We are huge fans of cloud computing: the use of software that lets you do your business in the "cloud," such that your data exist (securely, ideally!) not on relatively inaccessible hardware but on the Internet--in the "cloud"--in a place where those who you want to access it can. It lets you, the entrepreneur, run your business more cheaply and bring geographically disparate people together on a single project more easily; it can even make your business doings more secure. Numerous folk have identified cloud computing as the future. (Even Microsoft's getting in on the action!)

The most basic example of a cloud computing software is Google's email server, Gmail--this is why we love it so much, along with Google's attendant suite of cloud computing applications such as Google Docs (a word processor), Google Calendar (a scheduler), and Google Reader (an RSS device)--your personalized versions of which all can be shared among as many people as you would like.

As we've said, one concern with cloud computing is the security, which can be scary. Another concern, however, is that the administrator of the cloud can, whether through error or deliberate decision, make the cloud inaccesible to you (or to everyone) on a whim. We've written before about the awful experience that is--gasp!--losing access to your Gmail. So you can perhaps understand why, when TechCrunch reports that Google insists Gmail and its other applications have 99.9% availability--in other words, you can't access them for a cumulative total of about 15 minutes per month --we're left not thrilled at this exceptional record but dreading that .1%.

The post refers to the legendary August Outage, during which all users lost Gmail access for about two hours. (You remember this, right? We know we do.) Apparently, two weeks ago there was another outage that affected far fewer but lasted over a day (shudder). Hence Google's new 99.9% guarantee, extended to Gmail and the rest of its cloud apps. (Although those 15 minutes per month are not necessarily consecutive, and if experience dictates, most of those "outages" last no more than about twenty seconds.)

We should note--Google certainly does--that Gmail has a fraction of the downtime of the email servers of competitors GroupWise, Lotus, and Exchange, all of whom unlike Google have planned downtime in addition to unplanned downtime. Gmail is has one-fourth just the unplanned downtime of Exchange, which is the mail program of this small company.

Still, as TechCrunch puts it: "99.9 percent reliability is nice. But that is not even phone-company reliable. Get back to us when you get to 99.999 percent." Amen.

And the implementation of the $700 billion bailout plan just keeps getting more bizarre. First the money was to buy up toxic mortgage-backed securities, the better to establish a legitimate market price for them and thereby enable banks to offload them for good without having to take bankruptcy-inducing losses while doing so. Then it was to be injected into big banks who could in turn lend it out, the better to unfreeze the credit markets (the subzero credit markets being, by general consensus, the main problem here).

But then we learned that the big banks, with tacit government support, aren't planning on increasing their lending, but rather, again with tacit government support, are planning on using the money to buy up smaller banks. And this has people pissed off. In echo of the equally angry community bankers, the New York Times reports that American Bankers Association President Edward L. Yingling angrily informed Treasury Secretary Henry Paulson in a letter that the plan has made bankers "believe they are being asked—in some cases pressured—to participate in a program they did not want and do not need." Yingling also said he has “deep concerns with the lack of clarity about the program.” That makes two of us (at least).

Regarding the initial $250 billion of government investment, fully half has been set aside for nine of the country's biggest banks--JPMorgan Chase, Bank of America, et al--in set amounts, while the remaining $125 billion is there for the taking for those who ask (and are approved).

A turning point appears to have been what transpired last week with PNC Financial Services, one of the country's largests banks, and National City Bank, a much smaller institution based in Cleveland. Last week, the government approved PNC's request for an injection of $7.7 billion in exchange for preferred share, which is the procedure under which bailout money is invested, while rejecting National City's request for a capital investment. Guess what happened next? PNC bought National City for a bit over $5 billion. These events are being seized upon as an example of how the bailout's implementation has encouraged consolidation, and even as proof positive that this is what the government wants.

The big worry, expressed last week by the community banks and this week by Yingling and others, is the extremely difficult and unfair position into which the injection plan places relatively healthy banks, which are disproportionately the smaller banks who never got in over their heads with leverage and exotic securities in the first place. They can take the money, but then they may seem like they needed it in the first place and are therefore unwise and otherwise struggling; they would also be subject to numerous conditions governing such things as executive pay (which affects the very people who are making this decision!). As Yingling put it to Paulson, “It would make no sense for a well-capitalized bank with solid earnings to agree to a program which would greatly lower the value of its stock."

Or a smaller bank can reject the money but then be put at a capital disadvantage to those banks who do take the money, which can hurt their business or even lead to their being bought--just ask National City.

Something needs to be done so that the National Citys--the smart, prudent, small banks who are weathering the storm just fine--aren't all of a sudden subject to acquisition and consolidation just because a bunch of the bigger banks are flush with government money to do whatever they want with.

MSNBC talked to two entrepreneurs, who have some very sound thoughts on how you can run your business. We won't give away what the potato chip rule is, except to say that it has to do with the gap between marketing and product development. As for one entrepreneur's admonition that "cash is king": well, our very own Michael Taylor eloquently made that point two months ago. Check it out.

It's that day. (Should your employees have time off? Here's your answer.) This election has created unprecedented excitement, and there is a chance turnout will be record-high, so chances are you've voted anyway. But really, make sure you go vote. (You can vote however you like!)

As of last month it looked like more small business owners--a bloc thought to represent 15% of registered voters--will vote for Sen. John McCain than for Sen. Obama, which is to be expected among a constituency that generally tends to favor Republicans over Democrats (in fact, it is Obama, not McCain, who is overperforming as compared to how these voters think about the two parties). As we reported, a July poll of small business owners also found a not-insignificant lead for Sen. John McCain over Sen. Barack Obama. The survey's more significant finding, however, was that the vast majority of small business owners felt the candidates were not speaking sufficiently and with adequate specificity as to their livelihoods as owners of small businesses.

You'd certainly be forgiven for thinking this has been rectified by the discussion that has surrounded Joe the Plumber, which has dominated the few weeks between Mr. Wurzelbacher's repeated mentions at the third debate and now: Joe is, famously, a prospective small business owner (he offered the hypothetical of his buying a plumbing firm). But the debate surrounding Joe the Plumber has centered more on the candidates' respective personal income tax plans.

Fortunately, our take on the candidates' positions on issues particularly relevant to small business owners is here. And here is how to have your employees discuss (or not) the election.

Now go vote!!! NOW!

Last week 236 of my fellow marketing bloggers and I launched a very ambitious project. The second of its kind, it was a collaborative effort to write a book about the new world of media we are all living in, which the book aptly calls the "Age of Conversation."

Going further, the book engagingly asks with its subtitle, "why don't they get it?" You see, in the world of marketing, there is a temptation to make things just this black and white. You either get it or you don't. The real world, of course, is filled with business people who are skilled at their particular job and using media as much as they can to help promote what they do. But for the most part, that challenge has never really involved having real conversations. It's been about a big creative idea, or a stunt, or strong and consistent messaging. Conversation, on the other hand, has been relegated to focus groups and something that only customer support/services teams should handle. God forbid a marketer should actually have to talk to a customer!

That time is gone.

So when it came time to answer the question of what comes next, Drew McLellan and Gavin Heaton (the editors and creators of the project) did what comes naturally to social media focused marketing pros: they turned to the community. Their first effort (The Age of Conversation) was a unique collaborative book that brought together over 100 marketing minds to all share their thoughts in one place. The proceeds for that book went to a very worthy charity called Variety - The Children's Charity.

Building on that success and answering a call from many to do the project again, Gavin and Drew managed to recruit more than twice as many participants in the second book (including me) and structured it into eight big topics:

* Manifestos
* Keeping Secrets in the Age of Conversation
* Moving from Conversation to Action?
* The Accidental Marketer
* A New Brand of Creative
* My Marketing Tragedy
* Business Model Evolution
* Life in the Conversation Lane

The result is an engaging CONVERSATION about the future of marketing and a collection of voices that every businessperson or marketer should be reading.

My contribution is about something I call the "control myth"--one of the biggest mistaken assumptions in marketing today--and how to avoid making it. I realize that I'm part of the effort and therefore biased, but the collection of articles in AOC2 is quite simply one of the best value of any book you can buy today whether you measure it by CPA (Cost Per Author--I'm hoping to coin a new term here!) or sheer volume of insights. And the icing on the cake is that you can help a worthy cause. None of the authors are getting paid to be part of this effort, but looking at the finished product and quality of the thoughts - I probably would have PAID to be part of it.

Buy Age Of Conversation 2 today!

The group's president and CEO Todd Stottlemyer lays it out here. Suffice to say that many of the items enumerated on the ten-point plan are not exactly Democratic priorities. Indeed, the NFIB is going to be none too pleased if and when congressional Democrats and President-Elect Barack Obama get around to proposing so-called card-check legislation, which would make unionizing much easier than it is now.

Still, there are probably some areas for compromise, and our guess is that, on the Democratic side, you will see that in the area of taxation. The Democratic candidate just won on a platform of keeping the vast, vast majority of the country's income taxes low. This will not be a substantial battleground.

But compromise comes from both sides.

No one expects the NFIB to come out, all of a sudden, in favor of card-check, a signature issue for the group. But we do hope that when Obama and the Congress gets around to tackling our health-care system--which majorities of all political dispositions agree is fundamentally broken--we hope that the NFIB and other small business interest groups will keep an open mind. There are many ways to fix health care. And who said a more aggressive tack isn't good for businesses?

When we talk about credit cards on BizBox, it's usually to describe their use by small business owners, specifically to obtain credit--unfortunately, at high, double-digit and easily-changed rates--in this credit-starved economy. We also talk about credit cards to mention, when appropriate (like now!) that our sponsor is American Express OPEN.

But today we're talking about the other relationship small business owners have with credit cards: the fees they must pay the issuers and the underwriters every time one of their customers uses a card. The fees were easy to forget about during better times. But now, as the New York Times reports, small business owners are lobbying to negotiate those fees as well as to secure a "credit card bill of rights for merchants": a pointed reminder of the fact that, while many approve of a so-called "credit card bill of rights," such a thing is aimed at protecting consumers while merchants are left in the lurch.

