That didn't take long! On Thursday, we wrote a post about a new Small Business Administration rule concerning a cap on a certain type of loan it offers to those wishing to buy small businesses, and the poor reception it had received (of course, we were also contributing to said poor reception, but hey, what're you gonna do?).

Well, guess what? The SBA has decided that it might be a good idea after all to take six more months and think about this decision: the rule change, originally scheduled to go into effect yesterday, will instead be clarified by August 31, Sharon McLoone reports.

The SBA cited many of the same reasons we (and others) pointed to in questioning the wisdom of altering the agency's so-called "goodwill" loans in an apparent effort to discourage the purchasing of small businesses right now. Chiefly, the agency seems to have realized that purchasing a business can be a pretty good substitute for getting a new job, and that's not exactly something to be frowned upon in this labor market.

In fact, by its own admission, the agency appears not to have done the necessary homework: though it collected extensive information and data on business acquisitions, in its research into financing it did not distinguish between the amount or proportion of goodwill--a business's intangible assets, such as its brand, plus its cash-flow--versus non-goodwill in those acquisitions. This would seem to be a relevant omission, given that the rule had entirely to do with goodwill financing.

We wish we could take credit for this (and we wish even more that we could credit Sharon McLoone over at our sister site washingtonpost.com, who beat us to both stories). That said, it's hard to believe that the most effective critic in terms of causing the SBA to think twice wasn't the leadership of the U.S. House Small Business Committee, who contacted the agency Friday to protest. As Rep. Nydia Velazquez (D-N.Y.), the committee chairperson, told McLoone, "Credit markets are tight enough as it is and this proposed policy would only make things worse. The ultimate impact of this rule change would be to make it harder for small businesses to access capital."

We'd only add that it is heartening, after eight years in which it sometimes seemed in doubt, to see genuine accountability and transparency in government. Which is not to say we wish it hadn't made the wrong decision in the first place. But still, this somehow feels like an improvement.

NOTE: CORRECTION AT BOTTOM.

It appears that one of the central battles involving business, small business, and especially the leading small business lobby, the National Federation of Independent Business, is about to be joined. The Obama administration is getting ready to roll out its strategy concerning the Employee Free Choice Act--so-called card check legislation--which it hopes to pass sometime in the late spring/early summer, the New York Times reports. Specifically, Vice President Joe Biden will lay out Thursday in a speech to the annual conference of the A.F.L.-C.I.O., the über-labor organization, how the president will seek to pass the law (including getting to 60 votes in the Senate). The bill would eliminate the secret ballot for unionization and by all accounts make it easier for workers to organize (and harder for employers to try to stop organization). If it is passed, workers at a given company or factory or what-have-you could be considered unionized if a majority of them sign cards indicating a willingness to unionize.

"Business leaders have warned of Armageddon in their fight to kill the bill," the Times says, and it's difficult to accuse them of hyperbole once you read the NFIB on the subject. "The battle lines are drawn," the group announced in a recent article. The NFIB comes across, to us anyway, as disingenuous when it tries to cast its opposition to the bill as looking out for the best interests of employees. It is not that it is by definition wrong--an argument could be made that here, the interests of unions and ordinary employees are not perfectly aligned, and so that taking away the secret ballot in favor of increased unionization is a bad deal for ordinary employees. But everyone knows the NFIB is not, and should not, be in business to look out for employees' rights. And the NFIB's charges that the Obama administration's support for the bill is payback for union support during the election fails to deal with the bill's merits and sounds downright naive to boot.

The group is best, in other words, when it purports to be looking out for the small businesses. Which it does make an attempt to do regarding the EFCA.

The NFIB's objections, and other business groups' objections, is that the law takes the precarious equilibrium balancing out management and labor and tilts it heavily in labor's favor. According to the NFIB, unions win about 50% of secret ballots and 90% of card check campaigns (which are currently allowed, if management okays it; management also has the current right to reject them in favor of secret ballots). Given that, one is left to question if there weren't a fairer solution than preventing management from ever insisting upon a secret ballot. (The counter-argument would hold that the equilibrium is not being upset but rather that, after decades of drastic union decline, it is being reinstated. A bunch of prominent economists signed a statement to that effect recently, which can be read here.)

Ultimately, we feel that the NFIB and other EFCA opponents could be doing a better job persuading us that the bill is truly primed to hurt small business interests, and in an unfair way. The NFIB has an especially uphill battle since, as Fortune points out, the National Labor Relations Board doesn't even certify unions at firms whose annual revenue doesn't exceed $500,000, and would continue not to do so under the EFCA. So lots of small businesses couldn't be affected by the law; and it seems safe to assume that many others who could be affected by it still will likely not. (We can't imagine five-employee, $1-million-per-year firms, for example, are going to be particular targets for unionization.)

If the business lobby or the NFIB puts forward a compelling reason why the EFCA harms small businesses in an inequitable fashion--as opposed to crying crocodille tears for beleaguered, rights-denied employees, or accusing the Obama administration of doing things for its supporters (as though that weren't how politics has always worked)--then we'll be the first to report on it. 'Til then...

As a comment points out, the EFCA would not eliminate the secret ballot, but would rather give employees the option of card check instead of a secret ballot. We apologize for the error.

We have a veritable series going on about what in the past we have called "How NOT To Fire People". The idea being that, yes, you need to slash costs; and, yes, payroll takes up most of your costs; and, yes, it's best not to cut back on marketing during a recession; but, no, you really don't want to lay off any of your employees, because it will hurt the morale of your remaining employees and will leave you in a bad position when the economy finally does start moving again, and also because, frankly, you got into running your own business not just for reasons of cold, hard business sense (not that there's anything wrong with that) but also so that you could be a conscientious, benevolent manager, and you just don't want to fire anyone, and that's that.

And so we have reported on various alternatives: ways to cut your payroll expenses without going full bore and downsizing (all offered with the caveat that, at some point, you truly may have to do what you have to do). Last time we gave a broad overview. Today, we offer a more specific one: the slimmed-down workweek.

The New York Times has the goods. It cites one employer that has been faced with revenue problems--as it happens, it's a nonprofit that used to rely in part on the generosity of one Bernard Madoff--which has responded by cutting several employees' workweeks to 24 hours (e.g., three days), while cutting pay a corresponding 40%. A nice side point to this is that the employees have been able to make some of that up in state unemployment benefits that are specifically designed for when workers reduce your hours due to economic circumstances (as opposed to personal performance--Jerry Kalish blogged a bit about these sorts of benefits last week).

One of the affected employees believes that her new workweek, "even with its quirky rhythms, is highly preferable to a layoff," the Times reports. And the manager explains his thinking thusly: "Our business relies on people, and without them we don’t really have anything to offer. It was also shaped by an understanding there is going to be an upside to this downturn and we wanted to be better situated for the future when the economy does turn around and we need a full staff.” The set-up is, in other words, the closest they will get to win-win given the circumstances.

One further note of caution, should you be considering such a move: the 24-hour week seems to be the ideal. Much less than that, of course, and you've more than halved your worker's salary, at which point it may indeed make more sense just to go all the way. But any more than that, and you're barely saving money, plus you're not giving your employees the opportunity, should they desire it, to pursue additional employment.

In a recent post, "Persistence and Experience Pay Off", I cited a research study at The Harvard Business School indicating that entrepreneurs with a history of success are much more likely to succeed in new ventures than first-timers or those who failed previously.

But what about succeeding...in this economy? The Harvard Business School provides some help here also, this time in the person of Bhaskar Chakravorti, a senior lecturer of business administration at the Harvard Business School. Mr. Chakravorti was recently interviewed by Martha Lagace for the Harvard Business School’s Working Knowledge newsletter.

Mr. Chakravorti says that while the present economy removes opportunities and resources, it has also managed to add new and different opportunities. Here are his four key points:

1. There are three fundamental decisions facing any business: where to play, how to deliver, and how to win. Those are the three decisions during good times and bad times.

2. Entrepreneurs should systematically identify "downturn needs," which even now consumers are looking for. These woudl include necessities and affordable luxuries, substitutions for previous products and services, and products that deliver value for money.

3. To serve these needs, look for downtime resources that might be available at relatively low cost.

4. Think business model. Consider the unintended consequences of cost-cutting, and instead focus holistically on the interconnected parts of your entire business model.

You can read Ms. Lagace’s complete interview in her article, "Creative Entrepreneurship in a Downturn".

And as I indicated in my earlier article, if you want to get a first look at cutting-edge management thinking, you can subscribe to the Harvard Business School Working Knowledge newsletter as a weekly newsletter or through a nifty RSS feed.

Presented without much further comment: a new study (h/t Fresh Inc.) finds that white-owned start-ups are substantially more likely to receive additional financing in their first, nascent two or three years than are those that are owned by blacks. Roughly 55% of such white-owned firms receive initial debt financing; only 47% of black-owned ones do. And the white-owned firms' typical financing is over $80,000, compared to under $30,000.

One key problem, of course, is that blacks simply are, on average, less wealthy than whites. But that does not completely explain the fact that it is the black-owned start-ups that actually tend to be more reliant upon owner equity, both at the start-up's outset and for its next few years. In fact, that statistic bears out the fact that black entrepreneurs tend to have a harder time securing credit than do white entrepreneurs.

It's starting to look as though changing the character of Small Business Administration Community Express loans, so that they're no longer specifically about helping minority and female small business owners, in order to increase lending generally might not the best idea.

Looks like we can look forward to the formal roll-out of the Term Asset-Backed Securities Loan Facility (TALF)--that's the fancy phrase for the $200 billion (at least) that the Federal Reserve is going to use to buy up securities backed by several types of loans, including small-business ones--by the end of the month. The Washington Post reports that the Treasury Department and the Fed today released the final info on TALF, and announced that it will go into effect on March 25. It will start at $200 billion; as we said when reporting on the administration's Small Business and Community Lending Initiative, it could end up going as high as $1 trillion.

This is all to the good (and need not be expensive: remember the Fed isn't giving the money away, so much as buying securities no one else has the capital and/or guts to buy right now; the idea is to sell them eventually and at least break even). But keeping a fairly robust market for the assets backed by certain types of debt is crucial to persuading lenders to continue buying that sort of debt in the first place. And so TALF's purpose is to increase the sorts of loans whose securities it is buying: car, student, credit-card, and--yup!--small-business.

"Already, the expected launch of the program has helped make lenders more inclined to make various consumer loans," the Post reports, "as they have felt comfortable that they could package those loans as securities and, if no market exists for them, pledge them to the TALF in exchange for cash." Here's hoping!

Not only are Small Business Administration-backed loans falling at a precipitous rate; more and more of those outstanding are being defaulted on, Fortune reports. Specifically: 11.9% of SBA loans (under its flagship 7(a) and 504 programs) in fiscal year 2008 went into default, according to the Coleman Report. Wanna gulp some more? Fiscal year 2008 ended on Sept. 30. So the past five months--you know, the really horrific ones--aren't even factored in.

A look at the performance of these loans over recent years puts this number in slightly less alarming perspective, showing it to be more or less in line with past trends. The default rate in 2004 was 2.6%; 2007's was 8.4%. Graph them, and it gets a little less scary. At some point, though, the trend has to be stopped, no??

Indeed, it seems likely that what will slow the trend is the very thing that we elsewhere complain about: lenders' continued (over-)pickiness in deciding to whom, particularly among small businesses, to grant credit. An advantage of this overabundance of caution is it would seem likely to decrease defaults, or at least slow rates of increase.

The one other problem with all this defaulting, though, is who is getting defaulted on. The answer, of course, given the administration's recent policies aimed at boosting small-business lending (which we've largely, if tentatively, applauded), is that it will be to an increasing extent the federal goverment--which is to say, the taxpayers--that is being defaulted on, given that the SBA is soon to assume the burden and risk of guaranteeing 90% of most SBA loans.

The SBA ended up paying 1.9% of all money disbursed under SBA-backed loans last year, dramatically up from .4% in FY 2004. But, even if overall defaults fall for the reasons we laid out in the previous paragraph, we can expect the amount the SBA is on the hook for to rise given that increased guarantee. Now, maybe that's a good thing: after all, the whole idea is to give banks less to lose and therefore to coax them into lending again.

That said, this increasing disconnect between private lenders' power to make the loans (which is all-but absolute) and their risk on those loans (which is ever-shrinking) does make one wonder if wouldn't just be much more efficient to have the SBA just make these loans itself. Some food for thought.

We've been largely in favor of helping out the Big Three automakers, at least enough to stave off their total collapse, under the theory that many, many entrepreneurs, small businesses, and indeed entire regions are dependent upon the economic activity and jobs they create (though we also want specific help for those many entrepreneurs). But we also want to talk about this tremendously good post that Harvard economist Edward Glaeser just wrote on a New York Times blog. The post is called, "The Big Three? Try The Small Many".

Glaeser argues that it is the myriad small businesses all trying to make names for themselves through innovations that are the true drivers (pardon the pun) of economies, and not the big, lumbering, old companies. "That is how innovation works: small companies competing like crazy and trying out new things," Glaeser says. "Across cities, there is a strong connection between an abundance of small firms and local growth. The last thing that the government should be doing is propping up big declining firms. Real innovations are far more likely to come from someone’s garage."

In fact, guess which major innovation, which ended up doing untold economic good for the U.S., was driven by a bunch of competing entrepreneurs? That's right: the automobile, especially its mass-produced variant.

As Glaeser puts it, "The true story of the invention and mass production of the car...teaches the value of free competition among private entrepreneurs and the exchange of ideas across countries."

Indeed, Detroit, that great dying city, was once a center of innovative entrepreneurship: "The Detroit area had earlier been a center for engine works, often servicing boats on the Great Lakes, and carriage production, which took advantage of Michigan’s forests. Henry Ford came out of the engine business; Billy Durant made carriages."

Glaeser adds, provocatively: "Detroit a century ago looked a lot like Silicon Valley today. It was a city of small businesses, with an entrepreneurial genius on every corner."

To be sure, Glaeser is not 100% against a Big Three bailout--"The Big Three automakers pose real policy problems. The government is already on the hook for their huge pension liabilities. Vast layoffs will make the recession worse. I am not arguing for complete laissez-faire"--but he is against thinking of the bailout in terms of helping the economy get better as opposed to preventing it from getting worse. It is clear, rather, that he believes what will make the economy better is a sort of paradoxical government stance of hands-off encouragement towards entrepreneurship.

This is the sort of industrial policy--post-industrial policy? post-"industrial policy"?--that we need; and it stems from the recognition that it is the little guys who are the only ones who can pull us out of this mess and put the U.S. in a position of global economic leadership again.

Youngstown, anyone?

The Wall Street Journal reports that many of the nation's over 8,000 credit unions--those member-owned, not-for-profit lending institutions--remain relatively untainted by the bad assets that have brought the world's biggest banks to their knees, and consequently are open for business--which is to say, the roughly one-quarter of them who are in the business of lending to businesses are ready and happy to do so, even now.

Actually, it gets more interesting than that: the reason more credit unions don't provide business loans, and the reason that those that do don't provide more, is that a 1998 federal law prohibits credit unions from lending more than 12.25% of their assets in business loans. It isn't exactly hard to predict that as credit unions have become an increasingly viable option for business loans as compared to banks and community banks, there would be clamoring to raise or eliminate that cap, and indeed there has been: a bill that would've raised the limit to 20% has circulated without garnering enough support. It also isn't hard to guess that banks and the banking industry opposes raising the cap, which they do.

