The New York Times reporter with the Baby Boomer beat--nope, we're not making that up; every Sunday it publishes a column called "Generation B" all about that lovely group of folks--wrote a couple days ago about the latest fad for those born between 1946 and 1964: unemployment. (Hey, not all fads are voluntary! remember Pogs? As if you had a choice.)

The main problem for the man profiled in the article is that he's overqualified: a senior vice president at a private loan company who made a very substantial salary--one that was utterly merited, if we are to believe the many colleagues and industry folk who rave over his talent and enterprise. (He lost his job when his company shut down its student-loan business; he received a very generous severance at the time.) He represents the broader problem that has seen middle-aged workers--especially men--see their highest uneployment rate since, yes, the Great Depression.

The man is filling his time by working on a novel (he's already published one). Follow your dream, dude. But if you find that novel-writing isn't lucrative enough, perhaps you should consider starting your own business? As we've written before, you wouldn't be the only one.

One thing is clear: whether or not this article's specific subject decides to become an entrepreneur, there are many others like him--able-bodied and -minded, talented, middle-aged--who are going to start their own businesses. Whether they've been laid off or simply run their course in their lifelong career, it is clear that, for Baby Boomers, entrepreneurship is the new retirement.

It should come as no surprise that, as the Washington Post reports today, small businesses, led by the 300,000-strong National Association of Small Business Contractors (NASBC), are none too pleased with the federal government's 2008 contracting numbers. As we reported last week, 21.5% of federal contracts went to small businesses, where 23% are legally required to. (The number is even worse when you add in contracts that are exempt from the 23% requirement but nonetheless certainly could go to small businesses.)

The Post also does a good job filling in some blanks. Like the fact that one reason the requirement is necessary is that merely putting together a proposal can cost a tidy sum--something the average small business may not be able to do. Or that one problem is that while the Pentagon is responsible for an astonishing 75% of all federal contracting dollars, lots of those have been going to overseas work--think Iraq and Afghanistan--for jobs that, in fairness, small businesses are probably not equipped to handle. And if you're looking for which federal agencies to boo the most, then turn your ire on the U.S. Agency for International Development and the Office of Personnel Management, which met none of the five contracting quotas. (How OPM, which is responsible for tracking these very numbers and does most of its work domestically, failed to succeed here is confounding.)

So what does the NASBC want? Penalties for agencies that don't meet their quotas--which, let's remember, are not crafted to be voluntary, but are actually legally mandated, articulated in laws passed by Congress and signed by the president. Fines for companies that misrepresent themselves as small, and thereby cause ostensible small-business contracts to go to large companies--the American Small Business League's hobbyhorse. And let's not forget another request of theirs: the making of Small Business Administration head into a Cabinet-level position, something which President Bill Clinton did and which it was widely believed President Barack Obama would do.

Meanwhile, Entrepreneur's Daily Dose highlights the fact that small businesses received fully 23.4% of the $8.1 billion in stimulus money that has so far been doled out in federal contracts. That's obviously a lot more encouraging news.

The blog also offers this good piece of advice: if you want federal contracts, it might be easier to get federal subcontracts. That is, it is in many cases more difficult for a small business to go through the extensive process of bidding on and winning contracts directly from the federal government than it is for them to build relationships with large, frequent private contractors in their specific industries and be ready to take on work that these contractors subcontract out in the course of fulfilling their federal contracts.

And we will close with a reminder and a plea: the Fairness and Transparency in Contracting Act, which would institute a lot of mechanisms designed to keep small-business contracts in the hands of actual small businesses, has received bipartisan support. It ought to be made law, and then enforced far better than the already on-the-books 23% statute is.

It's been over half a year since the $770 billion federal stimulus package--official name: the American Recovery and Reinvestment Act--was signed into law. Has it helped small businesses? While there's no way to ascertain the counterfactual (how things would be had there been no stimulus), it's worth pointing out the following facts:
* The U.S. economy has, so far, recovered from its recession faster than most economists had predicted it would.
* Small businesses have received almost $2 billion, just in federal contracts, just out of the stimulus money that has been spent so far--which is not even close to all of it.
* The anecdotal evidence--see this OPEN Forum post (that site is published by our sponsor, American Express OPEN) and this one from Entrepreneur's Up and Running blog--demonstrates that plenty of small businesses have been directly helped, and even saved, by the stimulus.

The point we'd add is that the stimulus's beneficial effect on small businesses can and should be measured by more than just how much federal money went straight to small businesses. The whole idea behind the stimulus was to flush all that money into the economy, which would both be good in and of itself and would in turn provoke yet more money to be spent. With all this money being spent by consumers on all levels of the economic food chain, small businesses are bound to reap much of it. And the stimulus deserves much of the credit.

Last week I dealt with the question of what happens to retirement plans in a bankruptcy, and among other things I noted that there are two broad exceptions to retirement plans' being protected from creditors. A participant’s assets are not protected from 1) a federal tax levy, or 2) a Qualified Domestic Relations Order (“QDRO”)--under which a spouse, former spouse, child, or other dependent is recognized as an alternate payee.

You might think that neither exception applies to you since you’re on good terms with both Uncle Sam and your spouse. But that's not necessarily true. Why?

