10 Defining Moments in Business in 2012

With the new year underway, you may have an urge to just put your head down and plow forward- especially if 2012 didn’t treat you or your business so kindly. But, one of the biggest mistakes that we on a societal level tend to make is that we fail to apply the lessons of the past (even the recent past) to our present and future. The result is that we can make fatal errors in judgment and behavior that could have easily been prevented. Our desire to move on only trips us up later on.

That said, here are ten defining moments in business that occurred in 2012. Each event represents an important transition or trend that will no doubt shape 2013, and as such, should be kept in mind as we head into the new year.

1. Big banks settle on mortgage falsification reports. In February of 2012, 17 of the biggest banks in the US, including Bank of America, HSBC, and Morgan Stanley, collectively agreed to pay $25 billion to settle allegations by state and federal officials that they used falsified documents to evict homeowners facing foreclosure. Many critics of the deal pointed out, however, that the real perpetrators of the mortgage meltdown were basically getting off scot free, paving the way for some other, future financial crisis.

2. The fateful Facebook IPO fail. One of the most ballyhooed tech IPO’s of the decade, ended in a colossal fail. The stock’s May offering was marred by technical glitches and chaotic trading, but that was just the start of the stock’s woes in 2012. The company’s share prices plummeted after its $38 debut, trading below $20 in August. The stock has remained well below its IPO throughout the year. Industry analysts claim that the stock’s poor performance, coupled with a string of high profile tech let-downs (think Groupon, Zynga, etc) has spooked VC investors, making it more difficult for Silicon Valley startups to get financial backing.

3. Global economic slowdown. With all the turmoil among the European Union and a tepid U.S. economic recovery, strong growth among developing countries had been a persistent bright spot. But that began to change as emerging markets like China faced a manufacturing slowdown and India began its battle with inflation. In July, the International Monetary Fund lowered its forecasts for global growth further fueling fears of a word-wide economic slowdown.

4. Natural disasters. The U.S. saw a one-two punch of natural disasters this year. In the hot summer months, drought gripped the Corn Belt and more than half the United States, reaching proportions not seen in more than 50 years. Rising crop prices and a drop in farm inventories have cost the economy an estimated $50 billion. Later this past year, Hurricane Sandy whipped through the eastern seaboard, devastating coastal New Jersey and submerging lower Manhattan in several feet of water. Both disasters have raised serious issues about climate change and emergency preparations.

5. Quantitative easing continues. The Federal Reserve announced a third round of quantitative easing in September to stimulate the economy and reduce unemployment. For the first time, it made a definitive promise that it would keep interest rates ultra-low even if the economy starts to recover. Critics of the plan claim that the move only helps the big corporations and banks pad their coffers- since they can borrow money for next to no cost. Consumers, however, get little return on their savings (unless they invest in the volatile stock market), and the majority of small business owners, still struggling with sluggish sales, have little need for cheap financing. In short, the plan is hurting the economy, not helping it.

6. Standing at the edge of the Fiscal Cliff. Right after President Obama was reelected, the nation turned its attention to the series of year-end tax hikes and automatic spending cuts known as the “fiscal cliff.” Though a last minute bipartisan “solution” was reached shortly after the close of 2012, the legislation effectively postpones our free fall of the fiscal cliff and makes it a de facto issue in 2013.

7. Black Thursday. This year, retailers broke with the tradition of giving thanks and eating turkey to offer bargain hunters a head start on their holiday shopping. Walmart, Target and other stores had shoppers lining up on Thanksgiving night to take advantage of Black Friday sales. Though workers staged protests, and many consumer finance experts pointed out that most of these Black Friday sales would be available later in the shopping season, the shopping continued in spite of it.

8. Same day delivery. The past year also saw the push (and execution) of same day delivery services by mega-retailers, Amazon, Walmart, and even eBay. The move, puts greater pressure on small local retailers and other small businesses to offer their customers a reason to shop at their establishments.