This question isn't clean-cut.

The head of one North Carolina credit union estimated in the article that the country's credit unions could make $10 billion in small business loans in a year, just like that. Obviously that sounds wonderful (although one wonders if such demand even exists, especially right now).

That said, the 12.25% cap is not "arbitrary," as another credit union figure says it is. The fact is, credit unions have the particular purpose of serving less well-off consumers, and receive specific advantages--most notably, nonprofit (and therefore tax-free) status--as a result of their special mission. Doing away with the cap would subvert their very purpose and, given their massive advantages, probably run not a few community banks out of business.

Raising the cap to 20%, in other words, sounds like a nice compromise. Looks like the bill in question gained some momentum in 2005, attaining 100 sponsors in the House of Representatives. Any legislators feel like taking this up again? We'll have your back...

If you read the news, you probably believe that weʼre in a recession, bordering on a depression. Some people are fighting the news— such as those who wear buttons that say, “I refuse to participate in a recession.” Iʼm not sure if they started
it, but Business Networking International is at least partially behind that campaign.

Our book, The Three Laws of Performance, takes a different view. It says that there are actually two recessions—one you can do something about and one you canʼt.

The recession you canʼt do anything about is the one we read about in the paper. It's measured in job losses, economic contraction, eroding bank balance sheets, and so on. Even if youʼre head of the Fed or the new president, itʼs unclear how to change to course of this economy, or even if it can be changed. It's simply larger than you--what're you gonna do?

The recession you can do something about is the one that happens between your ears, and in your conversations with others. This is how the recession occurs to you. According to our First Law of Performance, this recession is the one that your actions will reflect.

Dave's father, now in his 80s, tells the story of a man he worked with at Lockheed who, on hearing the rumors of layoffs in the 1970s, went home and put his cat to sleep. The man never lost his job, but his cat was still dead. Besides the sadness of the story, consider the inner workings of how the economy occurred to this man. If we could've interviewed him then, he probably would've said: itʼs hopeless, it will spiral out of control; I will be left destitute and penniless. On the other hand, the man kept his job...

Although we all reside in the same economy, how our situations occur to us is different for each person. So what exactly does "occur" mean here? We mean the reality that arises within and from your perspective on the situation. Itʼs deeper than belief or your best guess about what will happen. For you, and for me, how something occurs is “how it is.” It isnʼt reshaped by motivational speeches, and hiding from the economic news doesnʼt lessen its impact on you.

Recently, I spoke with a group of CEOs in Laguna Beach, and at lunch, one of the participants told me: the old approach to business isnʼt working, and weʼre going to find a new model that will allow us to survive and even thrive in this economy.

He wasnʼt paralyzed by the economy—he was fired up about taking advantage of it.

For almost an hour, we talked about what his company could do. He smiled, laughed, and at the end of our time together, said he couldnʼt wait to get back to the office and talk through strategies with this in his company. At the end of our lunch, he laughed again and said, “A recession is a terrible thing to waste.”

For this CEO, the recession occurred as an opportunity, and his actions correlated with that point of view.

The good news is that you have something to say about how the economy occurs to you and those around you. The Three Laws of Performance is dedicated to giving people leverage over their performance by altering how situations occur to them.

It starts with noticing how situations occur to you, right now. Also with seeing the automatic connection between how things occur and your actions. Once you are aware of this connection, the next question, which weʼll discuss in future posts, is, "What can I do about how situations occur to me and others?” Stay tuned.

Steve Zaffron and Dave Logan are the authors of The Three Laws of Performance: Rewriting the Future of Your Organization and Your Life, part of the Warren Bennis series published by Jossey-Bass. www.threelawsofperformance.com

Dave Logan is on the faculty at the Marshall School of Business at the University of Southern California and is a former associate dean. He is also senior partner of CultureSync, a management consulting firm and has written three books.

We've previously discussed a compelling tension in how President Obama's policies will affect small business owners who are looking to benefit from government contracts (which federal law mandates that they receive 23% of). On the one hand, you have a relatively liberal president committed to vigorous government action, who has already passed a nearly $800 billion stimulus package and has submitted a budget that, if fully enacted, would fundamentally reshape the federal government's role in the economy and society, setting it on a path that would, suffice to say, provide plenty of contracting opportunities in the future. On the other hand, Obama has also pledged to take a good hard look at how the federal government money and try to trim the fat, specifically in the area of contracts, which have positively ballooned over the past couple of decades.

That look just got more serious. Yesterday, Obama announced a government-wide review of its contracting practices. "We will stop outsourcing services that should be performed by the government," he said. (Incidentally, his former opponent, Sen. John McCain (R-Ariz.), joined him). Though the focus in news reports has been on what this could mean for Defense Department contracting--as the military has become notorious for its use of contractors in Iraq over the past several years--the review itself concern all government departments. What this means for small businesses isn't quite clear yet. But given that 23% mandate, we can definitively say that, as go federal contracts, so go federal contracts for small businesses.

Yesterday we wrote about the grumbling in the small-business community over a federal law that bars credit unions--which are not-for-profit, member-owned lending institutions--from lending more than 12.25% of their total assets in business loans. Given the current credit situation, and given the claim of some that credit unions could make $10 billion in business loans in just one year if the rule were lifted, many were understandably upset with the rule.

Well, Sen. Chuck Schumer (D-N.Y.), one of the most powerful senators, has come forward to announce that he will introduce a bill raising the 12.25% limit in an effort to get business loans moving again--particularly to small businesses. “Our focus must be on increasing the lending to small businesses, which are the lifeblood of our economy,” he said, according to Dow Jones. “The situation facing these businesses right now is much worse than a matter of them simply being denied new loans. They are being strangled by having existing lines of credit pulled.”

Faithful BizBox readers know that Schumer is one of our favorites: we bring him up every so often to remind people that at least someone has proposed simply having the government lend directly to small businesses. Certainly he's not disappointing here.

While there are good reasons for not allowing credit unions free reign to lend however they want--briefly: it would unduly put community banks out of business--raising the limit does seem like a good idea. (Incidentally, commenter Robin Marohn: in saying the limit wasn't arbitrary, we meant having the limit at all, not the 12.25% figure, which is arbitrary and which we'd be happy to see changed; we apologize for not making that more clear.)

This is exciting: genuine attention being paid at the federal level to your problems! (Feels good, no?) As Matt Drudge likes to say, "Developing...".

Happy Friday! The U.S. unemployment rate has reached 8.1%--that's the lowest in a quarter-century--with the U.S. economy having shed 651,000 (which will probably eventually be revised upward) in February. According to ADP's monthly survey, small- and medium-sized businesses (under 500 employees) shed 576,000 positions last month. 262,000 of the came from small businesses (with under 50 employees)--that's compared to 175,000 in January.

Other good write-ups here and here.

What were we saying again? Oh, yeah. Happy Friday!

Much attention has been given to this New York Times article on entrepreneurs who start businesses to do good. That is, they have goals that you would ordinarily think of as the province of non-profits, but that the entrepreneurs believe are actually more effectively reached by in-business companies. Said one entrepreneur, who aims to provide safe and affordable kerosene lamps to the people of Benin, “We could have done it as a nonprofit over a hundred years, but if we wanted to do it in five or 10 years, then we believed it needed to be fueled by profit. That’s the way to grow.”

The only thing we have to add is that people should really take a look at the Website called Creative Capitalism, as well as the book it spawned. Spearheaded by Michael Kinsley--who founded our sister site Slate--it explores the implications of a speech Bill Gates gave to the effect that, to quote from the Website, "Many of the world's problems are too big for philanthropy--even on the scale of the Gates Foundation...the free-market capitalist system itself would have to solve them." "Creative capitalism," therefore, is capitalism towards a social end.

If the article is correct about current trends, the small-business community is going to start welcoming an increasing number of these sorts of entrepreneurs into the fold over the coming year. Best to get acquainted with them right away. Anyone know of any such companies? Leave your thoughts in the comments, or send them to bizboxonslate@gmail.com.

Good Friday isn't for another few weeks, but we wish you a good Friday this week, too.

Small-business argument for health care reform? A heartwarming anecdote about a small business owner generously contributing to an employee's health care could also be a great talking point for the Obama administration. [The New Republic]

Baby you can drive your car. Well, you always could. But now, small business owners who buy a new car before the end of the year get to deduct the sales tax. Not bad. [The New Entrepreneur]

Old job, new business. An increasingly popular strategy for wannabe entrepreneurs is to start new businesses while still doing their normal, steady work--giving new, literal meaning to the phrase, "Don't quit your day job". [WSJ]

Stimulate the start-ups! Such, anyway, is the advice Reid Hoffman--whose little start-up LinkedIn is not so little anymore--has for the government. [TechCrunch]

Contracting out. Increasingly, small businesses are turning to contractors over salaried employees for their new hires. [WaPo]

Secondhand is in. Retailers of used goods--all kinds of goods! even medical equipment!--are seeing business boom due to (what else?) the recession. [Fortune]

Timing is everything when it comes to establishing a retirement plan--but it may not be not too late for 2008.

Last October, I wrote that Pension Plan Procrastination Puts Proper Personal Planning in Peril. But if you didn’t quite get around to establishing a retirement plan in 2008, you still have time to establish an SEP--a Simplied Employee Pension, which allows business owners a more, well, simplied method for making contributions towards retirement.

You also have time to contribute to an IRA for 2008, of course--taxes, after all, aren't due quite yet!--but there are some important differences between an SEP and an IRA that a business owner should consider:

* Amount of the Contribution. The basic IRA limit for 2008 is $5,000 (plus $1,000 catch-up if you’re age 50 or older). With an SEP, however, a business owner can contribute up to 25% of compensation, maximum of $46,000, for the 2008 plan year. Note, however, that the contribution calculation for a business owner who is self-employed is more involved.

* Timing of the Contribution. Contributions to an IRA must be made no later than April 15--regardless of whether an extension is filed. There’s more breathing room, however, with an SEP. The same basic April 15 deadline applies, but unlike with an IRA, most taxpayers may extend their tax returns to as late as October 15 and receive a corresponding extension of time to create and fund their SEP.

The rules for both are, of course, a little more complicated than the brief comparison above, so be sure to discuss this matter with your tax advisor before making a decision. In the meantime, here is a link to the IRS’s Retirement Plans FAQs Regarding SEPs that you might find helpful.

And if you want to get a jump start on 2009 and avoid the above-mentioned Peter Piper-style procrastination, then check out Marc Tracy’s column, What Retirement Plan Should You Offer, and my own, Which Way To The Best Retirement Plan, which appeared on my other blog home, The Retirement Plan Blog.

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.

We enjoy remounting old hobbyhorses from time to time, and one of our oldest is our belief that smartphones--and, yes, especially the iPhone--are prime grounds for ambitious entrepreneurs: they provide prolific and accessible platforms for all manner of applications. It's just waiting for the next great new idea to come along. In fact, TechCrunch recently an iPhone entrepreneur testimonial that we heartily recommend.

Entrepreneur.com recently ran a great feature that more fully fleshes out the advantages of designing for the iPhone. For one thing, it has "sensory input," in the words of one entrepreneur (whose app is music-related). For another, it is multifunctional, and any apps that are in any way related to one of those core functions (listening to music; communicating with others; and more) would see a particular advantage to hopping onboard the iPhone. As the author writes, "this new mobile platform is making instant moguls of savvy developers. The technology, startup costs and workforces involved are not as daunting as they would be if you were launching full-service software."

The article contains further discussion: over whether app designers should be looking to monetize immediately, or hook users for future fee-charging; and over what the most popular type of app is (answer: games!).

A useful way to think of the iPhone is as a more focused, concentrated version of the Internet itself: it is a platform that reaches a ton of users, and it doesn't cost an entrepreneur who wants to hop onboard anything to reach all of those users. Compared to the massive entry costs in some other industries, particularly for entrepreneurs and wannabe small businesses, the iPhone truly does seem likely to play a major role in the world of entrepreneurship over the coming years.

Maybe the most challenging part of being the owner of a business is in managing your employees. The balancing act you must perform is formidable and daunting: how do you compel good work from your employees without alienating, demoralizing, or just plain losing them (the final option is admittedly, in this economy, more remote)? What does it take to be a truly good leader? It frequently comes down to intangibles, but two recent articles go some of the way in at least pointing in the right direction.

One piece contains a detailed, helpful list of ways to reward your employees that, crucially--again, given the economy--don't involve, you know, actual money.

The best thing you can do, the article says, is give praise. Importantly, you should take care not to be promiscuous in your praise, or vague. Be specific, and be sparing. That way, those whom you praise will know for sure that you mean it, and it will have its desired effect of motivation and of rewarding strong behavior--because praise from a superior, done right, is a reward.

You can give talented employees more freedom. Free them somewhat from your direct supervision. This is also usually good management anyway--frequently, another word for this is "delegation". But if you frame your management decisions as being clearly connected with superior performance and as clearly intended to reward said performance, then it can have the effect of praise as well.

Give out new job titles, even if they're honorary. (Hey, why not make that assistant to the regional manager the assistant regional manager?)

Publicly recognize excellence. Even if it's just an employee-of-the-month type of things, such initiatives can go a long way, especially adjusted for the fact that they don't cost you a penny.

Meanwhile, a Fortune attempts to answer the age-old question of governing, animal-management, and, yes, being a boss: what works better--carrots or sticks?

The article's worth a read, but we'll give you the answer right now: both, and neither. Both, in the sense of you can't just offer one without the other; rather, a comprehensive and predictable system of incentives and discouragements must be in place for either the one or the other to have a real effect on employee behavior.

But the real answer is that such concrete things as carrots--maybe an extra day off--or a stick--a pay freeze or some such thing--are simply not as effective and smooth managerial techniques as are those certain intangible qualities that just make some people great managers. As Fortune quotes one small-business owner, "I think it comes down to leadership, honestly. Incentives work to a degree, but you run the risk of good employees getting everything and having mediocre ones get resentful."

So above all, work on honing those qualities we associate with leadership, and go motivate your employees to excellence. That technique, too, is free.

It appears possible that there may be some regulatory changes on the horizon concerning individual retirement accounts, from the perspectives of both those who contribute to their own retirement plans and those who are employers, and we thought we'd give a brief update. Certainly, you'd think some changes were necessary--after all, many of these accounts have much of their wealth invested in the stock market, and, well, what we mean to say is have you seen where the Dow is? As always, it's a story we'll continue to follow. And, as always, those who want more information should check out BizBox contributor Jerry Kalish's Retirement Plan Blog, as well as his weekly posts here.

Perhaps the biggest news so far is President Obama's little-noticed feint (little-noticed, that is, until the Journal got to it today--on which more later), in his proposed 2010 budget, towards establishing automatic retirement accounts for all workers. Under such a program, all employers would be required to offer all their employees (who would still have an ultimate choice) the opportunity to enroll in direct-deposit IRAs, in which a part of each paycheck is taken out and put into the plan, which can offer certain tax benefits. A senior Treasury Department official told InvestmentNews, "The main idea, as the president talked about often during the campaign, is to have more of an automatic savings in IRA and 401(k)" (the well known 401(k) is a type of plan under which income tax is deferred on contributions).

(According to the Wall Street Journal, the proposal is based on a bill first introduced two years ago, and would affect all those businesses both 1. at least two years old and b. having at least ten employees who in the previous year made at least $5,000.)

Obama, the senior official reportedly said, will also advocate an increase in refundable credits for the less well-off, in which the government steps in and provides additional retirement savings.

