entrepreneurial Habits and a Roadmap For An Exceptional Career”.

“I’m not at all refuting Gladwell’s 10,000 hours,” confessed Hopkins, 53, who actually references Gladwell in the book. “The shortcut is really a way to get people to pick up the book and for me to say: ’If you do these things then you have a good shot at it, but it’s going to be a lot of work.’”

As far as the 10,000 hours goes, Hopkins has put in his time as an entrepreneur. After a career with Hewlett-Packard (NYSE:HPQ), Hopkins started his own medical device manufacturing company – Peak Industries – in 1996 and sold it nearly a decade later in 2004 for $44 million to Delphi (NYSE:DPH).

After that success, Hopkins, who describes himself as an “operations guy,” was looking to share his knowledge with other entrepreneurs and started up his own Denver, Colorado-based private equity firm – Crescendo Capital Partners.

“The motivation there was to continue to be involved in small businesses that we thought we could help,” said Hopkins, who targets companies with market capitalizations of $20 million or less in the health services industry.

Since starting the firm five years ago, Hopkins has switched from early-stage companies to more mature businesses: “We’re taking larger positions in small, boring, mature companies that we think we can help grow and operate better.”

He said one of the most important things successful companies share is what he refers to as “creative tension,” which emanates from founders who have a clear vision about where they are and where you want to be.

“Any entity that doesn’t have that clearly in mind is going to be wandering in the wilderness.”

The following is an abridged version of the conversation between Hopkins and Reuters Small Business:

What are some key takeaways for entrepreneurs from your experience and from your book?

The most fundamental thing about successful startups has to do with people. Startups only survive if they do something better, faster and cheaper than the other guys that are out there. The best indicator of whether you are able to do that or not, is the strength of the people you’re able to hire and how well they work together as a team. Do what you have to do to get the best people on the team and then use trust to cement their relationship. Teams that trust each other way outperform teams that don’t.

Every startup has a core group of leaders who are going to make great sacrifice and spend an inordinate amount of time with each other to make an organization a success. Choose them wisely. A good partner means someone who shares your values, balances your strengths, will work as hard as you do and is fun to be around. If you can do those things, you’ve got a wonderful opportunity to be successful.

Where do you see private equity right now and where it’s heading?

I see two different worlds in private equity. I see the really large private equity entities in the world – the multi-billion-dollar companies that are doing multi-billion-dollar deals – and that’s all about asset utilization and somebody having a better way to utilize assets that are captured in a big company. That’s not the world I play in. I play in the world that makes much smaller investments in arenas that we’re familiar with where it’s pretty clear to us how to operate those companies better.

I’m pretty bullish about private equity, because I always think there will be companies that are under-utilizing their assets. The amounts of leverage you’ll be able to attract through debt is going to be a lot different going forward than it has in the past, but that’s not necessarily a bad thing. It puts more of a premium on operating, which is more fundamentally helpful to the company.

A lot of private equity firms have been pretty outspoken about where they sit on the whole fiscal cliff debate. What’s your take on it?

I have a pretty moderate take on it. We’ve got spending problems that we fundamentally have to understand and begin to take actions to address. On the other hand we are historically gathering revenues that are under what it takes as a percentage of GDP to run our country the way we want to run it. We need both parties to come together. Somebody, or some group of people, has got to stand up. I listened to Erskine Bowles (Democratic co-chair of President Obama’s National Commission on Fiscal Responsibility and Reform with Republican Senator Alan Simpson) on a call the other day and was super impressed – he’s a Democrat I could believe in. I’ve heard Senator Simpson talk and I can say the same thing about him. If somebody would embrace the recommendations from a balanced set of knowledgeable guys like that, I think we can get this thing done.

Article source :http://uk.reuters.com

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us On Facebook

Small businesses face holiday expense filing crunch

While many of us are making merry, it’s hardly the most wonderful time of the year for the accounting staffs at many small businesses.

A rush by employees to submit their expense claims so they can be reimbursed before the holidays, makes today the busiest expense-filing day of the year, according to data from online accounting services firm Concur (NASDAQ: CNQR).

New Year new Passion 

On this day U.S. small businesses will process more than twice as many expense reports as the daily average. That’s a lot of unhappy accountants.

Putting off those expenses has a whole host of repercussions, including paying more money in federal and state taxes.

“It’s like sitting in a car and letting someone drive you down the Autobahn going 80 miles an hour with their eyes are closed,” said Nicole Fende, a financial consultant and president of the Small Business Finance Center. “You’re going to crash and it’s going to be bad.”

Fende added that every dollar not expensed costs a business roughly $1.35 in taxes. That figure is derived from adding up the 15 percent in Federal Insurance Contributions Act (FICA) taxes businesses pay to cover Medicare and Social Security costs, and the average 20 percent due in state and federal income taxes.

“If you have a dollar of income and you’re not offsetting it with a dollar of expense, the government will tax it at your effective tax rate,” said Fende, who added there are ways small businesses and self-employed individuals can mitigate this crunch.

Like we do with our children, Fende said offering a reward, or treat, is a good way to get employees to do something they don’t want to do, like filing boring expense reports.

For self-employed individuals, giving yourself a new book or even just a chocolate after the task is completed can make you “more likely to do it next time you’re required.”

If that doesn’t work the Web is full of free and paid services that small business owners can use to outsource the pain of accounting.

Concur offers subscribers the ability to take pictures of receipts with their iPhone and Android devices and submit them electronically, allowing employees to toss away their paper copies.

“That’s helped us to get rid of a whole lot of filing cabinets,” said Christian Metcalfe, co-founder of Seattle, WA-based data analytics startup Context Relevant, which uses Concur for all its accounting needs.

“In the ‘Moneyball’ example, this helps us keep our money on the field and be more efficient in how we’re running our business.”

Metcalfe, whose company is also paid by Concur to organize its data, said no software will eliminate employee procrastination when it comes to filing expense reports on time, but cloud-based services can offset the incidence of paper claims piling up on accountants desks.

Concur, also based in the Seattle area, estimates that inefficient manual expense filing is costing U.S. firms as much as $2 billion annually in additional processing costs.

That calculation is based on a recent study by the Aberdeen Group that showed it costs the average U.S. company $18 to process each expense report. The study also found that cost drops below $8 per report by automating the process through web-based applications.

Xero, a New Zealand-based accounting software firm with more than 110,000 paying customers, also offers the ability to scan receipts by phone and is attempting to get a foothold in the lucrative U.S. small business market.

Jamie Sutherland, who heads Xero’s U.S. operations, said the ability to “knock off” expense reports on the fly from such exotic locations as a cab or airplane makes the process more enjoyable.

“It makes it a little bit more fun and sexy to do expense management.”

However some small business owners remain reticent to try the new technology, preferring to store receipts in a shoebox and hand it over to an actual accountant.

Howie Statland, 41, who sells vintage guitars at New York-based Rivington Guitars, has an iPhone, but has yet to use it to scan a receipt or submit an expense.

“This is the only way I know how right now.”

Article source :http://uk.reuters.com

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us On Facebook