The merchant fees, incidentally, are not insubstantial. They average 1.7% of the sale price, plus a pre-set, flat per-transaction fee, plus usually an extra fee to the merchant's bank. And the fees have only been increasing: they were up, total, from $48.58 billion in 2005 to $61.56 billion last year.

A bill that would allow for some negotiation passed the U.S. House Judiciary Committee over the summer, but has received only a lukewarm reception from the small business lobby due to its narrow focus.

May we humbly suggest this is a place where Sen. and President-Elect Barack Obama could make some headway convincing skeptical small business owners that he has their interests at heart, too? He proudly supports a credit card bill of rights, but such a thing is of course directed at protecting consumers, not merchants. Why not make the two things companion priorities? It is all part and parcel of examining the way money is being lent (or not) these days.

And consumers: be kind and try to use cash where possible. It doesn't cost you any extra, but it makes a difference to the merchant. If you do need to use a credit card, make sure that magnetic strip on the back of yours works. You know how sometimes it doesn't, and the salesperson has to enter your number manually? Yup, that costs extra for the merchant, too.

Art reflected life in season 3 of The Sopranos, which was set in and aired during the (in retrospect, and in comparison to what we're facing now, brief and mild) recession that hit in 2000-01. Worried about his bottom line and despondent over the slowing of payments that have been kicked up to him, Tony screams at his crew that "This thing of ours is supposed to be recession-proof." There are certain things that people simply won't give up, the thinking goes, and some of those things--because people need a release valve during tough times; because some people have nasty compulsions--are vices like gambling, drugs, and prostitution, which is how Tony puts his family in that lovely house in Essex County.

We certainly are not advising you to enter such businesses. We don't like breaking the law, we don't like most of what Tony sells in and of themselves, and we'd point out that being in such a business causes Tony no small amount of agita (if not quite as much as that mother of his does). But, as Entrepreneur.com points out, just because you're selling perfectly legal and wholesome products doesn't mean you can't market them with a hint of the risqué. Vice sells; and never more does it sell than during bad times.

The article mostly documents businesses who are in a good and obvious position to do this. A wine-seller, for example, is expecting increased business as people up their booze purchases during bad times. But the article's larger point, again, has to do with marketing: how can you tickle that part of potential customers who are looking for a little, let's call it "safe sin" in their lives, especially in this poor economy? How well you answer that question could have a dramatic effect on your business over the next several months.

Independent Street raises the question of whether the small business vote swung Democratic this time around (certainly the rest of the country's vote did!). To back up a bit: although small business owners, representing an estimated 15% of registered voters, are far too large and diverse a bloc to be solidly and always in one camp or another, they and their lobbies do tend to favor policies, particularly in the realms of taxes, trade, and labor relations, that themselves tend to align with the Republican Party. You can see this in the National Federation of Independent Business's post-election agenda; and we hear that card-check legislation, favored by Democrats and opposed by Republicans, is an especially sore point with the group. And, of course, Joe the Plumber was perhaps Sen. John McCain's most recognizable surrogate in the campaign's final days, casting himself as a sort of Everyentrepreneur (even if he wasn't, really).

Independent Street looks at donation numbers and finds that President-elect Barack Obama substantially outraised McCain, $20.5 million to $13.4 million, among those who listed their occupational industry as "miscellaneous business," a category that Independent Street said would include small business owners. Obviously that's not a hard-and-fast proof of any kind, especially when Obama outraised McCain overall by truly massive proportions. Still, it makes you wonder. As does the president of the National Small Business Association--a nonpartisan outfit--who said yesterday “Overall, we have seen a swing from Republican to Democrat” in this election, according to Independent Street.

Over 52% of all voters went for the Democratic presidential candidate this time around, the highest percentage since 1964, and so you have to consider that even a traditionally (if weakly) Republican group maybe also followed suit in the unprecedented support department. We pointed out that while pre-election surveys among small business owners tended to favor McCain, one also showed that Obama was significantly overperforming as compared to how people feel about the Democratic Party, so it would make sense if it turned out that he picked up a historically high number of entrepreneurs' votes.

Ultimately, though, that's in the past. Obama now has the opportunity to set a comprehensive agenda. We should consider how much he deserves the support of small business owners on its basis.

What do you do when you're a business with not enough cash? Forbes takes a crack at answering this never-more-timely question.

Our favorite suggestions center around the success of the owner of Mirror Lake Inn, a quaint, 84-year-old boutique hotel in Lake Placid, N.Y. Mirror Lake has seen its bookings rise 10% recently, even during a time when most folks have precious little discretionary income to spend. It has accomplished this success, moreover, on its own terms: by taking advantage of its own smallness (now you see why this is our favorite example).

Mirror Lake has figured out that roughly 70% of its business comes either from repeat customers or referrals. Roughly 70% of its business comes, in other words, from the fact that previous visitors have had a good experience, so much that they have been inclined either to come back for more or to recommend it to their friends. So Mirror Lake is big on listening to feedback in order to improve customers' experiences as well as to satisfy individual customers who may be more inclined to return or refer others if they feel they were heard this time around. Every visitor, upon leaving, receives a comment card--postage prepaid!--and is encouraged to send it in; weekly staff meetings open with a reading of the cards. The hotel claims it receives thousands annually.

Another thing Mirror Lake has done is to offer discounts with a twist: instead of docking prices per se, it adds perks on for free: so-called value-added packages. Maybe they will upgrade your room for free if you stay multiple nights, or give you a $50 credit at their spa or one of their restaurants. Discounting is crucial during these times, but these value-added packages may be the wiser way to go about doing so. You're not cutting the price of the baseline service you're offering, and therefore not cutting into your profit margin there; it's much easier to control the costs of the few small perks that you're giving away (in fact, in many cases--such as upgrading a room when they're not at capacity--Mirror Inn's free perks don't really cost them any extra); the fact that you're charging full price for one thing and giving away another makes your math really easy; and your customer is probably going to feel a greater thrill at getting something extra for free rather than getting the same thing for a little bit cheaper. People still want luxury: in fact, they want it more than ever. Value-added packages enable them to get that same feeling of luxury without having to pay too much, so they are ideal.

The strategies Mirror Inn has deployed involve extreme attention and care to customer feedback and great flexibility with pricing and tinkering with the business's profit structure. Which is to say, they involve Mirror Inn's being a small business. How will you use your smallness to your advantage?

Credit cards, as we've reported, aren't just for consumers anymore: increasingly, small business owners willing to use any means necessary to obtain credit have resorted to borrowing money on them. (Disclosure: BizBox's sponsor is American Express OPEN.) The downside to this strategy is that the rates are high (15% or more, typically) and precarious, since the issuer can alter them virtually on a whim. The upside is that there still is fairly abundant credit available from them, as opposed to from, say, bank loans or credit lines, which have been severely constricted as of late.

Or, there was still fairly abundant credit available from credit cards. Recently, according to the Federal Reserve (as reported by The New Entrepreneur), about one-fifth of domestic banks have cut borrowing limits on credit cards even to prime borrowers over the past quarter--that is, even to those whose record of paying back loans is stellar, and who have credit scores reflecting that reliability. This is big, and harrowing, news.

It means, for one thing, that nothing is safe and sacred any more. You can do exactly what you're supposed to--borrow wisely, pay back in a timely fashion--and still be punished. It also means a further tightening of the credit markets (60% of domestic banks cut lending limits to non-prime borrowers over the past quarter, the Fed said), which means rates everywhere will continue to rise. It reflects continued loss of confidence in our economy as a whole, what with 95% of the banks who cut credit limits unsurprisingly saying that their decisions had to do with a worsened outlook and a decreased tolerance for risk.

It's just darn scary, is what we're trying to say.

So what can you do? Well, first, don't take it as a license to care no longer about your credit score: having one above 750 is, ultimately, going to get you cheaper and more credit as long as there is any credit whatsoever; what has changed is the degree to which having a good credit score gives you an advantage, not the existence of an advantage itself. (We tell you how to improve your credit score here.) Obviously, if you can, and you need the extra credit, get a card with one of the banks not slashing credit limits--although be warned that rates will likely be high everywhere.

But also, cut costs and try to stay in as much cash as possible. Our own Michael Taylor reported that "Cash is King" nearly two months ago, at the very outset of the current crisis. Subsequent events and data have underlined that to the utmost.

Our Friday afternoon video is here. It's about how you should roll out new products (or not) during bad times. And also, puppies.

The Small Business Administration Office of Advocacy has released its report for the third quarter of 2008. It contains little news that is new and just as much that is good. We know that the economy contracted .3% in that quarter, signaling the realization of the long-anticipated recession (technically, for a recession you need two consecutive quarters of contraction; anyone care to bet against that next quarter?). The quarterly report notes that the unemployment rate hit 6.1% in September, the highest in five years; it evidently was prepared too early to note that the October unemployment rate hit 6.5%, the highest in fourteen years. The frozen credit markets are old news, as are fears of inflation (although there are some encouraging consumer price numbers here). The report even reprints the dismal results of the National Federation of Independent Business's latest optimism survey, which we covered. So again: more of what we already know. And what we already know is not good.

But the report is worth a gander anyway because of the small business-specific numbers it provides.

Business bankruptcy filings have steadily rose, quarter-by-quarter, this year. Venture investment is in the doldrums in terms of number of deals and amount invested ($7.1 million in the third quarter; compare that to the $30.8 million total in 2007). Other helpful, broad macroeconomic numbers abound. So check it out.

And may we also direct you to the SBA Advocacy Office's new blog, The Small Business Watchdog? You can be sure that it's going on the ol' RSS feed.

We've been trying to show you alternate ways to obtain credit as banks, the traditional, logical source for borrowing money, have had precious little to lend. Yet banks remain a prime place to go to put to work what money your company does have, to manage your money, and even, yes, to try to borrow some. The National Federation of Independent Business provides a useful primer, compiled of several different articles they've published through the years, on how you decide at which institution to conduct your small business's banking, and what to do once you've decided on one.