The Wall Street Journal's article focused on the opposition these proposals are receiving from certain employers' interest groups, including (one might ask "who else?") the National Federation of Independent Business and (more surprisingly) the National Small Business Association, which tends to be more centrist in outlook.

It does appear that enrolling all those employees who under this proposal would need to be enrolled (assuming they chose to participate) is a daunting proposition. Low- and middle-income workers would likely go from a current participation rate of roughly 15% to one of about 80%; all told, no fewer than 75 million currently do not have the opportunity to participate in a tax-incentivized retirement plan through their jobs.

Arguments against also seem compelling, and they are best summarized by the Journal: "One of the biggest problems, critics said, is that small businesses don't normally do this kind of thing." The reason for that is that it really does make for extra work and paperwork, plus some extra attendant costs; plus it is one more venue in which lawsuits may arise. There is also the thought that adding this new requirement would likely see some businesss keep matching contributions static while increasing the number of participants, leading to lower matching contributions per employee--which does special harm to employees already participating.

This won't be the last we or you hear of this question.

Meanwhile, you might say, this is all well and good for employees, as well as for small-business owners/employers who choose to be self-employed for retirement plan purposes. But what about small businesses and small-business owners as employers--how will they be affected?

The House Small Business Committee looked into that a few weeks ago, according to Independent Street. Witnesses were called, and they suggested a bunch of things.

One of these things should sound familiar: making employee IRAs mandatory. But other proposals were focused on enabling employers to deal with downturns (such as the current one) that absolutely decimate the values of their employees' plans (as with the current one). One suggestion is the imposition of a cap on just how much employers end up on the hook for in the event of market downturn; no employer, the thinking goes, should be made insolvent because the Dow took its employees' retirement plans down with it. Another idea would permit employers to ramp up contributions to defined-benefit plans while the market is doing well, so that the value-destruction that invariably occurs when the market is doing bad can be absorbed. A combination of these two suggestions--with the cap set high enough to encourage businesses to make those extra contributions during good times, but not so high as to become irrelevant--sounds good to us. (Though hopefully Jerry will tell us if we're wrong!)

And a final solution that Independent Street mentions was floated was the creation of an annual tax credit to small businesses that offer these plans. Many, after all, are understandably closing off that option. Given the government's interest in having them continue them, however, we think some sort of tax-based incentive is eminently appropriate.

Via here and here, we see this tease of a Wall Street Journal article: Treasury Plans Small-Business Aid. What sort of small-business aid? Good question! Details the piece has not. What we know is that President Obama and Treasury Secretary Tim Geithner have informed House Democrats that a plan is in the works to "boost liquidity for small businesses as part of the administration's broadening efforts to spur lending and arrest the pace of job losses."

We also know that the initiative, which appears to be led, in its rollout, by Geithner, was prompted in part by "rankled" voters who have looked upon the administration's extensive efforts to bail out the nation's biggest banks and "have failed to see an equivalent concern for small-business and Main Street suffering." Well, we could've told you that. More interestingly, it also comes amid concerns that some of the Obama stimulus plan's and budget's programs place an extra onus on small-businesses owners--think about the retirement plan stuff we just reported on--and therefore that corresponding increases in government help are therefore in order.

The initiative "appears to be an expansion"--it's not just the $1 trillion set aside for the Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF), the fund dedicated to buying up securities backed by weak loans, including small-business ones, which we've reported on and which goes into effect later this month.

When we know more, you'll know more. This could be very big news.

It looks like the great card check battle--which has been pretty starkly divided between labor/unions and their supporters and business lobbies (including the National Federation of Independent Business) and their supporters--is about to begin. Stephen Greenhouse, the New York Times's ace labor beat writer, reports that Sen. Tom Harkin (D-Iowa) is expected to introduce the Employee Free Choice Act today. The bill, if enacted, would require employers to recognize their workforce as organized if a majority of employees sign cards indicating their wish to join a union--currently, unionionization may be declared only following a secret-ballot process. It would, in other words, make it easier to form unions.

Let the politicking begin! Ever since the filibuster's use was normalized (believe it or not, its deployment used to be reserved only for the rarest and most dramatic of occasions), the Senate has become a chamber where, for almost all purposes, 60 rather than 51 votes are required. According to Greenhouse, Harkin is confident about those 51, less so about those 60; in fact, a vote on the bill, whose chief sponsor is the ailing Sen. Ted Kennedy (D-Mass.), will probably be delayed for well over a month or so, in the hopes that by then the court battle over Minnesota's vacant Senate seat will be resolved and Al Franken will be named the 59th Democratic (or Democratic-leaning Independent) member of the Senate.

Rep. George Mitchell (D-Ca.) will introduce the EFCA in the House as well, but that story contains little drama: the House is still a majority-rules chamber, and a majority of the body's members are expected to co-sponsor the bill, much less vote for it.

The Senate bill, on the other hand, is expected to have 40 co-sponsors and still more voters. But the Democratic caucus does not appear unanimous, with holdouts said to include Blue Dog Sens. Mary Landrieu (La.) and Blanche Lincoln (Ark.), as well as, potentially, Sens. Mark Pryor (also Ark.) and freshman Mark Udall (Co.). Peeling Republicans away--as will be absolutely necessary--may prove daunting, with moderate Sen. Arlen Specter (Pa.), a previous if lukewarm EFCA supporter, signaling that he may come down against cloture.

It will also be interesting to see if President Obama, whom opinion polls show is still experiencing something of a honeymoon with the American people but who has been most unsucessful in bringing many Republican legislators onboard his agenda, can throw his weight around in a way that is productive to the passage of the EFCA, which he strongly supports.

This will certainly be an exciting battle. And we'll continue to watch it, and to try to make sure the rhetoric stays fair, and that the interests of small businesses are duly addressed without being expanded to the point of meaninglessness.

In my first column, I noted that in my law practice representing business owners and my experience running businesses, it seems that entrepreneurs tend to lament, or feel sorrow or regret for, the following:

o Focus. Pursuing new ideas to the detriment of the core business.
o Work/Life. Missing out on real life while pursuing business passion.
o Employees. Inability to find great help and keep them.
o Partners. Challenges in finding or maintaining good business partners.
o Money. Inability to find necessary financing for growth or survival.
o Burnout. When one morning you just can’t do it anymore.
o Boredom. When there’s not much more to build.

We talked about partners in the last column. Today we focus on frustrations and regrets in the always challenging process of obtaining financing for your entrepreneurial company’s growth.

There are six main sources of financing for a growing business. Let’s deal with each one in no particular order.

Bootstrap. Here you use your own funds or the cash-flow generated by your own business itself to grow the business. Many businesses bootstrap their way to success. It provides maximum freedom and you retain full ownership in the business. But you also maximize risk if things go wrong.

Government. Some businesses can obtain loans through government agencies such as the Small Business Administration. The advantage is that a loan does not take the business ownership away. Also, government agencies tend to be flexible if repayment becomes difficult, and payment terms in general are not onerous. But they also invariably require personal guaranties from the entrepreneur and his or her spouse.

But be careful: I had a client whose husband borrowed $1 million through the SBA for his business. They both guaranteed it. He shut down the business, filed for divorce, moved to Puerto Rico, and declared personal bankruptcy. She got stuck with the debt and had to repay it or have her credit destroyed. Credit, as the saying goes, is another word for trust.

Bank. Like government loans, bank loans have the benefit of not diluting your ownership, that is If you are lucky enough to qualify, and if banks are indeed lending. However, they burden not only the balance sheet but the cash-flow, as interest and principal payments are taken out of business profits. Unlike government loans, typically spousal guaranties are not required, but often individual guaranties of the owner are given. Banks also will be less tolerant in the event of default.

“Friends and Family.” These financings--typically equity, or where some stake or ownership is involved--are usually made on favorable terms from investors. There is some dilution but less than can be found from more professional investors. This is most commonly found in a business’s early stages, and generally you are not able to go to this well more than once in a company’s lifecycle.

Sounds like a great deal, no? The problem is the friends and family part. Be sure these are people that (1) are investing amounts that they can afford to lose without being really ticked at you if you fail and (2) are close enough that even if they lose the money they will not think about coming after you for any problems that may not have been disclosed. A downside to this method is that, other than in extremely rare and lucky circumstances, these investors are not likely to provide the kind of professional assistance and advice that can be found from experienced ones.

Angel, Venture Capital and Private Equity. Here you are looking at professional investors in the startup, early, and late stages, respectively. These guys really become your partners, as I pointed out in the last column. They can bring great ideas. But they typically require seats on your Board, and can bring agita if they are displeased with the direction of the company; generally, they hold veto powers over major decisions. But there is no debt to repay (though some insist on preferred stock with a guaranteed dividend), real help in the business, and, often, the ability to continue to fund future financing rounds.

Initial Public Offering or Public Company (PIPE) Financing. Yes, many companies opt to go public in part to raise money. But since 1999 it has been nearly impossible for a smaller company to complete a traditional IPO. Since then, thousands of companies have opted for reverse mergers, going public by combining with a public “shell company.” With a shady past, reverse mergers are now legitimate and popular if you work with the right people.

As part of going public, or after you are public, you can consider a so-called PIPE (private investment in public equity) investment. It provides fast cash and involves an investment by a hedge fund or an institutional investor at a discount to your stock’s public trading price. It has few restrictions on the company’s activities but is not always greeted positively by public investors, who sometimes send the stock price down.

Next time: What to do when burnout kicks in.

David N. Feldman, founding partner of Feldman Weinstein & Smith, is the author of Reverse Mergers and blogs at Reverse Merger & SPAC Blog. He can be reached at dfeldman@fwsllp.com.

We've written before (here, for example) about a paradox concerning President Obama's attitude towards federal contracting. On the one hand, he has already initiated a massive effort to cut back on how much work the federal government is contracting out. On the other hand, in his stimulus and now in his proposed budget, Obama is proposing a dramatic expansion in government spending, both for purposes of juicing the economy short-term and, long-term, for enacting a broader progressive agenda. Much of that spending is going to result, in, yup, more government contracts.

The Wall Street Journal more fully fleshes out this story. There's $787 billion in stimulus spending. And, as we've said before, given a law mandating that small businesses (really those with under 500 employees and $15 million in annual revenue) receive 23% of all federal contracts--a law that is mostly enforced--as federal contracts go, so go federal contracts to small businesses.

We've previously posted some tips for scoring federal contracts--do check out that post again. Additionally, the Journal suggests:
-Getting your business listed on the General Services Administration schedule.
-Looking into enlisting the services of a government contracting consultant (they're very busy these days, of course).
-Try starting out as a subcontractor rather than a direct government contractor if you have little experience in these matters.
-Checking out FedBizOpps.gov, which lists federal contracting gigs.

Finally, a comment on a previous post we wrote directed our attention to http://www.smalltofeds.blogspot.com/, which is all about how small businesses can navigate the byzantine regulations and daunting competition from big companies in order to land federal contracts. Definitely worth a visit.

It turns out that the community banks--those small (under $1 billion in assets), locally-focused financial institutions whom BizBox has veritably lionized these last several months--have been doing alright even now. According to Entrepreneur.com, over half saw an increase in deposits last month, and nearly that many saw new business customers (maybe BizBox readers!). To read our interview with Colorado community banker Dan Ford, click here; to read our very own Michael Taylor discuss how he found a small bank that would lend to his small business, click here.

Meanwhile, one thing we've noted about the community banks has been their great reluctance to take the money offered to banks as part of the federal government's Troubled Assets Relief Program. A main concern was the appearance of it (taking the money makes it look like you needed it and therefore are struggling). But another concern was the restrictions the federal government was imposing on recipients, including some that weren't even disclosed--as Dan Ford put it to us, "The contract said you would comply with all present conditions and all future conditions imposed. Well, have you ever signed a contract where they said they'll tell you what the terms are later???"

Now comes news that many banks, including small ones, that did elect to take TARP money now want to return it so that they do not have to comply with the conditions--especially feared future limits on foreclosures and the like. Looks like the community banks--the small businesses of the financial industry, and the ones frequently most available to the small businesses of other industries--were ahead of the game on this one, too.

Q: I’m a deeply religious person. Should I be wary of broadcasting my religion when building my personal brand?

A: There’s a reason for the saying, “Never talk about religion and politics.” They’re divisive subjects that get people’s passions all riled up. But as with so many other aspects of Personal Branding, the answer to this question depends on the nature of your business or practice.

If your target market is diverse, with many people who may not share your religious convictions, it’s wise to keep your personal information private. You never know whom you might alienate by broadcasting your born-again Christianity or lifelong Roman Catholicism. You can always share it with certain clients on a case-by-case basis if you choose.

However, if you are targeting primarily those who share your faith, then the opposite is true: your beliefs can enhance your brand’s effectiveness. And if your religion is such a vital part of who you are, we’d say that you actually should be targeting like-minded people, because they will share and relate to your passion. That’s why you commonly see service trucks and signage with the so-called “Jesus fish” prominently displayed: the proprietors know that fellow Christians will probably want to work with someone who shares their convictions.

Remember: specialization is one of the most powerful branding strategies around. Think of deliberately identifying yourself as a part of a certain religious group as a type of specialization.

So our advice would be to go public with your faith if and only if you are prepared for it to have a central position in your Personal Brand. If that's what you want, then it really doesn’t matter what profession you are in; we’ve even seen lawyers, physicians, architects, and other highly-educated professionals tilt their marketing and identity toward the Christian, Jewish, or Muslim communities with great success.

The best ways to communicate your faith, meanwhile, are typically the subtle ones: symbols on your marketing materials, phrases in your tagline, even such touches as religious magazines in your waiting area. Just be careful not to state that you only work with people who are of the same faith as you; that’s discriminatory and could be illegal.

The overall idea is to be overt but classy about your beliefs and their connection to your work so that you’ll attract like-minded clients. You’ll probably get some folks who aren’t part of your faith, and that’s fine. If you decide to brand yourself to a faith community, and you end up with 75% to 90% of your business from that community, you’ll be building a marvelous referral base as well as incredible client affinity.

Peter Montoya and Tim Vandehey are the authors of The Brand Called You, the definitive guide to personal branding, published by McGraw-Hill. The book can be purchased here.

One of our favorite bloggers is "Anonymous Banker," the friend of New York Times columnist Joe Nocera (also one of our favoriter blogger/writers) and a "small business banker and credit underwriter" at "one of the country’s biggest banks," according to Nocera. AB has since set up his own blog, which you can (and should!) check out here.

So you can imagine how thrilled we are to point out that Anonymous Banker can add another title: BizBox commenter! He (Nocera has used masculine pronouns to refer to him, so we will too) left a rather long comment, jam-packed with useful information and thoughtful argumentation, to our post about the Treasury Department's reportedly forthcoming small-business lending program. The comment itself deals with the program's likely predecessor: the Federal Reserve's Term Asset-Backed Securities Loan Facility (TALF), which will see up to $1 trillion used to purchase securities backed by auto, credit-card, student, and small-business loans in an effort to coax banks to make more such loans.

AB takes issue with numerous aspects of TALF. One of them should come as no surprise to those who have been following him. Back in October, he argued that the government--which is, y'know, actually doling out all this money--ought not to politely ask recipients to increase lending and use fairer credit standards, but rather ought to out-and-out compel them do so. He repeats this line of argument in our comment: the facility, he says,

does nothing to encourage the banks to improve their credit underwriting standards. Furthermore, TALF fails to require banks to direct the funds they receive, when they sell the loans, back into the market in the form of new loans. The government is assuming that the banks will do this on their own. Our government also assumed that the capital they injected into the banks would be directed towards lending and the bankers have basically hoarded those funds. Without clear direction, the banks cannot be counted on to meet the underlying intentions of TALF and improve credit availability to the public.