 

 

9. Small business owner pessimism. The whole past year has been characterized by a declining small business optimism. With issues like the fiscal cliff, health care reform, increasing competition from big businesses, and a weak economy, it’s little wonder why.

 

 


10. U.S unemployment rate finally drops
. The U.S. unemployment rate dropped to its lowest point in nearly four years in September, reaching 7.8 percent. This year also saw a modest growth in wages earned. So far, the employment numbers have held steady through the year’s end.

 

5 Resolutions for Small Business Owners in 2013

The new year hasn’t even arrived, yet many small business owners may be wishing the clocks would go backwards. With big issues such as the Fiscal Cliff and the early stages of health care reform slated to go into effect on January 1st, there’s little wonder why.

But even if 2013 looks a bit rough from the outside, it doesn’t mean small business owners should be sticking their heads in the sand. If you are running a small business heading into the new year, here are five resolutions that you can make to keep your business on course:

1. Work on focus. If there is one thing that small business owners should have learned from the 2012, it’s that bigger businesses are pulling out all the stops when it comes to acting like a small business. This is evinced by the push for personalized service and same day delivery. To survive, small businesses have to be hyper-focused on their niche market, only providing the products and services they can truly deliver with quality.

2. Work those networks. Another big resolution for 2013, is to work on partnering with other businesses and professionals. Now more than ever, small businesses need to pool their resources in order to be more competitive, more relevant, and more profitable. This goes for businesses based both online and off-line. Even if you are not a natural when it comes to networking, in the new year the success of your business may depend on how well you can reach out to other business owners.

3. Work your customer service. One of the biggest assets a small business can have these days is also one of its most elusive: customer loyalty. I just saw an article at Business Insider about a Zappos customer service representative who spent a mind boggling 9 hours and 37 minutes (!) with a customer on the phone (they weren’t talking business the whole time… but, still…). Now, obviously you can’t afford to go that extreme with your customer service, but you can make a commitment to revamp some of your customer loyalty programs in 2013, and try to improve your overall customer service experience.

4. Work your online reputation. In these heady days of social media, a business’ reputation can literally be made or broken in an instant. The range and speed with which information is exchanged today is unprecedented. Another commitment for 2013, is to improve your online reputation. This includes: staying in touch with what people are saying about you online, ensuring that you business’ profile information is accurate, up-to-date, and complete, and in short, ensuring that your business is being properly represented.

5. Work your cash flow. Last, but certainly not least, is to re-evaluate how you manage your cash flow. If you haven’t yet learned your lesson from the chronic economic difficulty or any of the natural disasters that have happened in 2012, then make a commitment to incorporate strategies, such as creating an emergency fund, and using financing tools, such as a business cash advance or accounts receivables financing, to help you be prepared for emergency expenses and ultimately smooth out the flow of working capital in your business.

In short, as a small business owner, if you make it a point to truly focus on any of the areas mentioned above, then it may be just what you need to get your head out of the sand and paint a brighter picture in 2013.

Obama Held on to the Presidency… What Does This Mean for Small Business?

Now that the presidential election is over, and the dust has settled a bit, we are left to speculate about what the next four years will bring. Whether or not you supported President Obama, it is hard to deny the uncertainty that still reigns supreme. There is much ado about fiscal policy, about staggering national debt, about income inequality, about homeland security, about natural disasters, about the world economy, and our ability as a individuals and as a nation to cope with it all.

For the owners of America’s smallest businesses, this chronic uncertainty has been bleeding into daily operations and management mindset, making an indelible impression on overall optimism and economic outlook, and in short, has changed the way small business owners do business.