The NFIB's guidelines for how you should pick a bank involve a long checklist and meticulous investigation. If there is any decision not to treat lightly, it is this one.

Questions to ask yourself of a given bank as you conduct your research:
Does it know you? That is, does it know small businesses, and does it know your particular industry or market niche or what-have-you? (Local community banks are a good bet here.)
Does it offer Small Business Administration-backed loans? 7(a)s and 504s may be down, but they're not out.
How agreeable is its banking policies? Find out about account minimums, the availability of Internet banking, and fees, to say nothing of interest rates.
Can you get an account that is specifically tailored to small businesses? Are its services generally personalized?
Does it seem like it wants your business? Go with your gut on this one. But if a given bank is not enthusiastic about having you as a customer, it is not going to go well.

It seems that fewer small businesses are being sold as of late, but for more money, Inc.com reports. The thinking seems to be that it may be more wise to sit out the most atrocious part of this business cycle and keep a start-up or small business off of the auction block until there are more willing buyers and easier credit for said buyers to obtain in order to complete a transaction.

The first question in the following video addresses this same issue, but from the perspective not of prospective sellers but of prospective buyers. Check it out.

Small business owners are independent, have confidence in their own abilities, and are entrepreneurial. So the results of the recently released 2008 Small Business Annual Retirement Trends (SBART) report, which included the results of a survey in which more than 500 U.S. small business owners partcipated, should come as no surprise.

• 67% said they wished their Social Security dollars would be put automatically into a personal account, such as a 401(k) or an IRA. Only 33% said they wished for a government-managed account.

• 77% said that taxpayers should be responsible for their own retirement, as compared to 23% who said they see it "as a function of government."

• 30% thought Social Security was a "very important" issue during the 2008 presidential campaign, with an additional 45% calling it "somewhat important".

But here’s the rub. According to the report, under 10% of companies with 50 or fewer employees currently offer 401(k) plans. That figure, combined with the survey's results, suggests that there are plenty of small business owners who would prefer a non-government-managed Social Security account who haven't taken advantage of the opportunity to attain just that. There’s still time to do so this year.

Jerry Kalish is founder and President of National Benefit Services, Inc., a Chicago-based employee benefit consulting and administrative firm that serves private-held companies, publicly traded companies, and public sector employers. He blogs at The Retirement Plan Blog and can be reached at jerry@nationalbenefit.com.

Well this seems--emphasis on seems--a step in the right direction. We've complained over and over that a key problem with the $700 billion bailout package is that while the money is ostensibly geared towards unfreezing the credit markets, the bank-recipients of the government capital are under no obligation actually to lend the money out. Not only that: according to some, they seem intent on not lending it out but instead on using it to buy up smaller banks. Not only that: according to some, this is what the Treasury Department wants. Which is all well and good for the country's biggest banks, the nine biggest of whom are already slated to receive the first $125 billion of the capital. It's less good for the community banks, who are relatively fiscally healthy, don't really want to take the money because of what taking the money may say about them, but who are therefore vulnerable to takeover by a bigger bank that is 'roided up on government capital. And it's even less good for the small businesses, who rely on the community banks, and who, more generally, really, really need to be able to borrow money right about now.

Phew. Anyway. The Washington Post reports that the government may be getting its act together after all, coming close to compelling (though ultimately, it will probably end up amounting to quite strong encouragement) recipients to lend that money out and grease the underheated economy.

The compromise among different legislators and federal agencies will probably take the form of a "federal guidance" that urges banks to lend out the money to creditworthy customers. Such a rule isn't as strong as, say, a law, but it does leave banks that don't observe it at risk of sanctions.

We say "compromise" because several agencies--most notably the Treasury Department--truly do want this money to go towards consolidation, a la the recent $5 billion purchase of Cleveland-based National City Bank by PNC Financial Services, which made the deal once it knew it would be flush with over $7 billion in new government capital.

But others felt that the money ought to be put back into the credit markets. The heroes here should be familiar to readers of this blog. They include the Federal Deposit Insurance Corporation, headed by Sheila Bair, whose decisions to raise the limit of fully insured bank accounts from $100,000 to $250,000, among other things, have been the most overtly pro-small business aspects of the whole bailout effort. They also include Sen. Chuck Schumer (D-N.Y.), easily one of the country's ten or so most powerful legislators, who called well over a month ago for the federal government to lend directly to small businesses. Take note: these are the people looking out for you.

What form will the federal guidance take? It's not altogether clear yet. But according to the Post, it will apply to all financial firms--that is, even those who didn't take government cash. It will also address executive compensation (setting universal rules sounds like a good idea, no? that way there wouldn't be an artificial discouragement to taking government capital) and dividend payment (the Bush administration has supported banks using government money in part to pay dividends to shareholders; Democrats have not). The main purpose of the guidance will be to increase lending.

Meanwhile, banks have til Friday to apply to receive government cash. Let's hope by the time the initial $250 billion is invested (which will be over the next few months), it is crystal clear that recipients are expected to lend much of it right back out to the businesses that need it and deserve it.

We've generally taken the view, which is the conventional wisdom, that, to quote the title of one of our posts, "In Hard Times, The Discounter Is King". In other words: during down business cycles, consumers have less to spend but the same necessities, and so the way to survive--even thrive--is to lower prices, draw consumers in, and sell more. The record of the ultimate discounter, Walmart, would seem to bear this out: while everyone else struggled, while retailers went out of business (poor Circuit City!), what did Walmart do during the third quarter? Grow 8.8% over 2007's numbers.

Still, there is a counter-view: that now is actually the time to raise prices. The New York Times prepares a useful clearinghouse of various price-raising strategies and their justifications. Which we further distill below!

Raise prices when they lower prices. The CW, being the CW, will be followed by most. If one person lowers prices, that puts them at an advantage; if everyone does, it doesn't. So while everyone else is discounting, you can be the one with higher prices, a differentiation that could add cache to what you're selling, to say nothing of give you far more healthy profit margins than your discounting competitors.
Raise prices because prices are higher. Sure the price of oil has collapsed over the past several months, but it's still significantly higher than it was, say, all of three years ago. Everything is more expensive right now, especially as business is down and credit is scarce. That means you get to raise prices.
Achieve the effect of higher prices by selling less of the same. The Times offers the example of a business that is now selling a 13-oz coffee for the same amount for which they previously sold a 16-oz cup. You give your profit margin a boost without the consumer even noticing (and therefore without the consumer altering his purchasing habits).

Forbes, meanwhile, recommends that you strategically and selectively raise prices less for purely economic--that is, profit margin-related--reasons and more for marketing and branding reasons. Namely: luxury products may actually see sales improve the higher they are priced, because when a customer buys a luxury product, he is in part buying the feeling of luxury, of having splurged, of being able to afford it. In fact, the pull of luxury may be, if anything, stronger during down times, when consumers, having to cut back elsewhere, may find it downright necessary for their own sanity to buy the $50 bottle of wine instead of the $30 one.

More broadly, never lose sight of the absolutely inherent, and obvious, advantage to higher pries: more cash in your pocket (and in your cash flow). Because of this, the argument for lowering prices ought to be overwhelming--it should be convincing and clear that failure to do so will result in a significant loss in total sales volume--in order for you actually to go ahead and discount.

And anyway, the wiser way to discount may be less through lowering prices and more through couponing, which enables those who truly need to save money to do so while still buying your product, while keeping those who don't truly need to save money buying your product at a more appropriate price for you.

It's been a week since Barack Obama pulled off his resounding victory. The postmortems have credited any number of factors: Obama's superior campaign; the massive warchest he amassed; the utterly debased status of the Republican brand; John McCain's selection of Sarah Palin as his running mate. All plausible explanations: there is no doubt that the country wanted change, and one candidate was clearly better situated to present himself as change's agent than the other.

But we wouldn't be doing our job as a small business blog if we didn't point out one other successful dimension of the Obama campaign: its marketing and branding. From the start, they chose a paradigm to define the election by--change versus more of the same--called themselves change, called the other guys (whether it was Hillary Clinton or John McCain) more of the same, and then stuck to this paradigm and their preassigned roles without mercy. It was an utter constant. No wonder Advertising Age named Obama "Marketer of the Year". And that was before the election was held.

The B2B Leader and our very own Rohit Bhargava have interesting things to say about the Obama for America brand and marketing strategies as well.

Definitely, definitely check out Rohit's post. We don't want to steal the images he put together so well, but they're really cool. Suffice to say that they prove just how effective the Obama logo--the worldless circle (doubling as an "O" for Obama) with the blue arc and red and white stripes at the bottom--as well as the nifty font the campaign invariably used were for extending Obama's brand, consistently, over everything having to do with his campaign.

And The B2B Leader points to the ways that Obama used newer technologies, primarily email and text messages, in order to personalize its marketing outreach. (Remember the 3 AM text message announcing the selection of Joe Biden as running mate?). The campaign also set up a sort of social network on its Website that now hosts over one million users. That's formidable. No wonder the campaign's fundraising was unprecedented: it was able to combine usual big-money donors with many, many more donors giving smaller amounts, a tremendously long long tail.

But really, the campaign looks to be only the beginning of the Obama marketing juggernaut. Just because he will be president come January 20th doesn't mean he's lost that famous list of over three million email addresses of supporters. They can expect continued missives--maybe even texts?--as the president-elect sets out to enact what promises to be an extremely ambitious domestic agenda on such issues as financial regulation, alternative energy production, taxes, health care, and education.

Obama is a famous adherent to the thinking of political theorist Saul Alinsky, who holds that the best way to compel the government to institute change is to cultivate pressure for such change from the governed: a bottom-up approach. Before the Internet, actively attempting to install this pressure was impossible to do on a national scale, which is why the application of this strategy was effectively restricted to, say, the poor, laid-off blacks of Chicago's South Side, whom Obama helped to organize in the '80s.

But now, it seems that Obama is going to try to turn the whole country into a 300 million-person South Side. Politically, of course, it will be fascinating to see how it turns out. But marketing gurus probably ought to be taking note as well.