But really, you should read the whole comment. His is a valuable voice, and we're honored to play host to it.

A few recent posts on how the struggling auto industry is affecting small businesses formed the sort of juxtaposition that positively screams, "Blog about this!" So here we go.

On the one hand, the potential collapse of the Big Three--although, really, at this point, it's only two of the Three, General Motors and Chrysler, who are in serious danger of insolvency should the federal government not once again step in with favorable loans--threatens untold thousands of small businesses both directly and, through the demolition to the whole Midwest region's economic prospects, indirectly. We've written on this before. And Forbes just published a nice piece on the businesses that form a part of the Three's supplier networks and thus would be likely to go under water should any of the big firms disappear. Some of these are themselves big (you may have heard of Dana, Delphi, and Visteon, for example), but others, such as Plymouth, Mich.'s E&E Manufacturing, are small--E&E had only 500 employees, and, given the way things have been, it has recently laid off half of those.

On the other hand, there is a different type of business--a type that we at least would think is unusually dominated by small corporations--that is actually benefiting from consumers' desire not to buy things and especially not to buy cars: we speak (and Entrepreneur.com speaks), of course, of auto-repair shops.

Think of it this way: if demand for cars themselves can vary with the times--the economic term is "elastic"--demand for the use of cars varies much less. Yes as people get laid off, or are permitted to work from home, or gain access to public transit, they may need to drive less; but, ultimately, no matter what, most people are going to need to drive and probably own a car. During good times, this would lead to a surge in car purchases. But during bad times, it leads to a surge in repairing of old cars, so that, at little cost, a much larger cost can be postponed.

Then again, thoughts of auto repair and other supposedly recession-proof industries (actually, if anything auto repair isn't so much recession-proof as recession-advantaged) caused Independent Street to take a closer look at the whole "recession-proof" concept and, ultimately, to find it wanting. The blog talks to the proprietor of, yes, an auto-repair shop: "People just aren’t fixing their cars, he said, unless it’s absolutely necessary."

As some of us like to say, why is this recession different from all other recessions? It seems as though not for a very long time--at least the early 1980s, if not (gulp) the 1930s--has the macroeconomic situation been so bad in so many ways and for so wide a swath of the country. Yes, the auto and finance industries are getting hit especially hard (and don't forget journalism...); the Midwest is in particularly dire straits. But it seems that no industry or region is an island. Which is why the best steps to take are likely not industry- or region-focused but national. When both auto dealers and auto repair shops are struggling, extraordinary measures are required.

Things are dire. Consumer spending is shockingly low. The last thing people want to do is spend their increasingly scarce money. Meanwhile, securing said money for yourself involves selling things--in other words, persuading these people, holding ever more tightly to their increasingly scarce money, to give some of it to you. What do you do?

According to the latest trends emanating from Madison Avenue, you tell people that they can do anything. The New York Times reports that Quaker Oats's new advertising motto is literally, "Go humans go". In fact, the buzzword appears to be "go". Visa's new slogan is, "“More people go with Visa" (disclosure: BizBox is sponsored by American Express OPEN); Hillshire Farm now declares, "Go meat!" The campaigns attempt to accomplish the double service of attesting to the merits of the particular product while also instilling a much broader sense of optimism, positivity, and the can-do spirit. If you humans can do anything, the thinking seems to go, then you humans can certainly eat oatmeal every day for breakfast. It's the least you could do, really.

So how does this translate to your business? We're generally not fans of smaller companies deploying what sometimes sounds like canned sloganeering--that's not exploiting your advantage over the big guys as much as playing right to their advantage. But the idea of using optimism to sell during a recession strikes as compelling, to say the least. And who knows? In trying to instill optimism in others, you might just give a much-needed dose of it to yourself.

As March marches along, here are some nice, useful pieces to digest this weekend.

"But can that knife really cut through anything?" Five marketing lessons you can learn from...infomercials. [Rohit Bhargava]

Give yourself a pay cut. You need to cut costs; but you want to keep inventory and marketing activities going;and you'd rather not make any firings. What's the solution? Consider taking one for the team in the pay department. It is your team, after all. [Fortune]

Are things really all that bad? If you read the news--and if you're reading this, we know you're at least reading us!--then you'd think everyone is getting killed out there. But a recent poll says that over half of small businesses believe they haven't been affected by the recession. [The Entrepreneurial Mind]

Two for the price of one. An introduction to the hybrid security: it's both debt and equity--that is, both a loan you're borrowing and a stake you're selling. It also may be the wisest way, in the current economy, for you to raise the capital you need. [Forbes]

Small businesses getting off the mat. As optimism starts to surge, some small businesses are starting again, and starting to grow again. [OPEN Forum--by BizBox sponsor American Express OPEN]

Self-employment and parenting. How many entrepreneurs decide to strike out on their own so that they have the flexibility in their lives that they desire for raising their children? [Small Business Administration Office of Advocacy]

Once you’ve got your new business idea pretty well formulated and you’ve done your preliminary research, it’s time to talk it up. Whether it's friends and family members, online communities, or industry groups and trade associations, you’re going to need help to get this dream off the ground, and networking is the best way to get it.

Networking is a never-ending process. From the moment your business is born to the day you retire, networking will be as integral to your success as any other aspect of the company. It’s how you learn. It’s how you connect with customers, suppliers, and partners. It’s how you find employees. And, if you’re lucky, you may even make a few friends along the way.

But first things first.

When you’re soliciting feedback, friends and family are going to be your most important networking resource. These are the people with whom you feel the most comfortable and most connected. They will give you honest opinions. And you will get some of your best contacts from friends and family. So do not dismiss them: even your crazy aunt up in Maine or your precocious nephew in Rochester might have something valuable to add, a friend for you to call, or a thought that will improve upon your idea. So be open-minded. Talk to them and make sure they understand what you are going to do and what you need. They are your biggest fans, so get them working for you.

But don’t stop there. Your next step is to go online. Social networking has caught fire of late. Everyone is doing it. You can find everyone from grade school friends to global executives on sites like Facebook and LinkedIn. Even our aunts and uncles are doing it, and they’re barely computer-literate.

Social networking may seem like a frivolous waste of time, but it connects you to a greater number of friends and family than you could ever manage in the physical world. In addition, you get a look at their friends, coworkers, acquaintances. Instantly. It’s amazing!!

There are dozens of social networking sites out there and each one is good for something. But the most important element of any social networking site is that it connect a large number of people. In other words, the bigger and more popular the network, the more powerful and valuable a tool it is.

Check out a few of our favorite networking sites:

Facebook.com: the most popular such site right now. Great for re-connecting with old friends and new colleagues. Works on both a social and professional level. Just be sure you understand the privacy settings before posting anything you don’t want the whole world to know about you.

LinkedIn.com: This site is all business--strictly for professionals. Resumes and curriculum vitaes litter the site. Far less social in nature. People can recommend colleagues and acquaintances--kind of like a preemptive reference.

Twitter.com: This is a free social messaging service that allows you to broadcast your every move to friends, family, or other subscribers. It’s kind of like micro-blogging. You send short text messages (140 characters or less) that go to anyone who is interested.

Youtube.com: This video-posting service is free and easy to use. You simply upload a video to the site and hope it goes viral. The vast majority of the material on YouTube is social- and entertainment-oriented. But marketing gimmicks have been known to go viral and generate huge amounts of demand.

Myspace.com: With nearly 115 million members, MySpace is still a force to be reckoned with in the social networking world, but Facebook’s simpler interface and broader appeal has eclipsed MySpace’s early popularity. MySpace continues to attract a younger crowed, and is useful for sharing music. But you’ll not find valuable business networking going on here.

After you’re up and running on the social networking sites, make sure you look into industry groups, organizations, or associations and join them. Even if your business is still in its nascent stages, these groups are usually open to all who are interested. You’ll learn a ton, have an opportunity to find out what’s going on in your industry, and meet the people in your field. Mingling in these groups, online or in person, will keep you abreast of industry news, trends, and resources as well as expand your network.

Well? What are you waiting for? Get out there and start meeting some people.

Nada Jones and Michelle Briody are the authors of Sixteen Weeks to Your Dream Business, a guide for prospective women entrepreneurs. They blog at Sixteen Weeks To Your Dream Business.

When we've written in the past about card check legislation--a version of which was submitted in the House and the Senate last week--we've questioned just how much the bill, which has received the staunch opposition of small-business groups for the way in which it will make it significantly easier for employees to unionize, will actually affect small businesses, which after all would not be likely targets for unionization anyway.

To the extent that it would, though, it seems like adjusting the bill so as not to affect the smallest of businesses might be a smart step, politically and policy-wise. Independent Street explores the issue further, noting that many small businesses lack the staffs to mount a legitimate anti-union lobbying effort among their employees. In other words, where, as labor activists argue, the Employee Free Choice Act (as the bill is called) would level a playing field that currently tilts towards management in big companies, it would, at small companies, unfairly tilt a currently level playing field towards unions. The head of the Small Business & Entrepreneurship Council "wouldn't be surprised" if Congress altered the bill to exempt truly small businesses--a move she'd welcome, but which would not prevent her from continuing to oppose the bill strongly.

Meanwhile, over at our sister site Slate, Chris Beam examines a question that a BizBox commenter also addressed: would the bill eliminate the right to secret ballot--the right for employees to insist that they be considered unionized only following a secret-ballot process? In our initial post, we had asserted that it did; a commenter corrected us, and we corrected our post, to reflect that, no, the law still permits employees to opt for a secret ballot rather than a card-check process. However, as Beam points out, that's a small issue: the reason for the new bill's existence is that it allows the card-check model, under which it is far easier to receive union certification than via a secret-ballot process.

Think of it this way: any company whose employees could unionize via secret ballot probably would be unionized already, and thus unaffected by the law.

In other words, card-check's critics are technically distorting the bill in arguing that it denies employees the right to the secret ballot. However, for all intents and purposes, many employees no doubt will be denied that right; at the same time, many more of them will have the opportunity to join unions. Labor groups, for one, think this an eminently worthy trade-off, but reasonable people can differ on that.

We wish the debate were less disingenuous--what with business groups with a (completely legitimate) interest in preventing unionization pretending to oppose the bill from a workers' rights perspective, as though they particularly care about that, or even should care about that. Big Labor, for its part, has been admirably open about why it wants the law: it wants more unionized wokers (in fact, it's because it wants this for more high-minded reasons that it's unembarassed about it). Business groups need to be more persuasive about why this would hurt them, and why their interests need to outweigh those of the workers in this instance. We're listening, but we're getting impatient.

Well, big news today. Sorta. President Obama and Treasury Secretary Tim Geithner announced--well, really, publicized and clarified--several initiatives aimed at getting credit flowing to small businesses. We hesitate to say "announced" because, to us at least, it looks as though most of the proposals were not new. The main new thing was the focus on small businesses--"the heart of the American economy," as the president put it, "responsible for half of all private sector jobs and...roughly 70 percent of all new jobs in the past decade"--which we certainly found welcome. (He added: “This is still just going to be a first step in what is going to be a continuing effort to make sure that people get credit out there," which we also found encouraging.)

The one policy we had not heard about before is that the 21 largest bank-recipients of federal bailout money from the Troubled Assets Relief Program will now be required to file monthly reports to the goverment on their small-business lending, as Entrepreneur.com reported. This is actually a good idea. While we have in the past suggested actually requiring these recipients to up their lending, and their small-business lending specifically, as a condition of receiving bailout funds, at least this attempts to draw some connection between the taxpayer money these institutions are getting and the corresponding obligation they have to take actions that are for the public good. So, bravo!

What else was discussed? And what have people been saying about it?

Much of these were announced last month (and noted by us) under the "Small Business and Community Lending Initiative" heading, and they are largely designed to up the rate of Small Business Administration-backed loans. So fees are, for now, being eliminated from 7(a) and 504 loans (up to $75,000, which is to say, for all but the very biggest of loans). So the SBA is raising the maximum amount of these loans it will guarantee up to 90% (from a previous ceiling of 75% to 85%). So the Fed will buy up securities backed by SBA loans on the secondary market.

Here there actually was some news: because, in addition to the buying of such securities (among other sorts of securities) under Geithner's Term Asset-Backed Securities Loan Facility it looks like an additional $15 billion will be taken out of the TARP fund to buy specifically small-business loan-backed securities, starting as soon as the end of the month.

We'll have more analysis of these efforts in the coming days. But this is what your government's doing to try to help you. What do you think of it?

"I really like the fact that there are no limits on my success. But here comes a trade-off. There's no floor on possible failures, either. So it's kind of exhilarating. You're the master of your own domain, and if you come up with something, a good idea, and execute it, the sky's the limit, and that's really exhilarating."

Our guest today is Naren Aryal, the co-owner (with his wife) of Mascot Books, a Virginia-based publisher that specializes in children's books about college, professional, and elementary-school sports mascots. Naren discusses how he and his wife came up with their business idea, how they have learned to do business with gigantic retailers like Walmart and Costco, and what their most popular subject, Wally the Green Monster, is up to these days (he's a real busy guy).

If you are a small business owner interested in being interviewed for Small Business Salon, or know one who would be (or should be!), please email us at bizboxonslate@gmail.com.

BizBox: Please tell us about your business.
Naren: We're Mascot Books. We publish children's books featuring college mascots, professional sports team mascots, and now even elementary school mascots.

We got our start back in 2003 when we were in Blacksburg for a football game--my wife and I are [Virginia Tech] Hokies--and we took our daughter, who was two at the time, and she enjoyed everything about the football experience except for the football game. She particularly enjoyed the Hokie Bird, and she asked her mom to buy her a book about the Hokie Bird. We looked and looked, but couldn't find one. So on the ride home, my wife wrote this book called Hello, Hokie Bird--she scribbled simple illustrations, too. And it dawned on me that there are probably others who would be interested. So I got a trademark license from the university. It sold statewide. The lightbulb went off.

How has Mascot Books grown in that time?
We went from one title to 40 titles in a year. My wife writes all of them. Especially considering we had no experience, we built up a successful business in the collegiate marketplace. Then, we said, "Where do we go next?" So we do baseball teams, NFL teams, NBA teams. Now we're doing customized books for elementary schools. They're just like all of our other books--their school, their mascot, and the content is school-specific. Public schools use them as a fundraiser; private schools use them also as a marketing tool.

Do you have any employees (not including you and your wife)?
We have two artists, three salespersons, and a bookkeeper.

How have you financed your business?
Initially we were self-funded. Our goal was always to build a profitable business, and it took us a few years to find our way through the market, learn skills, distribution, get the right retail accounts, and once we were able to do that we were in good shape. Now, we're self-funded. At one point we did take on an investor, but we're doing this on our own.

You mentioned to me earlier that you were previously a lawyer. How did you adjust from being someone else's employee--or at most being a partner--to being in charge of your own business?
There's definitely a learning curve. As an entrepreneur, I think the natural tendency is to take on too much, and it's a skill to be able to delegate--to be able to have your staff take on some of the things you were doing. It's definitely something I've been learning to do. It's business, but it's all about the people.