Has anything changed now that the presidency has been set? Here is a rundown of some of the key issues affecting small business owners:

  • Obama’s re-election took away the uncertainty over The Affordable Care Act or “Obamacare” as it’s called, the President’s auspicious healthcare overhaul which is set to go into effect in 2014. It’s a legislative reality that business owners with 50 or more employees are going to have to deal with. (Businesses with fewer than 50 employees are exempt.) But, how all these changes will affect the healthcare industry “at the ground level” is still unclear, and even with all the checks in place, healthcare could still end up costing small business owners more.
  • The election process only deepened the partisan divide over taxes and fiscal policy. At issue is the imposing fiscal cliff, which is slated to go into effect in January 2013, barring any Congressional action. Going over the cliff will mean some $7 trillion worth of hard to swallow tax increases and spending cuts over the next decade. Here’s a brief summary of some of the key changes:

-Several Bush-era tax breaks are set to expire resulting in a 3 percent increase on individual income tax rates in 2013. Those making more than $388,350 a year, will see a 4.6 percent increase.

-Payroll taxes will increase to 6.2 percent from 4.2 percent. This will be particularly hard for small business owners who are both owners and employees of their businesses.

-The tax break for capital purchases will end. Under Section 179, if you purchased equipment for your business this year, you can deduct half the cost on your taxes right away and it counts as depreciation. In 2013, the depreciation rules will revert to their normal setup allowing you to only deduct the cost of equipment gradually, over the life of the asset.

-The Alternative Minimum Tax (AMT) may tax many middle class Americans, including small businesses. The intention of the AMT is to prevent wealthy individuals from using numerous deductions to significantly drive down their tax obligations so that they are effectively paying too little. But the threshold for those who are subject to the AMT is currently set at $150,000, an amount that will likely affect many middle class workers and small business owners. AMT also affects LLCs, partnerships, and S Corporations.

  • Obama’s re-election also ensures a continuation of quantitative easing- the Federal Reserve’s attempt at reviving the economy by artificially keeping interest rates exceptionally low. Why is this important to small business owners? The critics of quantitative easing, which are not surprisingly significantly Republican, point out that these policies have not helped the economy. Which ever way you hold, the Fed’s moves have an impact on inflation and the overall strength of the dollar- and that is something that can affect many small businesses, especially those who are involved in global purchasing or sales.

In short, though the question of who the next president will be has been answered, there still remain enough questions to keep small business owners” busy” for a while to come.

Will Your Small Business Fall off the Fiscal Cliff in 2013?

According to several recent surveys, such as NFIB Small Business Optimism report mentioned in my previous post and the U.S. Chamber of Commerce Q2 Small Business Study, small business owners are currently concerned about their tax requirements, a situation that has been exacerbated by the fact that the economy remains listless despite all the stimulus that has come its way.

But as we head towards the second half of the year, a greater tax specter looms large. This is the so called “fiscal cliff”- a challenging collection of tax breaks that will expire at the end of 2012, combined with a set of new taxes that will be going into effect in 2013. According to the Chamber of Commerce survey, a full 90% of small business owners are worried about the impact of these impending tax changes will have.

Barring Congressional action, here are some of the most pivotal tax changes waiting for us at the end of this year:

  • Several Bush-era tax breaks are set to expire resulting in a 3 percent increase on individual income tax rates in 2013. Those making more than $388,350 a year, will see a 4.6 percent increase.
  • Payroll taxes will increase to 6.2 percent from 4.2 percent. This will be particularly hard for small business owners who are both owners and employees of their businesses.
  • The tax break for capital purchases will end. Under Section 179, if you purchased equipment for your business this year, you can deduct half the cost on your taxes right away and it counts as depreciation. In 2013, the depreciation rules will revert to their normal setup allowing you to only deduct the cost of equipment gradually, over the life of the asset.
  • The Alternative Minimum Tax (AMT) may tax many middle class Americans, including small businesses. The intention of the AMT is to prevent wealthy individuals from using numerous deductions to significantly drive down their tax obligations so that they are effectively paying too little. But the threshold for those who are subject to the AMT is currently set at $150,000, an amount that will likely affect many middle class workers and small business owners. AMT also affects LLCs, partnerships, and S Corporations.

These tax changes combined with our difficult economy may be a one-two punch that will effectively knock out many small businesses- and that doesn’t seem like such a good move for our country.