Friendly tip for any of you out there who think you have what it takes to design a smartphone app (ground we've identified as prime real estate for start-ups these days): go location-specific. Such, anyway, is the lesson TechCrunch's Michael Arrington gleans from the news that Loopt, the social network application that allows users to signal to others where they currently are and find out where others are in turn, is now being downloaded more than the iPhone apps for social networking juggernauts MySpace and Facebook (all three apps are free).

Arrington gets in a nice (and deserved) I-told-you-so, linking to a post of his from July that warned that "Facebook [and] MySpace Ignore Location on iPhone At Their Peril", though he admits that part of the explanation for Loopt's newfound popularity (and a look at the graph shows that it is indeed newfound) is the above commercial.

But commercial or no commercial, Arrington's point is both undeniable and, in a sense, broader. Loopt takes advantage of an aspect of the smartphone in a way that the MySpace and Facebook apps do not. In this case, that aspect is the smartphone's mobility; more than that, its tendency to be wherever its user is at virtually all times.

But other apps will be able to take advantage of other smartphone aspects, or of the same aspect in different ways. The point is to learn from the way Loopt exploited the phone in a way its competitors didn't. Loopt embodies the essence of entrepreneurial thinking.

Oh, and a closing question: which type of portable handset phone (so including, say, the RAZR) sold the most in the just-finished third quarter? You guessed it.

We've been hearing for over a month now how the community banks are going to be among small business' lenders of last resort. The good news here is that these small (under $1 billion in assets), locally-focused institutions tend to be financially healthy, even now; the bad news is that the $700 billion bailout is putting them in the awkward position of either taking money they don't need (but would open them up to the perception of being in a weak position) or of being put at a capital disadvantage to competitors that did take the money. We've said that we are going to keep on eye on how the community banks are faring, both because they frequently are themselves small businesses--small businesses in the all-important financial industry--and they are in turn so crucial to the prospects of small businesses in other industries due to their ability to provide credit.

One point that the Anonymous Big Banker whom the New York Times quoted a couple weeks ago arguing for the federal government to give more help to small banks made is that the small banks know small businesses' actual prospects: they're not just looking blindly at a bunch of impersonal credit scores; they are taking the time to take in the whole package. A wonderful article in Tuesday's Wall Street Journal makes the same point: perfectly deserving, credit-worthy small businesses who are getting turned down for loans right now by big banks that don't know them have found themselves going to community banks and related credit unions for cash.

The idea is that the local institutions are familiar with how a small business fits into its community, the niche it has carved out, and therefore its prospects for making good on a loan. So a Mexican restaurant in California with a perfectly good credit score was turned down by numerous big banks that, basically, are very skeptical right now of lending to small businesses in the food industry (which is facing skyrocketing prices due to the costs of both food and energy as well as slumping consumer discretionary spending power). A local credit union, however, was happy to lend it close to $650,000 since it has a better sense of the advantages this particular restaurant possesses (such as its strategic location in a bedroom community where people are more open to going out to restaurants close to them).

The ordinary metrics are not unimporant to the local institutions. Credit score is still important (here's how to improve yours!). Cash flow is even more important, apparently.

But still, "Often times," to quote one observer, "the larger institutions will rely more heavily on the credit score, whereas sometimes community banks will take a much closer look at the business plan. And especially if they are based in the region or the community, they will make a decision based on their overall comfort with the business plan and presentation." The quoted observer being Sandy Baruah, the acting administrator of the Small Business Administration.

Anyway, bottom line: if you need any further persuasion of the merits of the government finding some way beyond the $700 billion plan to help the small banks, than read the article.

We've discussed candidate Barack Obama's prowess as a marketer--a marketer of his own brand. Today we look at Obama the social-networker. No, not candidate Barack Obama the social-networker. President Barack Obama the social-networker.

Farhad Manjoo at BizBox sister site Slate looks at one more way Barack Obama can bring change: by creating a WhiteHouse.gov that is interactive, connects citizens, and generally is less of a clearinghouse for profiles and policy bulletpoints and more The National MySpace.

You can already see a bit of what he's up to if you look, first, at his campaign Website; second, the social-networking component of that Website; and, third, the transition Website, which is named, appropriately and awesomely, Change.gov. In fact, Change.gov may be the most instructive example of what is to come.

Obama will probably be limited by the fact the he is, well, president, in terms of what he can do on the Web. At the same time, there is no reason why Obama can't turn the White House Website into the fireside chat of the 21st century; and ample reason to think he will. If former Vermont Gov. Howard Dean's 2004 Democratic primary campaign was the first instance of a national politician really beginning to understand how to use the Web to his advantage, the Obama campaign was the apotheosis of that strategy so far.

Moreover, Obama's rhetoric of creating bottom-up pressure from the governed in order to force those in power to effect change--"I, I, I actually believe my own rhetoric," Obama told Newsweek--creates a definite need for something like a Website at which supporters can get together and join with (or even dissent from) his agenda.

Are you ready for the social-networking presidency?

The Small Business Administration has approved two changes to the way in which so-called 7(a) loans, which form its main loan program, are administered, reports Sharon McLoone of BizBox sister site Washingtonpost.com.

The changes should in theory make it easier for banks to offer the loans, which are designed for small business and which the SBA partially backs. The changes were championed by Democratic Sens. John Kerry (Mass.) and Chuck Schumer (N.Y.)--the former the chair of the Senate Small Business & Entrepreneurship Committee, the latter an extremely powerful legislator who has advocated direct lending to small businesses. McLoone reports that Sen. Olympia Snowe (R-Me.), the ranking member of the committee, also praised the changes.

A bit of background: 7(a) loans are falling, even plummeting (although, interestingly, the average size of a 7(a) loan rose from 2007 to 2008). The SBA has asked banks to go easy on small businesses that took out 7(a) loans before the credit/asset/general financial and economic crisis hit and have seen the value of their collateral collapse, by for example giving them three-month payment deferrals, though some have warned that this could discourage banks from making 7(a) loans in the future.

What are the changes\, exactly?

1. Banks can use rates other than the prime rate to make loans. This includes the LIBOR rate.
2. Banks can bundle loans with differing rates into the same package for sale on the secondary market. This should make such sales, which provide incentive for the banks to make the loan in the first place as well as additional capital with which to make future loans, more palatable.

The changes are better than nothing--although it would be nice to see help for small businesses that isn't also help for big banks (who have been given quite a bit already). You know, such as direct lending, perhaps?

I’ve noted in past postings that small business owners should approach the credit crunch as if banks do not exist. One of the ways to do that, as The Wall Street Journal pointed out yesterday is to offer seller-financing when selling or merging your small business.

I’ve worked with Dominic Rinaldi, the Chicago-based business broker who is quoted in the article, and he knows inside and out how both buyers and sellers of small businesses can benefit from seller financing. Banks typically are not useful in facilitating the sale of a Main Street business, so small business owners should find a business broker and attorney who can walk them through the process.

In the ordinary course of business Cedarcrest purchases these seller-financed notes as well. I was pleased to see the Journal give good examples of well-structured notes, such as a 2 ½ year loan held by the business seller.

Since we do not know when a recognizable financial world will return, we small business owners need to be flexible…and one way is to be the bank.

Imagine all the components--financing, inventory, marketing, everything--of your business. Security in a sense supersedes all of these things, because it is not another one of these components so much as the ostensible protector of them all. You cannot ignore it, and you should not skimp on it.

To that end, the New York Times has some advice: cheap and easy (in some cases, free and incredibly easy) little things you can do that can go a long way towards protecting...well, everything in and about your business. These steps may not be sufficient for your and your business's needs; but that doesn't make them any less essential.

Make your laptop your own. One way to do this is to arrange so that, when your laptop is off or asleep, booting it back up requires a password--usually a very simple maneuver (here's how you create the perfect password). Also: don't let your laptop out of your sight! C'mon, be careful!

Protect your email. For one thing, stop using an internal network and outsource. Gmail is the obvious option. Second, get yourself and your employees email encryption software, to provide extra security for electronic missives with extra-sensitive information.

https:// Adding that extra "s" to all urls you access provides extra security. This is an especial must for whenever you find yourself using a public computer.

The Times closes by quoting a data security expert: “Until you see the light and the need for these products, such as with a stolen laptop or lost data, no one else is going to be able to motivate you to use them. A single data breach could easily cost several orders of magnitude more than any of these solutions.” Seconded.

Another month, another small business optimism survey courtesy the National Federation of Independent Business. The October survey (covering September) showed fairly dismal numbers yet also, for the most part, ones that were on their way up. Not so the November survey (covering October). As the NFIB's chief economist put it, "The July Index reading was recession low, but was then followed by two up months. October, however, would seem to be the proverbial 'nail'. Case closed."

Indeed, these numbers are just awful. So awful, in fact, that there is broader concern about just how low fourth-quarter consumer spending will go. How hard hit will be the buying of all of those holiday gifts, which is the meal ticket of so many small retailers, and to a lesser extent of the economy as a whole? (Download the whole thing here.)

The index itself fell to 87.5: its third-lowest total in its 35-year history. "The decline in the index is a clear indication that the economy is solidly lodged in a recessionary mire," the chief economist remarks. And yet, for all the talk about the index itself, the real devil is in the numerical details, where nine out of the index's ten measurements worsened from last month (and where the tenth, profit trends, had hit its all-time low last month). Figures follow the jump.

0%. That's the (seasonally adjusted) net number of surveyed small business owners who are planning on creating new jobs over the next three months. It was net 7% last month. 46% hired or tried to hire over the past three months, which is slightly down from last month.
The bad news is that net -4% expect business conditions to worsen over the next six months, perhaps the most explicit measurement of "optimism". The worse news is that this represents a whopping 18-point decline from last month. The better news is that it's not even close to the lowest reading in the survey's history.
19% are planning capital expenditures over the next six months. This figure was last this low over 30 years ago, and only once--in 1974--did it dip below it, when it was briefly 16%. 5% see now as a good time to expand facilities; that figure, too, has been lower only once in survey history.
Net -13% have gained in inventory, seasonally adjusted, meaning that more are liquidating than buying; indeed, this figure has been below zero for over one-and-a-half years now.
Net -15% report higher average sales prices, seasonally adjusted; as recently as July that figure was above zero. We suppose this is good news for the consumer (or, at least, for the consumer with any discretionary income right now).
Net -35%, seasonally adjusted, reported earnings gains. Ironically, this counts as not-terrible news: it was net -35% last month too.
33% are borrowing regularly: an improvement from last month, but historically dismal.