Do you enjoy being in business for yourself?
I really like the fact that there are no limits on my success. But here comes a trade-off. There's no floor on possible failures, either. So it's kind of exhilarating. You're the master of your own domain, and if you come up with something, a good idea, and execute it, the sky's the limit, and that's really exhilarating.

How has the recession affected your business?
Of course we felt it, and one of the reasons why it hasn't hit us harder is the fact that we have outstanding distribution: our best customers are places like Walmart and Sam's and Costco--retailers who are actually doing well right now. So our books are at the places where people are still shopping. We've definitely been able to weather the storm.

Was that intentional?
It kind of worked out that way. When we first got started, we tried to land these big accounts, without much success. Our business was primarily the mom-and-pops. And as we gained some traction, that's when we were able to gain the largest retailers. With the smaller retailers, we've seen a different story [in the current economy], but we've more than made up for it [with the big retailers].

What is it like, as a small business, dealing with these large retailers, some of which are among the biggest corporations in the world?
It's a little intimidating at first. But when we have a new product, and when we were able to turn the corner with large retailers, and you can start pointing to hard sales data--that's hard to deny. Sales numbers are sales numbers. Once you show a good track record, they'll come around. When we first started with Sam's, our sales were off the charts.

What are Mascot's bestselling titles?
Those for the Boston Red Sox. It's just amazing, the demand for anything Red Sox. For these, we partnered with a guy named Jerry Remy, a fan favorite, a former player, a commentator on TV. He's the author of our books featuring Wally the Green Monster.

Can you tell us a bit more about Wally's adventures?
We have five stories. Wally's a busy guy! In the first book, he takes a tour of Fenway during a baseball game, and then in the second book, he tours Red Sox Nation from Maine to Connecticut, stopping at landmarks along the way. And then Wally goes coast-to-coast, and visits Red Sox fans all over America. The fourth book is a championship commemorative--from spring training to the World Series parade. The latest one comes out next month: Wally takes a world tour, where he visits Red Sox fans all over the world and learns interesting things about geography. Wally's a busy guy.

We've offhandedly mentioned (see the bottom of this post) one of the National Federation of Independent Business's more heterodox and intriguing ideas: a payroll tax holiday as a stimulus measure. In one place, the group--which is probably the most prominent small-business lobby, and one that generally leans to the right--argues, "The payroll tax holiday would be a big boost to America's job creators and reduces the cost of labor." That's almost by definition correct: the payroll tax is (as its name suggests) a tax levied solely on those with jobs; eliminating it would make it cheaper to hold a job, and therefore cheaper to hire people. On top of that, eliminating the payroll tax reduces the burden of paperwork on the businesses themselves--in fact, it is the associated logistical nightmares associated with taxes rather than the taxes themselves that, according to a recent article at our sister site The Big Money, causes the biggest headaches for small businesses.

What's so interesting about the proposal, coming from the NFIB, is that the payroll tax--which ostensibly is dedicated to funding Social Security and other entitlements (though in reality all federal tax revenue goes to the same place)--is the most prominent regressive tax: it kicks in on the first dollars you make from a job, but phases out once you reach six-figure territory, and therefore falls on the poor heavier than on the rich, percentage-wise (as opposed to the income tax, which is progressive--it falls heavier the more you take in). For a conservative group to advocate the lowering or lifting of the tax that is, of all of them, the one that is already doing the least damage to the pocketbooks of the wealthiest is unusual. It suggests they may truly be on to something.

On the flipside, cutting taxes of any kind is not what you typically find proposed by a left-leaning political commentator. But there in this week's The New Yorker is prominent liberal Hendrik Hertzberg proposing--yes--the elimination of the payroll tax. What's that line about strange bedfellows again?

To be sure, Hertzberg and the NFIB aren't on the exact same page. The NFIB wants a temporary holiday on the tax as stimulus; Hertzberg wants an elimination of the tax that is offset, revenue-wise, with new or increased taxes on activities that he believes the federal government has a legitimate interest in discouraging--pollution and carbon emission, for example.

But the broad point is the same: the payroll tax is--literally!--a tax on work. And just about the last thing the government should be doing, particularly during a recession where unemployment is rising, is discouraging working and hiring.

Think of it this way. When Obama attempted to sell his new measures aimed specifically at helping small businesses yesterday, he sold them under the logic that small businesses are crucial to the larger economy precisely in their capacity as job-creators: they are responsible, he asserted, "for half of all private sector jobs and...roughly 70 percent of all new jobs in the past decade." Well, Mr. President, how would you like to help small businesses create jobs for the economy, and help small businesses and less-well-off workers in the process? We think we have an idea for you.

I recently read the fable of the “Seven Blind Mice” to my three year-old daughter, which reminded me of the difficulty of describing the business environment right now. In the story, a family of mice crawl over an elephant, each one claiming vastly different aspects of the giant animal as perceived truth.

“It’s a rope!” cries the mouse on the tail.

“No, it’s a pillar!” replies the one on the leg. Other mice proclaim they’re on a spear (the tusk), a leaf (the ear), or a snake (the trunk).

The credit crisis of 2007-2009 (and counting!) has metastasized into a malevolent force looming so large in the minds of business people that we are left grasping for accurate descriptions.

In the end, I’m reduced to anecdote. Over the next few weeks I’ll describe a series of ways the credit crunch affects my small business. Some things hurt in small annoying ways, others cause profound trouble, others present as opportunities. I hope BizBox readers will offer up their own anecdotes so we can all understand this elephant better.

--------

In the category of “small but annoying result of the credit crunch”:

For my business, I had obtained a moderate line of credit from a major bank in 2006. Now, I am careful to the point of obsession with my use and acquisition of credit. I had other credit available from the bank, but saw this additional line as both “insurance” and something to build upon over time.

The line cost an annual fee of $350, which I gladly paid, most recently in late October 2008. Not more than a month later, I got a letter from the company that they had decided to discontinue my line. Effective immediately, availability of credit would be reduced by 90%, and it would be eliminated by January 2009.

For my business, which rarely drew upon the line of credit anyway, this registered as more a symptom of the times than as anything genuinely problematic. I ripped up my checks and considered the account closed.

Had I been a regular small-business user of the line, however, and had the line been bigger, that letter could have been devastating. I wonder how many small-business owners had to scramble when they got their November letter.

Two other notes:

It occurred to me in January that I should be refunded for my annual fee. I called the company, requested a pro-rated refund, and it arrived in the mail shortly afterwards, no problem. Don't forget to do the same if you find yourself in a similar situation!

Finally, I recalled J.P. Morgan’s famous banker’s dictum: never lend money to a man who needs it. As a small business owner, it’s wise to remember that your bank probably believes in this theory. Especially in times like this.

How is the crisis affecting your business?

Now here's an index for us. Not the widely publicized ones that report on broad opinions on the economy or the business environment, but rather one designed especially for owners of businesses with under 100 employees.

It’s the Small Business Success Index, launched just last week by Network Solutions and the University of Maryland's Robert H. Smith School of Business. The SBSI identifies exactly how and why small businesses are successful on 28 business activities that are critical to their long-term health.

The small businesses included in the study were privately-held companies that had fewer than 100 employees and had a payroll and/or contributed at least 50% of the owner’s household income. Rockbridge Associates Inc., a market research firm, conducted the survey by interviewing 1,000 small business owners by phone in December 2008 and January 2009.

Here are the key findings from the Small Business Success Index:

1. Small businesses are succeeding despite the economic downturn.
* 69% of small businesses made a profit in 2008.
* 7% of small businesses report that they broke even.
* The majority (69%) of those who showed a profit in 2008 indicated it was equal to or better than 2007.
* 70% of small businesses expect their firms to still be operating in 5 years as opposed to being closed, sold or transferred, and of these, 66% expect to be bigger in size.

2. The majority of small business owners remain somewhat optimistic.
* 23% of small businesses believe the economy will improve in 2009.
* 26% of small businesses believe it will remain unchanged in 2009.
* 48% of small businesses expect a decline in 2009.

3. Small businesses are still investing in their companies, in spite of the 48% of small business owners expecting the economy to be in decline in 2009.
* 25% plan to increase their overall business spending.
* 42% plan to spend the same.
* 31% plan to decrease their spending.
* 23% plan to increase spending on professional development of employees.
* 26% plan to increase their Internet marketing budgets, including online advertising and Website development.

So just where is all this optimism coming from? P.K. Kannan, director of the Center for Excellence in Service at the University of Maryland's Robert H. Smith School of Business connects small business owners' outlook to their customer relations: "Those that are more engaged in understanding their customer needs, creating relationships with customers and increasing the value of their customer base through marketing activities and innovations are also those that are the most optimistic."

Here's an idea: survey yourself! You can diagnose your own competitive success by taking the Small Business Survey.

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.

Last week, we wondered whether the word "recession-proof" weren't practically non-existent. Today we'll try to be cheerier, with a look at some companies that actually are doing alright for themselves during these down times--and how you can emulate their success.

The success story is a venerable business journalism trope, and the New York Times and the Wall Street Journal each provide one today. The Times profiles New York-based, 25-employee Arena Media Networks, which sells advertising on closed-circuit televisions in the venues that host 50 professional sports teams. Why is it still doing well? Because its fortunes are tethered to that of professional sports, which aren't going anywhere anytime soon ("Sports fans are one of the last bastions in this economy," the company's head says). Specifically, advertisers with fewer dollars to spend may care less about reaching the biggest audiences and more about reaching the most concentrated ones. Advertise on TV, and who knows who's watching; advertise at a basketball game--especially in a bad economy, where only the diehards are spending ticket money--and you know basketball fans will see your ad. Great bang for the buck. And great news for the company that places the ad.

The Journal, meanwhile, describes the continued boom of microbreweries, with more opening in 2008 than in any year since 1999. (The headline is, "In Lean Times, A Stout Dream". Har har har.) Once again, you have a fairly, and genuinely, recession-proof (get it? "proof"? har har har) industry--alcohol/beer--and small businesses and entrepreneurs divining their niche, poor economy or no.

So certainly it helps to be in, or latched onto, these still-churning industries. The one other thing to do in order to survive and even thrive in the recession, our sister site The Big Money suggests, is to embrace your smallness, and exploit your differences with the big-guy competitors. Here, the author writes:

Welcome to the Little-Guy Economy, where boutique investment banks make deals while big finance is frozen, where Web geeks field calls from big media and corporate clients who need viral video and other digital-branding tools, where small law firms prosper and laid-off lawyers open their own shops, where independent music labels innovate faster, and where the word "team" can have a whole new meaning. As their bigger, more established peers restructure departments, sell assets, and slash budgets, little guys who offer better, more streamlined, and less costly services are healthier and, in come cases, flourishing.

Note that this advice is without regard to the industry. Sure, finance is down, but it's not gone (at least not completely; at least not yet). Someone's gotta do the business there, and if you play your cards right, it will be you and your small business.

We'll actually have a special guest discussing taxation issues related to small businesses tomorrow. For now, we simply want to make sure that everyone is aware that, according to WebCPA (h/t: Independent Street), IRS audits of medium-sized and small companies have been steadily increasing over the past several years, while ones of big companies have gone down.

Specifically:
-Companies with assets over $250 million are 40% less likely to receive an audit than in years past.
-Companies with between $10 million and $50 million in assets saw their audits increase 29% from 2005 to 2007.
-Companies with assets under $10 million--so the true small businesses--saw audits over that same period increase by a whopping 41%.

Why is this going on? Some call the trend "inexplicable"; others points to calls from IRS higher-ups to close audits more quickly, which encourages investigations of smaller companies.

To disrupt this trend for the better would definitely be change we can believe in. In the meantime, make sure all your paperwork's in order...

We've written before about the Small Business Administration's brand-new emergency microlending program. Designed specifically for those small businesses and entrepreneurs struggling to pay off pre-existing bank loans, it allows them to apply for loans up to $35,000 that are then backed 100% (so at zero risk to the lender) by the SBA. Good deal--for the banks. But what about small business owners and entrepreneurs who need just a little bit of financing, but need it for something other than to pay off bank loans--who may not even have, or be able to obtain, bank loans in the first place?

Enter microlenders. The New York Times reports on the increased business--usually, requests for loans in the range of $5,000 to $35,000--that has been thrown the way of these largely non-profit, community-focused financial institutions. The average 2008 loan was $11,500, due back in full in ten years, with an interest rate of 11%. These lenders are specifically designed for entrepreneurs who, because they lack sufficient collateral or sheer experience to obtain a more traditional bank loan, have few other places to turn.

The catch being that (say it with us) in this economy more established businesses--and even some banks!--have had to turn to the microlenders for more help. Currently, SBA regulations prohibit most microlenders from lending more than $750,000 per year. How long until we hear people clamoring for that to rise?

In February, President Obama signed into law the American Recovery and Reinvestment Act, which provides $787 billion in spending and tax relief. Some of the tax breaks create opportunities for small business owners, while others impose new obligations on employers. I recently conducted an expert forum on Bank of America’s Small Business Online Community, where I answered questions about the impact of this package on small business owners. Here is a quick guide to a couple of the important updates you’ll want to keep in mind (with more to come next week).

The employment tax reduction. There’s a new rule that can affect you if your company is subject to COBRA requirements to offer continuation of health coverage for employees who leave the company. For example, if you regularly employ 20 or more workers and offer health coverage, there’s a new rule that can affect you.

If you’ve involuntarily terminated or will terminate anyone between September 8, 2008, and December 31, 2009, then such person who opts for COBRA only has to pay 35% of the premiums; the federal government will pay 65% of COBRA for nine months. (Remember, employees usually have 18 months of COBRA, or nine months more than the period of the federal subsidy, if they want it.) Those terminated before the new law who did not opt for COBRA (perhaps because it was too expensive) but now want coverage (perhaps because of the federal subsidy) have 60 days after the receipt of a notice from you that they can still elect COBRA. You must send a notice by April 18, 2009, to eligible individuals informing them of this new choice. (BizBox's Jerry Kalish recently covered this as well.)

Here’s how the subsidy works: Employers pay the full premiums (after receiving the 35% from former employees). Then employers recoup the other 65%--the portion to be paid by the federal government--by reducing their employment tax deposits or by claiming a refund for an overpayment when they file their quarterly employer returns (Form 941 has been revised to reflect this new law). The IRS has provided extensive guidance on this new COBRA rule for employers.

Of course, not all eligible employees will opt for COBRA coverage despite the federal subsidy. Higher income taxpayers who would be fully or partially taxed on the subsidies might decline. Also, some might find less costly medical coverage alternatives to COBRA.

Claiming tax refunds. If 2008 proved to be a bad year for your business and you lost money, you may have a net operating loss (NOL). You can carry the loss back a set number of years to offset income in those years and obtain a tax refund. The usual NOL carryback period is two years. However, for losses in tax years beginning or ending in 2008, small businesses can opt for a three-, four-, or five-year carryback period. Losses not used up via carrybacks can be forward for up to 20 years.

To qualify for a longer carryback period, the business’s average annual gross receipts for the three prior years must be under $15 million. For S corporations, partnerships, and limited liability companies that meet this definition, owners claim NOLs on their personal returns based on their share of business losses.

Barbara Weltman is a top-selling author, attorney, tax and small business expert. Barbara serves as an expert on the Small Business Online Community, powered by Bank of America. Barbara has also authored several books, including J.K. Lasser's Small Business Taxes and The Complete Idiot's Guide to Starting a Home-Based Business.

We've written before about how some small businesses have received the sort of governement help they need not from the federal or even their state governments--that would make too much sense--but rather from their more localized communities, who know better and firsthand how important these companies' solvency is to the rest of the local economic ecosystem. Last time, it was two California towns--actually in the middle of the state's Inland Empire, which has been hit harder by the housing crash than just about anywhere else--who gave favorable loans to car dealerships reeling from the domestic auto industry's troubles.

Now, the Wall Street Journal brings news of a broader trend of small communities and municipalities engaging in, essentailly, stimulus measures both orthodox--cutting corporate taxes; spending money on public works to create jobs--and unorthodox--subsidizing shopping (in one California town, spending $300 at local businesses will get you a $30 gift certificate). These places "can't wait" for the $787 billion in stimulus to trickle down; they need to ensure sufficient tax revenue now. And they're pulling out all the stops to try to get it.

While the development is interesting in and of itself, it may also be worth following some of these specific efforts to see which work, which don't, and why. Some could end up being models for larger-scale (read: state or federal) efforts. Real "laboratories of democracy"-type stuff. Our favorites, after the jump.

-That California gift-card idea. The same California town, Lancaster (appears to be an L.A. exurb), is also taking care of all new vehicle-registration fees.

-Carrollton, Tx., a Dallas suburb, has hired 250 temporary workers to construct various public works, up to and including "sprucing up fire hydrants". This reminds us of that saying of John Maynard Keynes--the economist most associated with the notion of spending to stimulate a struggling economy--that it's worth it to pay one person to dig a hole and to pay another to fill it, so long as you're putting money in consumers' hands. Certain politicians who have complained that some efforts do not create "real" jobs and therefore are uneffective stimulus may want to take note.

-Allegheny County--in western Pennsylvania's steel country, so an area already used to hard times--has offered laid-off workers free tuition at the county's community college.

-San Francisco has $23 million standing by for no-interest small-business loans. It also plans to waive payroll taxes (!!!) on new hires.

-New York City is offering extremely cheap office space to laid-off finance workers who want to become entrepreneurs. What a wise investment! Who wants to bet against the prospect that at least a few of the thousands of these talented, smart men and women are going to come up with productive innovations and businesses on their own? Not us.

Like we said in the last post: would you like to bet that more than a few of the thousands, indeed hundreds of thousands, of the recently laid-off, are going to come up with exciting and important new ideas and innovations and businesses? The New York Times reports that this has already begun to happen: "Plenty of other laid-off workers across the country, burned out by a merciless job market, are building business plans instead of sending out résumés. For these people, recession has become the mother of invention."

Specifically, right now is when the tipping point seems to be happening: the mentality is changing from one of desperation to one of opportunity. From here on out, the little guys are going to be playing a bigger and bigger role in putting the economy on the road to recovery. We can only hope that policymakers are wise enough to perceive, and to act to make to encourage such private efforts.

It's Tourney Time! We hope you have a good, basketball-filled weekend. And in those brief lulls between games, we suggest you check out the following.

Getting paid to find your passion. A primer on search funds--in which investors support entrepreneurs while they figure out just what it is they should be doing. (Yes, it's a little odd.) [NYT]

The next Silicon Valley. What it takes to be a hub of innovation--and what to look for when you're looking for one. [OPEN Forum--published by our sponsor, American Express OPEN]

How to beat the big box. What to do when Walmart comes to town. [WSJ]

Home away from home. Is your office--as in, the physical office--a place where your employees will do their most productive work? [Entrepreneur.com]

Support the community. The promise of "Buy Local" campaigns. [Business Week]

Inbred hirings? The perils of referral bonuses. [Inc.com]

Last week I wrote about the optimistic optimism index, the new Small Business Success Index. The SBSI indicated that small businesses are succeeding despite the economic downturn.

But for the country as a whole, there’s a slightly different view. Such, anyway, are the findings of the 2009 MetLife Study of the American Dream (our illustration is borrowed from the report; Snoopy is, of course, Met's long-time mascot). It’s the third year that Met has done the study, and there have been substantial changes since in the way the American Dream is this very short amount of time.

The inaugural MetLife study in 2007 revealed that an insatiable hunger and persistent pressure to consume--to buy more and better material possessions. But now, two short years later, it’s a different story. The American Dream is still alive. It’s just revised and put on hold.

Here are a few of the study’s significant findings:

1. Americans are beginning to reevaluate their priorities. While the dream is still defined first and foremost by financial security, it now includes a greater emphasis on personal relationships.

2. Work is the linchpin holding the Dream together. While job mobility had previously been seen as a means to greater financial compensation and career growth, job stability, rather than mobility, is now a major concern for many Americans.

3. Americans are putting a higher premium on protection and stability with concerns about job loss affecting most of them. This is a major change in the way Americans are thinking about creating and protecting their financial futures.

4. Generations X and Y, those born between 1965-1978 and 1979-1991 respectively, have been particularly hit hard by job loss. Yet they remain optimistic about their long-term ability to achieve the Dream.

5. Many of the changes in behavior exhibited by respondents in the MetLife study may be rooted in economic necessity. It’s not clear whether the findings represent a permanent return to the values that were thought to comprise the traditional American Dream, or whether there will be a return to the finding of the original study in 2007--the emphasis on consumerism.

(Ed.: A long, well-thought-out essay in this month's Vanity Fair actually described the current state of the Dream along much the same lines as Met has more empirically found it.)

The American Dream is alive and well, but the definition is very different. You can get a better understanding of the changes that have taken place and their profound implications by going here and downloading the entire 2009 MetLife Study of the American Dream.

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.

On Wednesday, your humble blog-servant will be playing host to Kevin Carroll, author of The Red Rubber Ball at Work, as part of our BizBooks discussion series. Go ask Kevin a question, here! And don't forget to check in on Wednesday at 3 P.M. EST, and anytime thereafter, for a transcript of our conversation.

Here's a new development to the credit union issue. To recap: various voices in the small-business community were grumbling that the over 8,000 credit unions--which are not-for-profit, membership-oriented financial lending institutions--are prohibited, by federal law, from lending more than the equivalent of 12.25% of their total assets in business loans, prompting the majority of them simply to make no business loans at all. It irked many that, as businesses struggle to obtain credit, these places--which remain relatively untainted by the sorts of toxic assets that have brought the titans of the financial world to their knees--had their hands tied behind their back where business lending was concerned. Soon after all this, Sen. Chuck Schumer (D-N.Y.) came forward with a bill to raise that 12.25% limit; we welcomed this.

But it's hard not to think that the news that the U.S. government seized two institutions described as "provid[ing] critical banking services to the credit union industry" could jeopardize the bill's prospects. Both had invested heavily in--wait for it, wait for it--mortgage-backed securities.

But we thought that credit unions largely stayed away from such investments? Well, most of them did. Here's where it gets complicated.

As the Post reports, these were not typical credit unions. One, Western Corporate Federal Credit Union, is one of 27 so-called corporate credit unions. These institutions serve as group investors, almost like a big hedge fund, for many of the smaller, community-based credit unions that we and the rest of the small-business community love to talk up. These corporate unions put the investments of these smaller unions together and use the larger purchasing power to make the sorts of investments that the smaller ones couldn't make on their own. These corporate unions also invest some of their assets with U.S. Central Corporate Federal Credit Union, a sort of "central bank" to the credit union industry. U.S. Central, natch, is the other seized credit union.

What's really striking is that this may not be the end: the other corporate credit unions are also said to have significant positions in mortgage-backed securities. In fact, all told, the 27 of them invested a total of $64 billion in such assets.

The irony here, incidentally, is kind of staggering. The corporate unions' raison d'etre would appeaar to be their ability to make more profitable investments, on the smaller unions' behalves, than any of the individual ones could make themselves. But the smaller unions' forced conservatism has left them solvent and, in the current climate dominant; meanwhile, the larger unions' supposed savvy has left them in the cruel embrace of the federal government.

We need to see some more reporting--and we'll try to do some more reporting--on how this will affect the smaller unions. For now, though, we're not putting our money on that Schumer bill being passed anytime soon.

The New York Times has been following a bunch of area small-business owners since last October as they attempt to cope with the recession. They've recently published an update on three: an historic Queens bike manufacturer, a Financial District Middle Eastern deli, a Brooklyn building contractor, a butcher in The Bronx, and a Manhattan tour company. We especially recommend the accompanying video, which you can see here.

The basic sense seems to be that the proverbial light at the end of the tunnel may at least have made its presence felt, even if it's not quite visible yet. If a small business has made it this far, it looks like they will have what it takes to ride out the whole darn recession (assuming it doesn't get drastically worse).

The other lesson seems to be that bargaining with your counterparties--that is, with the other companies with whom, in the course of doing your own business, you find yourself doing business--is an eminently workable idea right now. The butcher struck a special payment deal with ConEd when the utility threatened to snatch his security deposit; the deli's landlord temporarily lowered his rent so that he would not have to move to a smaller location. It's not difficult to see the reasoning behind this: ConEd would rather have a continuing customer even if it gets paid more slowly; the landlord would rather make less than make nothing at all from its tenant in the future. So who can you strike a special, recession-era deal with?

As we struggle to understand the-economic-situation-which-has-yet-to-be-named (I like Peggy Noonan’s “Great Recession” moniker as well as any name so far, so I’m going to use it below), I’ve decided to offer up anecdotes from my own small business to illustrate specific consequences.

Last week, I mentioned that the Great Recession prompted a major bank to eliminate its line of credit program, cutting off a small amount of backup funding to Cedarcrest. This hardly registered as more than an annoyance a few months ago, albeit a sign of the times.

Another situation resulting from the Great Recession this past fall, however, caused considerable stress and a significant financial loss to Cedarcrest.

In the summer of 2007, my company extended a meaningful amount of credit to a bakery café and catering business in Salem, Oregon. The proprietor, named Scott, had purchased the business in 2006, although it had already existed in the same location for decades. They served seventeen kinds of coffee, baked their own bread, and did a brisk breakfast and lunch business in the downtown Salem business area.

Just as importantly for me, Scott personally guaranteed the loan and had excellent credit as well as a history of running this type of business in the past. Although the space was leased, Cedarcrest held a security interest in all business equipment at the location.

I felt good about being paid back everything owed, on time and in full. In fact, the café built a perfect history of payments through September 2008.

Suddenly, and without any inkling of prior trouble, Scott called me in mid-October. He said he’d been operating at a loss all year, with his usual lunch crowd thinning. His business was failing, but he’d found a buyer who could take over and make certain I got paid what I was owed. When I objected that he couldn’t transfer his debts to someone else without my permission, he said the alternative was bankruptcy.

As anyone running a small business who is owed money during this Great Recession can probably guess, the worst possible outcome ultimately came to pass. Two weeks later, having heard nothing, I called Scott. He reported that his deal had fallen through, and both he and his business would file for bankruptcy shortly.

The loss to Cedarcrest was in the nearly six-figure range. The café had gone from being a perfect Cedarcrest customer in September to a major loss by late October. When the equipment liquidated in December, I recovered about $10,000, but the personal and business bankruptcy meant I would get nothing more.

Losses from this one business failure of course ripple out to others in the community and local economy. I spoke to the landlord for the building where the café operated, who fretted about lost revenue while the space stayed empty. Scott laid off all of his employees, affecting a half-dozen folks in Salem. As for Scott, his credit is destroyed for the next few years; he won't be able to restart a similar business, for one thing. And Cedarcrest will almost certainly not extend credit to another restaurant business if it--if I--can help it.

Restaurants open and close all the time, of course. My small business’s experience of the Great Recession of 2007-2009 (and counting) keeps hurting in surprising and upsetting ways, however.

How has the Great Recession affected your business?

The lesson to take away from this New York Times article on how sales of candy have risen during the recession is, of course, not literally that you should go into the candy business. The point is, rather, that you should be thinking about how the recession can play to your business's strengths, and then double-down on that aspect of your business. (Another example: the butcher featured in the video we linked to yesterday pointed out that, because of the recession, lots of people are cooking at home rather than going out--good news for someone who sells raw meat.) So ask yourself: what part of your business is recession-friendly?

Meanwhile, it does appear that if you do happen to be in the candy business, you are making out like a bandit right now. (Fun pop-sociological fact: some of America's most iconic candies, including the Tootsie Pop, the almond Mars bar, and Snickers, date back to, yes, the early years of the Great Depression.) Which reminds us: it's high time that the Senate get around to confirming the heir to the Tootsie Pop fortune as our next Small Business Administration head.

Well, we've all had about a week to digest the Obama administration's plan to get credit flowing to small businesses again, and, well, it looks like most people have ended up with some heartburn. The plan centers around upping the currently dismal rate of Small Business Administration-backed loans by taking $15 billion from the TARP fund to buy securities made up of SBA-backed loans on the secondary market, eliminating loan fees, and raising the amount of these loans the government will guarantee. (A good summary can be found in this AP article.)

Some of the most trenchant criticisms of this plan did not concern its efficacy--that is, how likely these measures are to up the rate of SBA loans--as much as its ultimate goal. A favorite was this post on OPEN Forum (whose sponsor, American Express OPEN, is also our sponsor), "Is President Obama's New Small Business Plan Relevant?" The answer being, probably not much as it should be, if only because most businesses don't need SBA loans (which, the post says, only make up a small fraction of total small-business loans anyway), or even any kind of loan; what they need is for consumers to start spending money again. The plan is good symbolically, and the symbolism isn't irrelevant--in fact, it should prove a help. But it's also probably not enough.

This point was echoed by Independent Street, which pointed out that most start-ups now--and most of the start-ups that we should be most encouraging the growth of--lack the tangible assets necessary to constitute collateral for loans; their worth consists primarily of intellectual capital, which could prove incredibly lucrative and macroeconomically important down the road, but which right now shuts them out of SBA loans no matter how much the government guarantees. (Imagine how difficult it likely would have been for Google to secure a substantial loan ten years ago.)

Another OPEN Forum post goes a step further and argues that the small-business plan is targeted at those businesses that are small in technical name only: "in some industries a business that has as many as 1500 employees is considered small," this author writes. "I think the small business stimulus was targeted more at the 'larger' small business without consideration of the 'small' small businesses most of us own." That sounds fairly spot-on to us.

Now, when announcing the plan, President Obama did leave himself some wiggle room in asserting, "This is still just going to be a first step in what is going to be a continuing effort to make sure that people get credit out there." But even that's a little troubling because, again, in most cases, credit isn't the problem.

So what should the next steps be? They should be things like additional stimulus, as needed; because ultimately, it is only a surge in consumer spending that is going to pull our economy and the rest of the world's out of recession. And it should be reform of things that particularly weigh on small (actually small) businesses. So perhaps temporarily lifting the payroll tax (which we explored here). Perhaps, at the very least, making sure the 7(a) loan program runs as efficiently as it can, which this article says it doesn't.

We're not going to sit here and say the administration's plan is useless, or even that it's just symbolism; plainly neither of those things is true. What we will say is that if the administration thinks its efforts at helping small businesses can end here, then we will have a serious bone to pick with it.

In February, President Obama signed into law the American Recovery and Reinvestment Act, which provides $787 billion in spending and tax relief. Some of the tax breaks create opportunities for small business owners, while others impose new obligations on employers. I recently conducted an expert forum on Bank of America’s Small Business Online Community, where I answered questions about the impact of this package on small business owners. Last week, I began a quick guide to a couple of important tax updates you’ll want to keep in mind. Following are two more.