Finally, sales. The percentage of small business owners expecting higher sales in the coming months is net -16%, the second-worst reading ever, and one that is down a staggering 14 points from last month's. And as for sales over the past three months? That figure fell ten points, to net -21%. The last time the survey's sales rating was that bad was never.

One way to view just how dispiriting this is is to look at the inventory numbers before they were seasonally adjusted. If there is any time of year when, typically, businesses are looking to stock up on goods to sell, it is now, in anticipation of the holiday season. Well, in raw terms, an extremely weak 10% of those surveyed are planning to add to inventory--a figure unchanged from the previous month, which was one month farther away from the holiday season. A full 20%, meanwhile, are planning to liquidate from inventory. And that's up four points from last month.

While the sales figure is probably the most depressing, arguably more worrying are the capital expenditure ones, which are extremely low, both absolutely and historically. This should come as no surprise given that capital expenditure requires capital--that is, either investments or credit, and we know how the investment and credit markets have been faring recently. But this is the essence of the recessionary cycle: low growth begets low investment (e.g., capital expenditure) begets inability to grow...etc. What can break this cycle?

Well, for one thing, government action can, if it's done right. The NFIB's chief economist sardonically points out, "In the middle of all this, we will be changing 'management teams' for USA Inc. (over $14 trillion in revenue)." (We suppose that means USA Inc. doesn't qualify as a small business?) He then goes on to issue a warning that President-elect Barack Obama is unlikely to turn down Congressional demands for Democratic-styled tax cuts, NAFTA reform, and card-check--the usual laundry list of the NFIB's main beefs with Democratic policy.

It's not an entirely unfair point, particularly regarding NAFTA. But frankly, wouldn't a Keynesian type of stimulus really be what's needed right now to give consumers money, which would in turn give businesses a little extra cash, which in turn would allow businesses to invest in their futures and our economy's? And isn't exactly such a stimulus at the very top of Obama's agenda? Perhaps there is (ever-so-slight) cause for optimism after all.

The New York Times runs an interview in its Business section each Saturday, and this Saturday it turned to a regulator who has been prominently in the news of late: Sandy Baruah, the acting head of the Small Business Administration. The agency last week loosened two crucial standards associated with bank-originated loans that are backed by the SBA, chiefly 7(a) and 504 loans, and naturally, Baruah addresses this. He also responds to the news that SBA loans fell sharply this year (this news being what in part prompted the regulatory changes) and to the misreporting of federal small business contracting numbers.

Baruah confirmed that the decision to allow small business lenders to use the Libor rate instead of the prime rate is designed to encourage such loans. "The credit crisis has disrupted the normal relationship between the two rates, which has limited the number of small-business loans our lenders are willing to approve," he explained. Ditto the "emergency rule" to allow the bundling of loans at different rates into packages with an average rate for resale on the secondary market: "This will make it easier for such loans to be assembled for sale and should encourage SBA lenders relying on the secondary market for funds to continue to originate loans, which helps increase the availability of capital to small businesses."

Regarding the misreporting of the amount of federal contracting dollars that went to small businesses, while he admitted this was a major problem--which he also did last month, when news of the misreporting first broke--he also attempted to exculpate the SBA: "There are six million contracting actions yearly," he said, "so realistically we have to rely on the data provided by our federal partners." (We don't think it's the SBA's fault either.) "In the next couple of months, I want to get the agency on a glide path to see what we can do to improve the integrity of the data," he adds.

Curiously, the interview does not address what we think is a fairly relevant dynamic at play: namely, that Baruah's got about two more months. The guy is the acting administrator--appointed in August, the Senate, wrapped up in all the campaigning, never got around to approving him. And now there's a new sheriff in town, and one figures that he won't have a place for Baruah, who is after all a Republican political appointee.

We think Baruah has done a fairly decent job in his brief tenure. We hope that President-elect Barack Obama will take his new appointment (if a new appointment there will be) to permanent head of the SBA as seriously as it looks like he is taking his secretary of state decision.

In a recent post about federal procurement problems--related to the mess in which nearly $5 billion in reported small business contracts last year actually went to some of the world's largest corporations--the owner of La Grange, Mo.-based Mark Twain Computer made the following comment: "How do companies like mine get forms to apply for help? My business has fallen more than 50% this year. After Christmas, some employees will have to go."

Tough stuff. To start off, though, it is strange that this comment should appear on a post about the procurement problems. The problems are serious, and the American Small Business League, for example, is correct to be every bit as pissed off about them as it is (which is to say, very, very pissed off). But at the same time, the numbers aren't dismal. The $83.2 billion in federal contracts that actually did go to small businesses in 2007 is a record, and is only one percentage point shy of the 23% that is legally mandated to go to small businesses (although among those that count as small businesses under the relevant standards are some decidedly un-small companies). And besides, fixing this problem, while important, surely isn't the most immediate way to direct more dollars Mark Twain Computer's way.

All that said, if you own a small business that is not registered as such with the Small Business Administration, you can register, find contracting opportunities, and do other fun stuff here.

But there are other things to do in the meantime. Payroll problems? Here's our advice on how not to fire people. Lack of credit? Getting SBA-backed 7(a) loans likely just got easier. More, and more official, info on those here.

Finally: it's worth remembering that we are in a recession. Everyone is going to get hit, in a myriad of ways. While the impulse not to lay anyone off is both admirable and even in one sense wise, what is unwise is to take on expenses right now that you simply can't afford. Better to slim down, ride these bad times out, and put yourself in a position where you can rehire down the road than to keep everyone on the boat and take everyone down, including yourself.

NOTE: GOOGLE VOICE IS NOW OBTAINABLE FROM THE IPHONE APP STORE, WHICH IS NOT REFLECTED IN THE ORIGINAL POST. THAT SAID, THE LARGER POINT, ABOUT APPLE'S SECRECY AND BIZARRE CAPRICIOUSNESS IN TERMS OF APP STORE APPROVAL, STILL VERY MUCH STANDS.

There they go again: Apple appears to have gone overboard in terms of keeping applications off of the app store of the blockbuster iPhone for no good reason (smartphone apps being one of our favorite start-up opportunities). Apple has been repeatedly accused of being heavy-handed and capricious with regard to which apps it allows into the iPhone app store (said entrance being extremely valuable for the companies that own said apps), especially in comparison to the app store for a prime rival, Google's Android, which launched last month with a far more open app store. At times, it seems as though what has agitated observers the most is the apparently arbitrary nature of some of Apple's more prominent app store exclusions. But a development this week presents a more ominous characteristic of such exclusions than their being for no good reason: it presents the possiblity of Apple's deliberately crowding out good apps for a good reason after all: because they are owned by competitors--in this case, none other than Google.

It's not clear what exactly has happened regarding Google Voice, which would enable iPhone users who have downloaded the free app to conduct Google searches via their own voices. But, reports Google blog "Feeling Lucky" over at our sister site The Big Money, Google had apparently expected the app to be available on iTunes by Friday; and as of Monday, it was not there.

If Apple is going out of its way to mess with the introduction of Google Voice to the iPhone app store, that very well could be the tipping point. Apple has been criticized over the iPhone app store, as we've said; but it has also been defended, and not illegitimately, either.

However, if it is preventing Google from encroaching on its own turf, and can't come up with an extremely good and unimpeachably valid reason why, then it will be hard for Google to find much sympathy among users, tech-savvy and -unsavvy alike. Or among the Antitrust Division of the U.S. Department of Justice. Or among the DOJ Antitrust Division of a new Democratic administration, which has already struck enough fear into the heart of, well, Google to make it drop its proposed (and purportedly monopolistically kosher) search-ad deal with Yahoo!.

One other note: it is (as a Wired blogger notes) very interesting indeed that Google chose to launch this buzz-generating and potentially blockbuster app not through its own Android but through the iPhone. A sign of the iPhone's amazing dominance? (It's the most sold phone, period.) Sure. An attempt to garner goodwill from users and regulators alike, at a time when Apple seems to be doing everything it can to cede any goodwill that may possibly remain? We've said over and over that this comes down to an issue of branding. And right now, from a branding perspective, regarding their respective smartphones and attendant app stores, Google seems to kicking Apple's ass.

If you’re a business owner that sponsors a 401(k) plan, it seems like there’s always some kind of compliance deadline. But here’s one coming up on December 1st--that's two weeks from yesterday, for everyone keeping score--that you may be able to exploit to put more money in your pocket.

What's December 1st? It’s the deadline for you to provide a “Safe Harbor” notice to your employees for 2009. And why should you consider it? Safe Harbor is a provision in the retirement plan law that allows you as an owner to meet the 401(k) discrimination test--and thus avoid the return to you any 401(k) contribution--automatically. And the dollars can be significant: the new 401(k) limits for 2009, just announced by the IRS, are $16,500 plus $5,500 catch-up if you are aged 50 or older.

So what do you have to do in order to take advantage of this for 2009? You can satisfy the Safe Harbor requirements in 2009 (after you give timely notice to your employees) by making one of two types of contributions:

* Contribute at least 3% of compensation to all eligible employees. Generally, the 3% contribution must be provided to all employees eligible to make elective deferrals to the plan even if they make no contributions themselves.

* Contribute a matching contribution equal to 100% of the first 3% of employee contributions, and 50% of the next 2%. So, for example, if every employee contributes at least 5% of compensation, the maximum employer match is 4% of total compensation.

There’s some fine print, of course, to consider, and Safe Harbor plans are not for every business owner. The decision to use the Safe Harbor method to maximize your 401(k) contributions should be based on your objectives and your plan’s demographics.

But if Safe Harbor is right for you, then get out your Sharpie and circle "December 1st" on the calendar. And then get to work.