Making payroll changes. If you have employees, you must adjust wage withholding so that employees can receive the Making Work Pay tax credit to which they are entitled. The IRS has released revised withholding tables so that employees will see a portion of the $400 credit ($800 for married persons filing jointly) in their paychecks in 2009 (new tables will also be used for 2010).

The tables should be used as soon as possible, but must be implemented no later than April 1. There are a number of services and tools available to small business owners that can help with this process. Bank of America, for example, offers its small business customers Easy Online Payroll, which provides a 100% tax guarantee on payroll deductions.

Minimizing estimated tax payments. Small business owners may be able to pay less estimated tax for 2009 without incurring a penalty. Those with adjusted gross income under $500,000 and who derive more than half their gross income from a business with 500 or fewer employees can base their 2009 estimated tax payments on 90% of their 2008 taxes.

Should this special rule not apply (or had it never been enacted), owners must pay at least 90% of the 2009 taxes or 100% of the 2008 taxes (110% if adjusted gross income in 2008 was $150,000, or $75,000 if married filing separately).

In figuring estimated tax payments, self-employed individuals need to factor in self-employment tax. For purposes of figuring the Social Security portion of self-employment tax, net earnings from self-employment up to $106,800 are taken into account. The Medicare portion of self-employment tax applies to all net earnings from self-employment--there is no cap.

Ultimately, of course, the new rule governing estimated taxes does not actually reduce taxes; it merely postpones paying them. But depending on your situation, that could be useful nonetheless.

Barbara Weltman is a top-selling author, attorney, tax and small business expert. Barbara serves as an expert on the Small Business Online Community, powered by Bank of America. Barbara has also authored several books, including J.K. Lasser's Small Business Taxes and The Complete Idiot's Guide to Starting a Home-Based Business.

Though we're generally supportive of efforts designed to increase the flow of Small Business Administration-backed loans, we actually objected to the agency's decision to alter its Community Express program from one aimed specifically at aiding female entrepreneurs and entrepreneurs of color to one that aided all entrepreneurs operating in "distressed" neighborhoods or in SBA-designated Historically Underutilized Business Zones (HUBZones). We wish the program stayed true to its roots, and we are wary of doubling-down on the now-altered program for that reason, too.

Of course, our objections to the new Community Express program were predicated on the assumption that at the very least it would benefit businesses in those HUBZones--in other words, at least it would aid neighborhoods in need, and the entrepreneurs trying to make it in them. Now, however, comes news that, according to a Government Accountability Office study, tens and perhaps even hundreds of millions of dollars from the $8 billion program did not go to HUBZone businesses.

Essentially, many companies based elsewhere were able to set up fake offices in HUBZones or misrepresent the size and predominance of HUBZone-located offices in order to secure favorable SBA-backed Community Express credit--recipients of which must have their "principal office" be located in an applicable neighborhood. The GAO report lays at least part of the blame at the feet of the SBA, which, it said, failed to conduct sufficient auditing and paperwork verification to detect undeserving Community Express participants.

Sharon McLoone roots out more problems that the GAO found, including a current six-month backlog of Community Express loan applications despite regulations that aim for a merely one-month delay.

The scandal is of course reminiscent of the broader federal procurement issue, in which roughly $5 billion of federal contracts that purportedly went to small businesses actually went to big businesses like Lockheed Martin and the like. Concerning the Community Express revelations, the SBA told the AP that it's “re-engineering the entire HUBZone” program. Looks like here, as with the procurement issue (for which, truth be told, the SBA isn't really to blame, although we'd like to see it get the funding and authority to clean up the mess), the agency has its work cut out for it. Indeed, it might be nice for it to have a real administrator--in the person of President Obama's nominee, Karen G. Mills--rather than an acting one, as is currently the case.

Meanwhile, the Community Express problem ought to give policymakers further pause as to the wisdom of expanding the program beyond its original purpose. It's hard not to think that these issues arose in part because the program was being asked to accomplish things it wasn't designed to accomplish.

As the Obama administration takes steps aimed at reversing the dramatic slide in Small Business Administration-backed loans, it is becoming even more clear that so long as such loans are ultimately dependent on private lenders, especially big banks, intiating them, the federal government's efforts are extremely likely to prove fruitless.

Most notably, earlier this week came news that four financial institutions--including Bank of America and Capital One Bank--that together accounted for 4% of all SBA loans in Fiscal Year 2008 have declared, "No más": they have either shut the door to new SBA loan applications completely or have effectively turned off that particular spigot at their bank. "Their sudden absence from the lending scene has left a hole that the banks continuing to participate in the program have not filled in," the article declares.

In fact, Bank of America's slide might be the most dramatic. In FY 2008, it made $136.1 million in SBA loans. But ever since its CEO referred to its SBA loan portfolio as a "damn disaster," well...in the first quarter of FY 2009, it originated only $3.3 million in SBA loans. Clearly that insane drop has something rather more to it than just dropping demand for credit. Clearly the bank that has received tens of billions in taxpayer money over the past half-year has decided it doesn't need to lend to small businesses anymore; and since, technically, no one is making it, why shouldn't it decide as much? Guess it's just too much of a damn disaster for a bank that might well be insolvent were it not for massive, unprecedented federal aid.

(Apologies if just how livid we are doesn't quite come across onto your computer screen.)

Meanwhile, even if you buy that lack of credit is the main problem for small businesses right now--which we don't really--the article is dubious that the administration's new efforts, including its pledge to purchase $15 billion of securitized small-business loans, will be enough to reverse this trend.

In addition to which, the Wall Street Journal reports that the Government Accountability Office has found that many banks do not secure from small businesses the documentation necessary to being eligible for an SBA-backed 7(a) loan, and that the SBA has failed to police this problem adequately.

When you put all this together, we're largely left back where we were all the way back in October: at an insistence that smaller financial instutions, and in particular community banks, must be made a crucial part of the process of restarting small-business lending. Fortunately, it does look like one person who would agree with us is Federal Reserve Chairman Ben Bernanke. But will he put his money where his mouth is (at least, where it is when he's speaking to the Independent Community Bankers of America)? We'll be watching him to see.

"Smallness works to advantage. With us, a client is considered a large fish in a small pond. So these accounts that we're competing with nationally, I think we have more of a personalized approach, and specifically they get attention from myself as the owner, management staff that average 12 years of experience, collectors that average four years. At a lot of these larger agencies, just because of sheer volume, they don't have these numbers. Being a big fish in a small pond is an advantage to our clients."

Our guest today is Frank H. Cann, Jr., of F.H. Cann & Associates, an accounts-receivable and debt-collection agency based in North Andover, Mass. Frank discusses what it's like competing against much larger agencies, how the recession has created more opportunities for his business but also made doing his job more difficult, and the part of President Obama's 2010 proposed budget that worries him.

If you are a small business owner interested in being interviewed for Small Business Salon, or know one who would be (or should be!), please email us at bizboxonslate@gmail.com.

BizBox: Please tell us about your business.
Frank: The name of the business is F.H. Cann & Associates--FHC. We are a collection agency, also known as an accounts receivable management firm. We handle collections on delinquent accounts, and we personalize our recovery strategies based on the specific needs of our clients. We also perform skip tracing, to find people that have skipped out on their debts. We use different means, different databases to locate people who've skipped out. Basically what we do is: whatever our client needs, we tailor according to what they need. And we realize that, in this changing economy, we need to be more flexible and lenient towards payment plans. We go in with a different approach, trying to set it up so that people pay what they can.

The services that we provide put money back into the economy. This is money that is actually owed--we're not a telemarketing firm trying to sell something--items that have already been purchased, student loans that have already been utilized. Our company uses a professional approach, almost more like a counselor, as to how the people we deal with can resolve their debt in the quickest way possible, and to help them get back on track and make themselves credit-worthy. I think that is the message I would want to put across. We're performing a service for the betterment of the economy, but also for the consumer.

How do you "personalize" or "tailor" for a given client?
A client may want us to substitute for an inhouse collection department, for example. We're dealing with their current client base that they're trying to maintain. So we're identifying ourselves as employees or representatives of their company, which helps them defray their costs, their full-time benefits, and their hourly rates. In that way, we're more of a customer-service agent. Whereas for those who refuse to pay, we also service the client by affecting administrative wage garnishment.

What's that?
It's when after we've afforded the students, say, every ability to rehabilitate their loan by paying 1% over a nine- or ten-month period. We've given them the ability to consolidate their loans. And the last step is involuntary collection, where we set up the AWG--we let them know of their rights, and then, based on federal laws, we can send a note to their employer to garnish up to 15% of their check.

Relative to other collection agencies, how big or small is your company?
I would consider us a small collection agency in terms of number of employees. However, we're competing against the larger ones nationally, and we're subcontracting some of their work as well--a good portion of our work is subcontracting. But when it comes to going head-to-head, it's like David and Goliath. In the five years that we've been going head-to-head, we've only lost one quarterly contests, and we've won every single annual contest.

Has your relative size helped you in competing with bigger companies?
Smallness works to advantage. With us, a client is considered a large fish in a small pond. So these accounts that we're competing with nationally, I think we have more of a personalized approach, and specifically they get attention from myself as the owner, management staff that average 12 years of experience, collectors that average four years. At a lot of these larger agencies, just because of sheer volume, they don't have these numbers. Being a big fish in a small pond is an advantage to our clients.

How did your business start?
Started in 1999 as a two-person shop, my wife and I, and we pretty much wore several hats. I was the one in charge of sales, making my cold calls every day, and then also collecting. My wife dealt with more of the bookkeeping and clerical aspects. Then, over time, we brought in other family members: my mother and grandmother stuffing envelopes, my uncle did compliance and licensing on a part-time basis, another uncle helped with a cash infusion. It was a family effort. We had 1000 square feet.

Ten years later now, we've invested any profits back into the company, and in some of our employees. And now we have 56 employees, 8000 square feet, the past three years we've averaged 35% growth in gross receipts. We've seen a dramatic, steady growth every year, and that has a lot to do with the key people around me. I surround myself with very trustworthy, confident people.

How are you currently trying to position yourselves to grow?
Now, we're trying to position ourselves to get involved with the Department of Education contract, which recently was just awarded. So we're getting involved with the mentoring program to be able to bid on it in 2012. A lot of things are being controlled by government than ever before, so we're getting on the GSA schedule to be able to bid.

How has the economy affected your company? It seems like yours might be one of the few types of businesses that might actually benefit.
It certainly has increased the volume of delinquent placements, but it's decreased the collectability. Unemployment's at 8.1% naturally--we're working harder for less money. So there are more accounts, but less money per account. Also, because the lending market is virtually frozen, especially since October, the rehabilitation process is frozen, too. Frequently, we're in a stalemate, and in turn we haven't been paid our fee for the sales we've been setting up. So we're servicing, and we're getting a percentage of what delinquent debtors pay on a monthly basis, but we're not paid in full until the lender comes to the table.

You also said to me that something in President Obama's budget concerned you. Could you discuss that briefly?
Right, we're dealing with President Obama's budget proposal for 2010. In that proposal, he has proposed to eliminate the Federal Family Education Loan Program, and have all loans originate through the direct lending program, which is through the Treasury. If successful, that will greatly impact not only my business but the jobs of 35,000 Americans in the collection industry, in the service industry, who service these loans. There's a lot of literacy that goes along with the FFELP program: it's providing awareness of financial aid, improving financial literacy. And the direct lending does not provide any of these services.

I'm not saying the FFELP program is running as efficiently as it should be. But it's been in existence for 43 years. And I feel that a radical approach isn't in order--keep it in place and make the necessary changes, whether it be reduction in fees or whatever. But total elimination seems very radical. It doesn't seem it would provide the services the students should have, or the competitive nature of interest rates. Why recreate the wheel? Just tweak it so that it works. I'd still get impacted, cause my fees would go down, but at the same time it would make it more competitive, and it would keep everything in place.

Has the current credit climate affected your ability to obtain financing for your business?
I haven't had the need recently to go to any lenders. I foresee a need, especially if I get some of these subcontracts, for the techonology that's needed and the certification. I'm assuming that it will be difficult to secure that type of financing. I do have an investor that's a partner that can certainly help out, but it's not something I'm concerned about right now.

How do you feel about being in business for yourself?
I like working for myself because even though I consult with team members, management, my wife, my partner, I have the final say on decisions that ultimately affect my family and my employees and their families. Whereas before I would have to carry out hasty instructions of hasty employers, now I can make my own decisions, try to think it out, try to implement them in an organzied fashion.

Also to see the success for my employees is a driving force. When I see an employee buying a new car or buying a new home, I think I feel as much satisfaction as if I bought it. I know it's their hard work that bought it, but I feel the satisfaction.

Another perk is not having to own an alarm clock, although I make it up at the backend of the day, when my insomina kicks in. Overall, no matter what stress comes with owning your own business, it's worth it. You control your own destiny as much as you can. And you make your own decisions.

This morning's New York Times brings a helpful new way to look at the broader problems affecting small businesses--one that bears out what we've been saying. What've we been saying? That the credit crunch is something of a red herring--real, but a distraction--and that the true problem is the drop in consumer spending that is dragging every other indicator down; and that therefore the Obama administration's strategies for helping out small businesses, which have so far focused largely on the problem of credit, are missing the point and not likely to prove all that effective.

The Times reports today on a bookstore that is a household name in all households that love books: Powell's, of Portland, Ore. Don't panic: Powell's isn't going out of the business. But it has had to stall plans for a $5 million expansion. Problem securing financing? Actually, no--the credit was there if the bookstore's owner, the eponymous Michael Powell, wanted it. Rather, in the article's words, with the economy and especially consumer spending being what they are, "the project no longer looked prudent."

The article looks at another Portland company, Columbia Sportswear (you may very well be wearing one of their fleeces as you read this). How has the credit crisis hit it? Um, it hasn't, really: they have no long-term debt, and actually a comfortable couple-hundred million in cash. But that doesn't mean they haven't had to lay off workers and think long and hard about their future plans. Not a small business, but, with a balance sheet that resembles that of one, the same principle applies.

Powell's failure to expand is apt to have a ripple effect, we would think, as that $5 million it was going to spend simply goes unspent, and all attendant multipliers are left unmultiplied. But certainly it feels wrong to blame Powell's. Can you really hold it against them for holding back on plans for expansion until it seems really clear that the good people of Portland (and the rest of the country) are ready to start buying books like they used to again?

This is all one more reason we feel that a little less attention should be focused purely on the credit problem and a little more at getting people buying books again so that Powell's can spend its $5 million on an expanded site (and so that people can buy yet more books, so that publishing companies can sign more authors and editors, who can buy more sandwiches for lunch at their offices, etc. etc.). In other words, that $15 billion being used to buy up small-business loans might be better put to use hiring people to build things so that they can in turn buy things. Just a thought.

Everybody's working for the weekend. Us included. Here are some things to pore over while not-working.

Entrepreneurship Czar. Why Obama needs that position. And what such a person needs to do. [The Entrepreneurial Mind]

Ailing health insurance. A new nonpartisan government report finds that the small-business health care market has become more concentrated and is therefore likely to become more expensive. [Independent Street]

What credit crunch? Well, yes, there is one. But is it really affecting small businesses? Do you really need credit right now? [The New Entrepreneur]

Work, meet life. How to prioritize, and other things that will ensure your business isn't cheating you out of your personal life, or vice versa. [Forbes]

Be a mensch. How your own behavior affects the behavior of your employees--and also their productivity, and also your business's fortunes. [Entrepreneur.com]

Be a mensch II. It means behaving like an adult, but it also means treating your employees like they are adults, too. [NYT]

In my first column, I noted that in my law practice representing business owners and my experience running businesses, it seems that entrepreneurs tend to lament, or feel sorrow or regret for, the following:

o Focus. Pursuing new ideas to the detriment of the core business.
o Work/Life. Missing out on real life while pursuing business passion.
o Employees. Inability to find great help and keep them.
o Partners. Challenges in finding or maintaining good business partners.
o Money. Inability to find necessary financing for growth or survival.
o Burnout. When one morning you just can’t do it anymore.
o Boredom. When there’s not much more to build.

We talked about financing in the last column. Today we focus on one of the most difficult challenges entrepreneurs face: what happens when enthusiasm and passion for building the business fades.

On the one hand, most entrepreneurs don’t know much about punching time clocks. They work nights and weekends because they are focused, determined, and excited about the business. At some point, though, it takes its toll, even if the business is successful. There are six options you have when you are simply too “pooped to produce.”

Take a Break. Sometimes it’s just a nice relaxing vacation that you need; but too many entrepreneurs keep putting off taking time off. "Maybe next year," they might tell their spouse, "when the business is doing better." It might even be just a nice long weekend at a little inn, or a few days with the kids by the beach. I’ve always believed in taking a healthy amount of time off, but I trade that for making myself available to my office and clients in today’s wirelessly connected world. “If you can’t bother me on vacation I can never go,” I tell them. It works for me.

Rely More on Others. Recently I handed the role of Managing Partner in my firm to my co-founder and friend of 10 years. I found that I was not tired of practicing law, hustling for business, overseeing my practice team, traveling and giving speeches. Moreover, I still oversee important decisions and policy matters, which is what I really care about. But I was tired, after 16 years, of the daily grind of operating our multimillion-dollar business and now that I am no longer managing partner, I feel renewed energy towards the things I enjoy.

Find a New Related Challenge. Sorry, another me story. I decided about six months ago, after prodding from clients, to upgrade the quality and scope of my blog and start selling ads. I do it in my spare time, and I enjoy writing, so it’s been fun. And with some help, the blog is now in the top 1% of all Websites! I’m even planning a broader blog, which recently soft launched at www.crisispost.com. This takes nothing away from my work with law clients and colleagues. In fact, it enhances it and leads to new business opportunities.

Sell the Business. A long time client in an entertainment-related business decided that he was tired, after 15 years, of working constantly and building the business to about a $25 million-per-year level. He had put away about $30 million. He had lost his wife over it, and now had a great new girlfriend. He also saw some consolidation in the industry. So, he put the company on the block.

The only problem was, the one potential buyer changed their mind and decided not to go forward. So sometimes you are stuck even if you want to sell. Which led to….

Shut Down. This same client realized he’d lose his equity, but since no one wanted the business and he didn’t trust it to anyone else, he had what he called “**** you” money and could retire at 42, so he just shut the business down. For those without $30 million, this may be, er, less of an option.

And even those with $30 million should be careful about exercising this option. My client, in shutting down, discovered that his union agreement required large severance payments if he simply stopped operating. So instead he took advantage of his right to lay off employees, and did so one at a time over a nine-month period; then he shut down and went on to enjoy his life.

Hand It Over. More dramatic than simply relying on others, this option has you literally leaving the business and letting someone else run it. You remain involved either as chairperson (the Bill Gates Option) or just a shareholder and adviser. You go enjoy yourself, and trust the person you hopefully groomed for the job. This move is particularly common to family businesses, where it tends to be hard when the original founder first has to hand things over to their own children, but where, after that, it gets a bit easier.

Next time: The last in this series: how to respond when you’re simply bored.

David N. Feldman, founding partner of Feldman Weinstein & Smith, is the author of Reverse Mergers and blogs at Reverse Merger & SPAC Blog. He can be reached at dfeldman@fwsllp.com.

This New York Times article on the changes and flattening afoot in the video-game industry takes primarily the perspective of the established video-game companies--the Electronic Arts and Take-Twos of the world, as well as much larger corporations, such as Microsoft and Sony, with extensive positions in selling, respectively, their Xbox and Playstation modules. These big businesses face the strange paradox of a sector that is radically expanding (with older people in particular beginning to partake) and robustly growing (video-game sales were up 19% in 2008 over 2007) combined with the increasing difficulty of actually turning a profit on games, which tend to require large investments and are therefore expensive to retail. Not unlike the world of book publishing, the video-game industry is moving in an increasingly blockbuster-reliant direction. So things do indeed look, if not grim, at least challenging for even such mainstays as Nintendo.

But there is, of course, another side to the story, which the article touches on several paragraphs down: "But game companies say there is a bigger force at work: the proliferation of consumer choice in the game industry prevents them from raising prices on console games. Games for iPhones are considerably cheaper; indeed, many are free." It might have added that games for iPhones are stupendously popular: a quick check on our iPhone revealed that the significant majority of the top 25 most-downloaded applications are games of one kind or another, and that many of these are simpler types of games that probably cost very, very little to make (and which appear to be sold by unheard-of start-ups).

The point is not just that, as we've written many times before (here's one particularly salient example), iPhone apps are a great place for ambitious, talented entrepreneurs to look to start making names (and money) for themselves.

The point is that, generally, new technology over the past decade or two has reached the point where, on the hand, the old-line, staid corporations are not quite flexible enough to move as quickly as the times, whereas, on the other hand, the barriers to entry for extremely small companies have shrunk to next to nothing, or to just plain nothing.

The flattening of the video-game industry may just prove a harbinger of a larger trend, surely only exacerbated by the current recession (which is damaging big companies and giving a lot of brilliant laid-off folks a bit more time and incentive to strike out on their own), in which we will increasingly see an advantage go to the little guy. Should be exciting to watch.

Well earlier today we hosted our BizBooks discussion with Kevin Carroll, author of The Red Rubber Ball at Work, and, if we may say so ourselves, we think it went rather splendidly.

Kevin is a recent convert to Twitter--you can check his feed out here (and BizBox's here!)--and the snappy, concise style of his answers definitely reflects that. You can check out the whole discussion here. A couple of our favorite answers follow.

BizBooks: In sports, there are two types of leaders: the designated coach/manager, but also players who step up and provide a different sort of leadership. Is it wise to cultivate similar types of player/employee-leaders in the office? Or is it best to leave the leading to the designated bosses?
Kevin Carroll: it is always important to cultivate leadership at all levels. you hear all the time in sports about a player behaving/acting like the "coach on the floor or an extension of the coach." that is really an important trait for an organiaation to have top-down + bottom-up leadership happening (unexpected emerging leadership is great too!

Evanston, Illinois: I have streamlined and cut back recently on many employee perks. It's just due to the economy--the alternative would be to start laying people off. Is there a way I can follow your advice without incurring further costs and without losing man-hours from my employees?
Kevin Carroll: try to find simple cost-effective solutions to add purposeful creative/play. here's one: a "look-up" contests - go out for 5 mins and find something unusual to tell us about/take a pic is an option - the winner gets a nominal prize or extra long lunch break or can go run a personal errand early from work

BizBooks: What should a manager who is trying to implement your theories to when confronted with an employee or employees who say they would prefer simply to clock in, do their work quietly and alone, and clock out?
Kevin Carroll: they need to be reminded about why they have been hired to be a part of the organization and how their efforts/commitment contributes to the overall vision. leaders are responsibile for keeping the team motivated + inspired so I would look to the leader to "own" thtat employees attitutde + shift it in a positive way.

Independent Street presents the story of two entrepreneurs who launched a Website, Tappening, initially and ostensibly for the public-service cause of drawing attention to the environmental downsides of purchasing and using disposable plastic water bottles. To fund the project, they offered 39,000 reusable plastic water bottles for sale. And they succeeded in selling those 39,000 water bottles. In two days. Then they sold 350,000 more, grossing over $6 million. And counting.

Though they have so far drove all of that revenue back into the project, controversy has erupted over the prospect of them making money over what seemed to be a not-for-profit sort of endeavor. They themselves have defended such a notion, in the face of criticism; and they've even hosted a poll on the site asking whether they're "Greedy Entrepreneurs," "Selfless Environmentalists," or "Both".

While, if we had to guess, we'd probably check-mark "both," the real question is: who cares?

The end result, after all, is the increased use of eco-friendly water bottles, and, assuming that is an end result you feel worthwhile (we know we do), should it really bother you if the people behind it are also profiting? (This is assuming there's no false advertising at work, which in this instance there wasn't: it appears that they genuinely believed their bottles would sell modestly, and planned only to recoup their costs, and were surprised as anyone when their idea took off.)

But the larger point is that this is creative capitalism at its best and, as we've argued, it may represent the future of both entrepreneurship and of philanthropy. And in fact, the real answer isn't "Who cares?", it's, "hopefully". We hope these entrepreneurs are greedy: the greedier they are, the more of their great eco-friendly water bottles they will sell. The whole point of creative capitalism is that it allies the private profit motive with the public good in a non-zero sum relationship, such that the energies behind both are accumulative rather than at odds.

Incidentally, we'd also point out that one can do a similar thing but come at it from the opposite direction. Tappening's founders set out to do good, and now may be in it for profit; but you can just as easily practice eco-preneurship if you are already in business for the money (what else is anyone in business for?) and decide that it might help your business if you are more green-friendly.

So bravo for Tappening! May they help save the environment, and may they do well by themselves in the process.

Recently I wrote about how small business owners are feeling about the current state of the economy in my column. I was reporting on the new Small Business Success Index. Survey says, small businesses are generally optimistic.

But what about the employees? How are they feeling about the economy? The recently released Principal Financial Well-Being Index for the first quarter of 2009 provides some answers. Principal Financial Group, the financial service provider, does this study on a quarterly basis to identify and track changes in the workplace of small and mid-sized (growing) businesses.

The respondents included both employees and retirees. And the study also included some key findings about the employees only.

Benefits. Employees continue to rate health insurance as the most important benefit, followed by defined contribution plans, dental insurance, disability insurance, and defined benefit plans. Health insurance is the benefit most employees would like to see their company improve upon.

Health Coverage Changes. More than four out of ten employees (43%) have not seen health coverage changes in the past 12 months. Nearly three out of ten employees have seen increased employee co-pays (29%) and increased employee deductibles (29%).

Job Security. Job security continues to top the importance chart over such other virtues as long-term financial future and challenging work. Six out of ten employees ranked job security as most important to them. When asked what concerns they have about their company in the next year, the most common concern cited was that their company will reduce the number of employees, mentioned by 46% of employees (this figure is up from the fourth quarter of 2008, when 41% expressed layoffs as a concern).

Planning for Job Loss. Employees were asked what actions they have taken, if any, to prepare for a potential layoff. The most common such action was to cut spending on miscellaneous items such as eating out, take-out coffee, entertainment, and other consumer purchases--reported by 43% of employees. Nearly a quarter (23%) of employees have tried to put aside more money in savings each month, while 19% have cut some of their fixed monthly expenses such as gym memberships, media subscriptions, and cable TV.

Retirement Savings. Nearly six out of ten (59%) employees said they did not change the amount that they are saving towards retirement in the past six months. 14% of employees have increased the amount they are saving, up from 11% in the fourth quarter of 2008. Although only 7% of employees reported that they have reduced the amount they are saving for retirement, this is a significant increase from the fourth quarter of 2008 (4%). 20% of employees indicated they are not currently saving for their retirement.

401(k) Changes. Employees participating in their employers' defined contribution plan were asked what changes they have made, if any, to their 401(k) accounts in the past six months due to current economic conditions. Consistent with the fourth quarter of 2008, 10% indicated they have made some type of change to their 401(k)--5% have decreased the amount they are contributing, 4% have stopped contributing, 2% have taken out a loan from their 401(k) account, and 1% have taken out a hardship withdrawal. Employees who have made changes to their 401(k) account have made these changes most commonly either to pay daily expenses (45%) or to pay down debt (26%).

You can download the full report, which has all the survey questions and data, from the online Index Summary.

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.

The news came a little under a week ago: Sen. Arlen Specter (R-Pa.), otherwise known as the only Republican who voted for cloture (i.e. to bypass a filibuster) the last time the Employee Free Choice Act came to vote, announced that he had changed his mind, and that this time around he would join a filibuster of the EFCA, commonly known as card check legislation. The political reality--with the Democrats holding 58 to 59 Senate seats (depending on what happens to Al Franken), and with the filibuster, long the province only of extraordinary protests, having been normalized--is such that, as we explained in an earlier post, this goes quite some way toward dooming the bill's overall, ultimate chances. The Entrepreneurial Agenda's Robb Mandelbaum has an interesting discussion of what may have prompted Specter's change of heart--if you suspected he's up for reelection in 2010, then you suspected correctly--but also concludes, "The fight over the Employee Free Choice Act--a.k.a. "card check"--appears to have ended before it even began."

Or is it? Here is where things get complicated. The EFCA itself, or any alternative bill that includes card check--that is, that allows union certification through the signing of cards as opposed to a secret-ballot process--looks exquisitely unlikely to pass until 2011 (at the very least). But there have been alternatives proposed, mostly either by businesses (including Whole Foods and Starbucks) or conservative Democrats/moderate Republicans. Crucially, none of them include card check. But they do include some concessions: fixed election dates, requiring binding arbitration--certain steps that would make forming unions easier than it currently is, if not nearly as easy as it would be under a card check regime.

What has been disheartening about all of this negotiating and counter-offering and the like is that it seems to us to have been dominated solely by large, powerful interests: the biggest of the big unions; the biggest of the big corporations; the most powerful of politicians. They may not all get their way, but they have all had their say, and have all made ample contributions towards shaping whatever the ultimate outcome turns out to be.

But the needs of small businesses, whose interests in this matter strike us as being unaligned with either Big Business's or Big Labor's, have gone largely unheeded. We're pretty sure this is the point of representative democracy: powerful politicians can stand up and speak for those less powerful interests. So far, though, the only politicians who have spoken up seem concerned either with unions, big businesses, or their own careers. It's time for someone to step up and speak on the issue for the small businesses.

President Obama's nominee for head of the Small Business Administration, Karen G. Mills, will get her confirmation hearing tomorrow in front of the Senate Small Business & Entrepreneurship Committee (the agency is currently being run by an acting administrator). We wouldn't expect too much difficulty. For one thing, there is nothing glaringly/explosively controversial about her; for another, she seems to have been selected with the committee's ranking minority member, Sen. Olympia Snowe (R-Me.)--also a successful, moderate woman from Maine--in mind. Our guess is we will soon have, officially, a new Small Business Administrator. (For our brief rundown on Mills, see here.)

Which is not to suggest that Mills's appointment has been wholly uncontested. Some, including perennial gadfly (we don't mean that in a bad way) Lloyd Chapman of the American Small Business League and blogger Robb Mandelbaum have criticized her selection on the grounds that her experience comes from the world of venture capital rather than small business. Also brought up has been the apparently less-than-stellar performance of a private-equity fund she helped to run.

But our guess, as we say, is that these will turn out to be inconsequential quibbles as far as her confirmation is concerned. And we'll go a step further: she should be confirmed. She has struck as impressive, competent, and even visionary. And the SBA needs itself a permanent head and permanent direction. It has to deal with misallocated federal contracts; with the recent HUBZone scandal; with the changes to and expansion of its flagship 7(a) lending program that the stimulus package wrought. Now is the time--now is past time--for the SBA to have real leadership. Hopefully, it will very soon.