Jerry Kalish is founder and President of National Benefit Services, Inc., a Chicago-based employee benefit consulting and administrative firm that serves private-held companies, publicly traded companies, and public sector employers. He blogs at The Retirement Plan Blog and can be reached at jerry@nationalbenefit.com.

It's hard not to look at the current economic crisis as an opportunity to cringe and to fear, particularly if you're a small business owner. And, if the National Federation of Independent Business's monthly optimism index is to be believed, cringing and fearing is exactly what the vast majority of small business owners are doing.

So the challenge for the preternatural optimist is to give small business owners grounds for hope. More than that: to give grounds for hope and to justify them not in despite of current economic conditions but in fact because of them. What about things being as they are right now will give small business owners a leg up?

Business Week author Gene Marks thinks he has the answer, and he doesn't sound implausible. One thing that helps is that he is very careful to hedge. Start-ups, for example, he says, are facing very dire straits. But, if you are someone who has "been running businesses for a while, who employ people, and have customers"--an "established" business owner--then these down times really do produce a concrete set of opportunities, he argues. How?

Cleaner balance sheet. We--specifically, BizBox contributing writer Michael Taylor--said from the get-go that "Cash Is King". But now as the stock market tanks, cash will become a better thing to have on hand; and as credit becomes harder to obtain, cash will look that much more attractive to prospective lenders on a balance sheet. This is one of the few virtuous cycles this lousy economy seems poised to produce.

Better relationships with banks. This sounds insane. Isn't the financial industry where this whole mess started? And isn't the scarcity of credit--i.e., the main reason why small businesses and banks have relationships in the first place--the main problem right now? But Marks's point is actually one we've made: that the banks that are surviving and lending right now are those that were more prudent than the Bear Stearnses of the world. These in turn tend to be the locally-focused community banks that are more likely and better equipped to be lending to small businesses anyway. In this light, the average small business is very enviably situated. And even the bigger banks are going to be behaving more like those little banks right now. As Marks puts it, "Suddenly, those boring little local banks that lent money to small businesses with actual assets are looking pretty smart right now. Surviving institutions, their egos bruised and their credibility in ruins, are going to want to be just like them. Look for a change in the way the banking industry operates. A little more humble. A lot more relationship."

Ability to raise prices. We've examined this too. Marks points out that the coming inflation--the inevitable result of the flood of money the Federal Reserve is releasing--will allow established small businesses, with customers who trust it, to raise its prices.

Space is cheap Yes we're aware that it was the popped real estate bubble that, in many ways, is what started this whole mess. But guess what? Post-pop, the asset of an asset bubble gets uncharacteristically cheap. That, right now, means real estate. Need more space to grow? Now's the time to make your purchase.

Well, okay. I guess we're feeling a little better now. It seems increasingly likely that the current downturn's effect is very much going to be to separate the fundamentally strong and sound from the not. A meritocracy by fire.

Daniel Gross, the exceptional business columnist for our sister sites Slate and The Big Money, has a great article on the ethical subprime lending industry--folks who have figured out how to provide financing to lower-income and minority homebuyers, and to turn a profit while doing so. In fact, their loan default and foreclosure rates are frequently lower than those of average prime lenders. (We've actually covered so-called community development financial institutions once before.)

Why are we highlighting the piece? Because the companies that are in the ethical subprime lending business tend to be, yup, locally-focused small businesses: credit unions, community banks, and CDFIs. And they tend to amass their stellar foreclosure rates the way community banks do: by doing the work necessary to understand the specific circumstances of each of its prospective loans and clients; by relying less on impersonal metrics like credit scores and more on the extremely personal characteristics that are what really determine the soundness of a loan.

"Ethical subprime lenders have to look beyond credit scores and algorithms when making lending judgments," Gross writes. He quotes the executive director of Santa Fe, N.M.-based Homewise: "If customers build a savings habit to save that money on a modest income, it says a lot about them and their financial discipline." Homewise, which lends to first-time working-class homebuyers in the currently poor housing market of the southwest, has .6% of its loans 90 days late, as compared to over 2% for prime loans nationwide.

Something to keep in mind as we hear calls for money to be loaned directly to these smaller banks.

The new projection is that holiday sales will grow 2.2% this year. Growth! you think. In a contracting economy--this is good news!

Think again. Retailers depend on the yearly holiday season the way workers depend on that paycheck every other week. In other words, a robust holiday season is factored into larger business plans. And if holiday sales tend to grow over the previous year's, then that's factored in, too.

And they do. That 2.2% growth may sound nice, but it's exactly half the 4.4% growth that holiday sales have grown by on average over the past ten years.

So what do you do? MSNBC interviews a representative from the National Retail Federation as well as the main behind all of those National Federation of Independent Business press releases, economist William Dunkelberg, for some advice.

It's interesting that Dunkelberg sees a greater choking of inventory than of credit, on which he appears relatively sanguine. The key point made by the NFR guy, meanwhile, is one we've hammered home: that small businesses--"independent retailers," in his parlance--have a crucial advantage over the chains, and that is their ability to offer one-on-one, personalized customer service.

So by all means, discount where you can; and certainly look out for your payroll costs, which Dunkelberg identifies in the clip as small retailers' most vulnerable spot. But don't forget to do what you were likely doing best before the downturn: giving customers reasons beyond price and inventory do their holiday shopping with you.

We've generally focused on smartphones and applications for them as the prime ground for eager start-ups. But for a very similar platform, one should not at all ignore facebook, the massive social-networking Website. We should not ignore it because it claims over 120 million active users; over 48,000 apps; the number-four spot on the list of most trafficked Websites; and the number-one spot on the list of most trafficked social network sites. And we should not ignore it because, regarding apps, it looks like it has what might be called an "Apple Problem"; or maybe it's that Apple has a "facebook Problem".

Basically, facebook is changing the way its apps work by creating a Verified App Program. According to TechCrunch's Michael Arrington, the Program essentially separates the apps into two different classes (actually three, since a limited few are already known as "Great Apps"), and being "verified" brings with that distinction numerous advantages: preferred placement, free advertising, and other perks. As he puts it, "you don't want to be in the loser group."

And the way you make yourself a winner is by fulfilling the definitions of three key adjectives: you must be Secure, Respectful, and Transparent.

Translation: you must pay $375. Per year.

Arrington refers to this as a "protection racket," and to illustrate his point uploads an image from The Godfather next to his post (for the non-obsessed, that is Bonasera, the undertaker, kissing the Don's hand). He...has a point.

At the same time, unless his sarcasm is undetectable, Arrington appears to be not overly concerned: "It’s a beautiful model. And I have no problem with it, as long as we’re all willing to admit that it is what it is," he writes. "I just wish Facebook put as much effort into launching their payments platform as they did on the new verification system. Because then app developers could start charging for apps like they do quite successfully on the iPhone, and make some of this money back."

A couple add-on points. First, presumably, there is eventually going to be a way--or at least an attempt to craft a way--to monetize these apps. It would simply be too big of a wasted opportunity not to. The tech industry is known for speed, generally, but one of the places where it is well-known for slothfulness is in figuring out how to make new innovations make money. So the free-app model's still existing not two years since apps were introduced onto facebook does not seem exceptional.

The problem with the protection racket comes--as we have said time and time again with regards to Apple's heavy-handed treatment of the iPhone app store--in the realm of branding. With the iPhone, Apple's behavior turns off consumers, our theory (and it is many people's theory) goes. facebook's situation is slightly different, in that, where smartphone consumers turned off by Apple can go buy a phone that runs Android--whose app store is much more open--facebook has less of a direct competitor. (There is of course the behemoth MySpace, but as anyone who has used the two sites will tell you, they do not do the same thing; more precisely and importantly, their respective functions are not nearly as similar as those of the iPhone and the T-Mobile Dream are).

Still. This is not going to earn facebook any fans, and that is not good for facebook or for the thousands of entrepreneurs who have staked their livelihoods on it.

In cautioning small business owners to be sure to control payroll costs, National Federation of Independent Business Chief Economist William Dunkelberg notes that labor costs tend to be roughly 80% of business costs. So while on the one hand there are good arguments for trying to minimize layoffs--and by the way, here are our tips on how to accomplish that--on the other hand if one segment of your costs takes up 80% of the total, and you need to cut costs, the first place you should look should be pretty obvious; and if you need to cut labor costs, well, there is one very obvious way to do that.

So let's say you've decided to let an employee go. What comes next? Forbes puts together a nice primer, which we've gone ahead and summarized for you below. After all, if you're going to do it, you may as well do it right: right for them (to the extent that's possible), and right for you (ditto).

Whom do you let go? You obviously need first to answer that question, and how easy that is to do really depends more on how much "excess capacity" you have to begin with. The two types of employees that you are most looking to keep are those who are best at doing a crucial function for you, and those that are proficient in a wide range of functions (since, especially post-layoffs, you may need them to take on extra chores). As for seniority: it's certainly important as a measure of experience, and it's probably slightly better for morale if it is a factor in your decision. That said, you can't let it be the be-all end-all, either.

Warning shots. Assuming you have the time, and there are clearly underperforming employees, give them formal warnings. Who knows? They may improve their performance and make themeselves into valuable (and unfireable) members of the team.

Document, document, document. You can't document all of the various steps taken towards an employee's firing enough. You can, however, document all too little, in the event that legal issues arise after the fact.

Short and not unsweet.The firing meeting should be kept to ten to fifteen minutes, and should of course be respecful and cordial, but not much beyond that: the time to go into detail for the reasons behind your action was during a prior warning, not now. And, believe it or not, Forbes actually does recommend firing people on Friday afternoons. And reminds: "discretion is the better part of dismissal."

The New York Times has an interesting piece on Internet retailers who, in anticipation of the predicted dreary holiday season, are slashing their prices. And we mean slashing: for example, the piece cites a Sony DVR machine that was released, in April, with a $1200 suggested retail price that you can now purchase on one site for $750. Shipping included.

It was over three months ago that we first pointed out that the discounter is king during down times. But then we had no idea just how bad things would look now, after the collapse of the financial industry, the official news that we are all-but-certainly in a recession, and the other poor business news that has swirled about during the past quarter-year.

Of course, offering deals during the holiday season isn't exactly anything new: it's when people are buying the most, and therefore when competition is fiercest--that retailers would cut prices during such a time is something any sophomore Econ 101 student could tell you.

But the Times mentions two things that are different about this year's price-cutting in addition to its sheer scale.

The Wild, Wild Internet Price-cutting among online retailers seems to be distinctly sharper than among physical stores. The reason for this should be clear to anyone who understands the advantages of the Internet and of information technology innovations in general: the increased abundance of information that the Internet provides shifts power further from retailers to consumers, who are able to "shop around" to an unprecedented degree. Pre-Internet (and pre-Internet-dominace), if you wanted the same item, you had to walk or drive to several different stores to compare products and prices; several of these stores would be situated in the same mall if you were lucky. Now, Google can inform any consumer with an Internet connection (remember when we used to say "modem"?) of vastly more products and prices for vastly less effort.

A Longer Holiday Season Everyone knows that the biggest retail day of the year is Black Friday, otherwise known as the day after Thanksgiving. "Black," in this context, is not a sign of darkness; rather, it denotes the color ink that retailers get to use to tally their yearly balance once customers have had their way on this annual shoppingfest. Except this year for Kmart--already no stranger to discounting--Black Friday came, for pricing purposes, at the very beginning of November in expectation of generally poor holiday sales. It may improve quantity sold, but it won't be great for profit margins.

Profit margins are, indeed, the big, inescapable killer here. And guess who lowered profit margins hurt more? That's right: the small businesses, who almost by definition have less room for error, which is to say, less room to absorb revenue cuts.

And diminishing profit margins are only exacerbated by what has become an e-commerce virtual requirement: free shipping, on at least some orders. It needs to be done, because everyone else is doing it; but it is essentially an added business cost on each and every transaction to which it applies.

Looks like consumers, at least, appear in a fairly enviable position, at least compared to the retailers. Maybe they ought to celebrate their good fortune by going out and treating themselves and their families to some nice gifts.

It was easier to be a telecommuting evangelist when oil was approaching $150/barrel, instead of, y'know, under $50/barrel. Still, its advantages--greater flexibility for employees (which is a nice enticement to get them to come work for you); lower overhead and energy costs, if you do it right--make it something well worth pursuing, from the entrepreneur's level, and well worth encouraging, from the government's level. Which is why we consider President-elect Barack Obama's purported commitment to expanding broadband access as a part of a broader "green infrastructure" agenda to be a genuinely pro-small business, pro-entrepreneur policy move.

Announcement of the initiative came from Obama's future chief of staff, Rahm Emanuel, at a meeting with business executives and leaders earlier this week. (In case you're wondering: he declined to express the future administration's position on card-check legislation. Translation: anti-card-check hopes should not be up.) Part of the infrastructure initiative's purpose, of course, is that funding new infrastructure is a particularly efficient way for the government to provide a Keynesian stimulus to our sagging economy, which economists across the political spectrum have deemed necessary right now. Then there's the "green" aspect: no further explanation or justification required. And finally, there is the pro-entrepreneur aspect of some components of the proposed new infrastructure, most notably the increased broadband, which Emanuel explicitly cast as designed to promote telecommuting.

Broadband access apparently in fact does do this: according to one study (h/t The Vine), "differences in broadband access explain three-fourths of the gap in telecommuting between urban and rural markets."

If nothing else, the election of a Democratic president--and quite possibly the most liberal president since LBJ--ought to provoke something of a rethinking, or at least an expansion of thinking, among entrepreneurs and entrepreneurs' interest groups, as to what constitutes "pro-small business" policies. We've posited in the past, for example, that universal health care could actually ultimately prove a boon to small businesses because health care no longer becomes primarily employers' problem.

Similarly, even if the expansion of broadband access doesn't sound like a typical taxes/trade/labor pro- or anti-small business issue, there is no escaping the fact that more broadband will help those entrepreneurs savvy enough to take advantage of it, and that politicians who commit to increasing broadband access deserve to be lauded in explicitly small business terms.

We thought we'd highlight a wonderful blogpost we just came across from the blog Your Friendly Neighborhood Computer Guy, which chronicles, among other things, the blogger's quest (his word) to start his own computer business. His latest topic: how to choose a bank for your business.

This is ground we have covered before, and YFNCG's advice doesn't sharply differ from that which we've already offered: look for a bank that will work with you on a personal level; that knows your industry and market niche specifically; and has advantageous perks such as good hours, good location, and the like. If they participate in Small Business Administration loan programs (and the vast majority of banks do), then all the better.

But the post is still worth a read because it provides a specific, on-the-ground view of what's facing small business owners as they look to open up accounts for their business alongside their personal accounts. (It also provides a brief reminder of why this is a good idea: for one thing, it enables you at once to keep your personal and business money separate while depositing checks that were made out to you personally but are in fact business-related into your business account.)

One thing YFNCG does warn you to look out for is monthly transaction limits: most banks impose one of these when you sign up for a free, separate business account in addition to your personal account. At some banks, the limit is a low as 50; at TD Bank, where YFNCG settled, it's a much more attractive 300.

Finally, he uncovers what seems to us a truism: "What I came to find out is that some of the biggest national chains really don’t have business bank accounts that suit the small local business owner," he writes. "I then started digging into some of the more regional and local branches. They all had much better plans, truly 'free' checking with no hidden fees or minimum account balances." The small, locally-focused banks are better for small businesses' needs? We could've told you that.

You're a business that offers a tech service. You don't want to get the bad reviews that Apple gets every other day for keeping the iPhone app store more closed than most people would like. What do you do?

If you're Yahoo!, you commit to openness and even make your homepage compatible with a snazzy new eBay widget. And then you sit back and let the good press roll in.

A friendly Friday afternoon reminder that nearly every business decision you make has two separate categories of consequence: one that has to do inherently with the decision itself and its benefits and drawbacks (in this case, how open or closed to make your homepage); and the other that has to do with branding. Try not to forget about that second one.

So here's some good news: the community banks--those small (under $1 billion in assets), locally-focused financial institutions that are prime sources for small businesses seeking ever-more-scarce credit--are getting a little extra encouragement to take a part of the $700 billion Uncle Sam is offering up (although even some healthy ones are loathe to take the money and then look like they needed it in the first place).

We learn this and more from Reuters' write-up of a hearing that the U.S. House Small Business Committee held late last week. Entitled "Review of Recent Federal Efforts to Improve Credit Conditions for Small Businesses," the hearing gave a space for testimony to Federal Reserve Governor Randall S. Kroszner and Acting Assistant Treasury Secretary for Financial Markets Karthik Ramanathan.

Oh look, here's Kroszner's testimony. (You can find more YouTube of the hearing here.)

The concrete news is that while publicly traded banks had to get in their applications for a capital injection from the government's bailout fund over a week ago, community banks have until Dec. 8. Clearly, the government wants more of them to opt in. That's a good sign.

But just as important is that it finally looks like the Treasury Department and the Fed--both of which more often than not have appeared, frankly, tone-deaf to the needs of small businesses during their management of the financial crisis--just may get it after all: get that small businesses are deeply struggling; and get that helping community banks is maybe the best possible way to send help.

Particularly reassuring was Ramanathan, whom Reuters quoted as saying of the community banks, "Many of these privately held institutions have strong, long-lasting ties with local businesses," and adding, "By providing capital to such institutions, Treasury is directly assisting small businesses so that they have the ability to make loans, mitigate funding pressures and promote growth locally."

Kroszner's apparent reassurance that the Fed's recent dramatic cuts in interest rates would spur lending to small businesses was the exact opposite of reassuring. Economically, of course, he's right on the money: the Fed has lowered rates; and, on paper, lower rates equals banks being more willing to lend. But on the ground, banks aren't lending. They aren't even lending out the government capital they're getting. Clearly more needs to be done: at least the Treasury guy, speaking of the community banks, seemed like he was on something resembling the right track.

Is it too late to bring up Democratic Sen. Chuck Schumer (N.Y.) and his proposal to lend billions directly to small businesses? We hope not.

A point we have frequently tried to make when discussing the effect that the current recession is likely to have on the economy, and on the small business landscape in particular, is that there are a few companies that, in the long run, are actually going to be strengthened by it all. To be sure, rare indeed is the company who is doing better than average right now (when even the news for Walmart, which should be benefiting from this compared to everyone else, is mixed, then you know things are bad). And perhaps rarer still is the small company, with less room to cut profit margins in order to increase sales, that is currently doing better than average. The idea, rather, is that after all of this is over, the companies with the strongest fundamentals will be leaner than before and--let's be frank--facing less competition, at least initially, than before, because--let's be frank again--not all of their competition is going to make it through.

A recent New York Times article examined the common mechanism by which failed companies officially fail and successful companies make themselves stronger during these bad times: namely, acquisitions--consolidation.

The article's central point, which sounds counterintuitive but really isn't once you stop and think about it, is that now is actually a great time for a business looking to expand to buy another business, if they can pull it off. Yes, putting together financing for such a deal has never been harder. But if you can do it, you are going to get a bargain.

The piece cites an example of a Chicago-area manufacturer that purchased the assets of a completely defunct rival--in fact, the assets were purchased not from the rival itself but rather from the bank that was foreclosing on it. Certainly the credit crunch and soured economy are going to provide such opportunities. But there also may be small businesses that are still in existence but nonetheless in such a situation--we're thinking in terms of cash here especially--that their owners will be willing to part with them for less of a premium than they would during good times. In other words, if you get a fire-sale price, than you get our compliments. But don't be deterred by the prospect of simply a solid deal.

So far we've left two questions unstated. The piece answers one of them, but ignores the other.

The article does address what the owner of a small business that has just acquired another small business ought to do in terms of merging management and staff. It suggests keeping some previous employees, to be sure, but the more valuable advice it offers is: be conservative in your expectations.

The Times interviews the owner of a New York-based I.T. company (which incidentally appears to be slightly bigger than what you would typically think of as a small business). He advises prospective buyers to take their estimate of the growth that corporate synergy will produce in the short term and...halve it.

The other issue concerns the flip-side of this equation. The article addresses what it's like to be a prospective buyer--a strong small business with good credit and a yen for expansion. But what if you're a prospective seller--the owner of a small business whom the economy has hit hard, who is maybe weak in the cash department, and might be looking for someone to take your business off your hands?

All we'll say is that in coming to your decision, assuming you are in a position where outright survival is a possibility, you need to ask yourself what made you start your business in the first place. Were you just looking for the thrill--and is the thrill still there? Or were you looking to turn a profit? There is no shame in either course. The only mistake would be to betray your own fondest wishes.

Here's a good idea: get your employees financial advice. It's becoming an increasingly common practice, the New York Times reports, as workers have seen the value of their 401(k)s, tied up as they are with the stock market, go south. And it goes like this: your 401(k) manager is on the way for a regular, planned visit; you delegate a few hours for one-on-one consultations. It's a great perk to offer.

Oh, and it's usually free. Your representative will usually just tack on an extra couple hours.

Additionally, it should help with morale, both because you are putting in effort to help your employees and, ideally, it will result in your employees' retirement savings suffer a bit less, which certainly can't hurt the general workplace atmosphere. “It does us no good to have stressed-out employees with problems outside work that affect their work or lower their productivity,” a VP at a Michigan plastics manufacturer tells the Times.

If your advisor isn't offering this service free, poke around a bit. A lot of advisors are specifically trying to provide employee consultations, gratis, as a way to try to hook small businesses as clients.

It also really is the right thing to do. Or put another way: it is a corollary to any 401(k) program. The purpose of one, after all, is to encourage saving so that your employees' jobs are helping to take care of them even after they have retired. In any stock market, but in a poor stock market especially, that isn't worth much if not enough is being saved or if portfolios are being invested unwisely. Securing your employees some free and expert financial advice is therefore simply the natural extension to any 401(k) program.

You can call them independent contractors and pay them as such. But they may actually be employees. Deciding how you classify your workers--and doing it correctly--is never more timely than right now, as many retirement plans (and health insurance plans) have January 1st employee enrollments. It’s critical that workers be treated correctly for tax compliance purposes.

In essence, if someone is an employee, then the employer must withhold income tax, withhold and pay Social Security and Medicare taxes, and pay unemployment tax. In addition, the employee may be eligible and have to be included in benefit plans. However, the employer generally does not have any of these obligations for an independent contractor.

The problem is that both penalties and interest can pile up if someone is incorrectly treated as an independent contractor. In the case of a retirement plan, the employer who has misclassified an employee as an independent contractor will eventually be required to make up the benefits the individual would have received as an employee. That can end up being quite expensive.

Whether an individual is an independent contractor or an employee is a factual matter based on the extent of behavioral control, financial control, and relationship of the parties. The IRS publication Independent Contractor (Self-Employed) or Employee? provides an explanation.

And if in doubt--any doubt--seek guidance from your certified public accountant or attorney. This is one of those "kids, don't try this at home" situations.

We reported two weeks ago that it looked as though some more direct encouragement for banks to increase lending in the wake of the government's massive capital injection might be in the offing. The effort the Treasury Department and Federal Reserve were concocting may have come today, with the announcement that there is as much as $200 billion up for grabs for investors who in turn wish to lend it out for credit card, auto, and student loans--and loans backed by the Small Business Administration.

Specifically, the plan will see the Fed will be lending up to $200 billion to owners of securities that are backed by such loans. The program is made possible--in the event that the lending program produces losses--by $20 billion taken from the $700 billion allocated by Congress for the broader bailout.

The theory is that the new money will grease the lending wheels regarding those specific classes of loans. Perhaps, along with the SBA's recently announced slackening of loan rules, the program will help pull 7(a) lending out of its current, dismal slump.

Sharon McLoone reports that Rep. Nydia Velazquez (D-N.Y.), the chair of the U.S. House Small Business Committee, expressed support for the effort while insisting, "More needs to be done."

Yesterday we discussed how now is actually a relatively opportune time to acquire another small business, if you're looking to expand, or sell, if you're looking to get out while the getting-out's possible.

What we didn't discuss was the sort of intermediate step of two (or, we suppose, more) small businesses that enter into a partnership--even join up to some extent--without fully consolidating. Fortunately, the good folks at MSBNC have put together a brief clip on this phenomenon, which makes increasing sense during a climate where cost-cutting is in many cases the most crucial step a small business must take. As one vineyard owner says of his newfound partner, "I wouldn't say we're in business with one other--I'd say we're in cahoots with one another." Do give it a watch:

The news of the Federal Reserve's latest contribution to the bailout--which includes a pledge to lend up to $200 billion, on favorable terms, against collateral that consists of securities backed by several types of troubled loans, including ones backed by the Small Business Administration--is being greeted as something that's finally going to loosen banks' lending gears. "Small businesses finally are getting their own little piece of the federal government’s ballooning bailout package," writes Independent Street in a typical offering.

The post also quotes Sen. Chuck Schumer (D-N.Y.) offering praise on similar grounds: "This new focus by Treasury and the Fed should help inject some much needed economic life into Main Street and couldn’t come a day sooner."

While we hope for the best, we're not exactly expecting it. We can't get this article from last Sunday's New York Times out of our head. It pointed out that despite receiving the initial injection of billions and billions in government capital on the implicit and explicit grounds that they were expected to lend it back out, the banks aren't offering much credit at all. Not that we didn't already know this: we did. But still, it's disheartening to read each time we have to read it.

"Reports from institutional and individual borrowers across the country indicate this," writes the columnist Gretchen Morgensen. "Nervous lenders are demanding that even healthy loans be paid back. Banks and other financial institutions, meanwhile, are reducing exposures to borrowers and doing whatever they can to discourage the assumption of further debt."

Morgensen doesn't blame the banks, exactly: they're just pursuing their own self-interest, which is another way of saying they're being good capitalists. It is for such reasons, rather, that government exists: to compel action that is not necessarily in economic players' self-interest but that is essential to the common good. Government does this constantly even when those whom it is compelling don't owe it anything. That it did not require (as opposed to encourage) specific behavior from banks that were the beneficiaries of hundreds of billions of dollars in government money is frankly kind of appalling. In other words, either promote a free market or don't--either let the banks die or bail them out. But if you're going to bail them out, at least make sure you get something in return!

And so we're worried about this new step, because once again, there isn't really any compulsion. A bank could now put up its crappy asset-backed securities for Fed cash; and it could in turn lend that cash out to the small businesses that need it. Certainly in good times this would be a no-brainer: after all, in good times, lending out money is a prime way--maybe the prime way--banks make money. (That's what a bank is!) But these are not good times. And who's to say that banks, having borrowed that money, are going in turn to lend it out? Who's to say they're not going instead to take it and use it to buy smaller banks? Or increase dividends to hard-hit shareholders (and executives)? Nothing would stop them from doing that. Come to think of it, what's to stop them from simply not taking the Fed's money in the first place?

Schumer may be praising this new step, which could, via three degrees of separation, increase lending to small businesses. But it's worth remembering that Schumer is also the one who proposed lending directly to small businesses, to the tune of somewhere in the neighborhood of $10 billion.

If such a hypothetical program were to be instituted, there's not an x% chance that x% of the money would be lended to small businesses, as is the case with the Treasury Department's capital injections or with the Fed's new lending program. Rather, there would be a 100% chance that 100% of the allocated money woud be lended to small businesses. Too-big government? Government micromanagement? That ship has long since left the free-market harbor.

Okay, okay. We hope it works--we hope the Fed's neutralizing of the toxicity of these assets ups lending to small businesses. But in case you couldn't tell, count us skeptical.

As Black Friday--where, this year, the "black" may be less about the ink--is upon us, we thought we'd point your way to this recent New York Times article about online coupons. They are all the vogue, apparently, and have even spawned side businesses: Websites devoted to finding secret coupon codes and serving as a clearinghouse for users to access them (for a small commission, of course).

We've already written about how the Internet, and its infinite tranche of information, is if anything more conducive to price-cutting as a strategy in lean times than is, say, your local mall. More conducive and, to some extent, more necessary, because if you're not doing it, your competitor is, and everyone will know about it soon enough.

The article articulates a tension between some retailers who have fashioned their discounts and secret coupon codes only for reliable customers and some of these coupon-publishing Websites that reveal the secret coupons to all. Frankly, though, and especially at a time like this, we think those complaining retailers doth protest too much.

Right now--yes, even right now, during prime gift-buying season--there are some people who are absolutely not going to make purchases without those coupons. As the Times points out, this is hardly unusual: such shoppers are "the digital era’s version of bargain hunters who used to spend hours clipping coupons to shrink their grocery bills."

Now, do you want them shopping at your store, with its secret coupon code, or at your competitors', with their more public one?

More broadly, these clearinghouse Websites are a great idea: if anything, they improve the retail market's efficiency. A bunch of graphs in Econ 101 tell us that the absolutely most efficient market is not in fact the perfectly free market, where price is set at the level at which the right number of people will purchase the right number of supply. Rather, the most efficient market is one in which each individual consumer pays the highest amount he is willing to pay for a particular product, even if that means the same product is sold to different people for different prices. For practical purposes such a market can never be attained, which is why you always hear about the free market's efficiency.

With couponing, you get something at times resembling this hyperefficient market, though. The consumer who, for whatever reason, is willling to pay full retail price for a given product may still do so: he may not take the time to find your secret coupon code in favor of going straight to your Website and clicking "Buy". But the consumer who will only buy that same product for 20% less will take the time to search out the coupon and then will use it. As a retailer, you should be encouraging both. You can't do much to control their demand; you can, however, give each one what he wants.

Which is why we're proud to publish the names of the clearinghouse Websites the Times mentions: RetailMeNot.com, FatWallet.com, and the Budget Fashionista. Happy Black Friday!