Because in the world of retirement plans, there are three parties to a divorce: the retirement plan participant, the ex- (called the alternative payee), and the plan administrator (“PA”). And if you’re the PA--small business owners, this likely means you--then you’re right in the middle, because you have to decide whether a domestic relations order that provides for child support or recognizes marital property rights in the participant’s retirement benefits meets the requirements of a QDRO under federal tax laws.

Tax laws being what they are, deciding that question can be pretty complicated. Fortunately, the Department of Labor, which has jurisdiction to interpret QDRO provisions, has published a comprehensive report on the matter.

But my advice is, if you ever find yourself in this situation, then make like someone who wants a divorce: call an attorney.

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.

As John Tozzi and others have relayed, ADP's August job numbers are out, and while they're an improvement over July's, they're worse than expected: a total of 298,000 payroll jobs lost, including 122,000 at small businesses (those with under 50 employees). The report's author predicts continued losses for at least the next several months, even in the event that the economy improves, as it is expected to do. In total, since a January 2008 peak, small businesses have cut 2.5 million jobs.

So where's the silver lining? Fortune Small Business, in an otherwise dour (but good) article pegged to these latest numbers, finds it in the extra lengths small employers are going to keep what remaining employees they have happy, and presumably in the increased productivity that such measures engender. Think of this hopeful if morbid consequence of the awful jobs climate as one of those many ways in which the recession will necessarily leave companies--those it doesn't kill, that is--slimmer and stronger and ready to reap the turnaround.

We don't have much more to add to Feeling Lucky's take on yesterday's Gmail crash over at our sister site The Big Money: "As hair-pulling promptly commences throughout the country, cloud computing's reputation takes yet another hit."

We'd only add that the actual problem that caused yesterday's outage apparently had to do with routine server maintenance. In other words, we're not sure it evinces an endemic problem to cloud computing that is going to prevent Gmail from continuing to grow in popularity over the long haul. It strikes us as evidence, rather, of what we've previously termed cloud computing's messy adolescence. It's sure to grow up sooner or later!

Robb Mandelbaum has two excellent recent posts over at You're The Boss profiling two major players in the health-care reform debate that both purport to represent--to borrow the motto of one of them--the voice of small business.

About a week ago, he looked at the National Federation of Independent Business, which is generally accepted to be the most influential small-business lobby. We've trained our eye on the NFIB before, which tends to advocate policies that lie on the right side of the political spectrum. At its worst, though, it does little more than spout empty Republican talking points; at its best, it shows a broad-minded eagerness to solve the problems that small business owners typically face. Mandelbaum talks to people who agree that the NFIB is most accurately seen as being aligned more with one party than the other. Is that representative of its members? One argument would be that the NFIB claims to represent small business owners only when it comes to economic matters: it is plausible that the majority of small business owners are conservative when it comes to these, yet that these same owners are more evenly divided between the two main parties due to non-economic issues.

The other group, which Mandelbaum examined yesterday, is the Main Street Alliance. This organization, which is more ad hoc and is focused specifically on health care, supports liberal positions: universal health care, complete with the public option (a government-run insurance plan to compete alongside private insurers). Mandelbaum recounts the success the group has had in converting at least one Blue Dog (read: conservative) Democrat over to the decidedly progressive public option.

The thing we found most encouraging about the Main Street Alliance, particularly in contrast to the NFIB, is its bottom-up orientation, which gives the impression that they are just as much interested in empowering small business owners to speak for themselves as they are in speaking on their behalves. The Alliance tries hard to recruit small business owners who can speak knowledgeably and passionately about the issue, encouraging them to write letters to the editors and meet with their congresspeople. The NFIB is a classic top-down lobbying organization. That fact doesn't inherently mean that it is less representative of small business owners' true sentiments than the Alliance is. But the Alliance sure does sound more believable claiming that mantle.

Of course, health care just may turn out to be one of those issues where the NFIB shows its conciliatory side. As we've previously reported, the organization is one of four ideologically diverse groups involved in the Divided We Fail pro-reform group--the others beeing the Business Roundtable, the Service Employees International Union, and the American Association of Retired Persons.

Besides, it strikes us that proponents of health-care reform ought to be clear on who their true enemies are. They are not necessarily those who disagreee on the means--say, those who oppose a public option--but those who unreasonably fearmonger in an effort to derail any chance of reform. As New York Times columnist David Leonhardt--a notable progressive--wrote today incremental reform is not only better than no reform at all, it's the only sort of reform we're likely to get currently. While the Main Street Alliance is not wrong to reach for the reform stars, it would also not be wrong to welcome the NFIB into a bigger, more moderate tent.

A new study finds what you probably suspected anyway: using credit cards as a way to borrow cash--giving the "credit" in credit card its full meaning--can threaten businesses. The Ewing Marion Kauffman Foundation finds that extensive credit card debt plays a not-insignificant role in a business's chances of surviving its first three years. Specificaly, "every $1,000 increase in credit card debt increases the probability a firm will close by 2.2 percent." (Note: we're talking here about using your card actually to borrow money for a sustained period of time; this isn't putting some purchase on the card and then paying the balance back by the end of the month.)

The problem with borrowing this way is that credit cards charge higher (and less predictable) rates and more fees. Moreover, the lack of due diligence on the part of the lender--you don't have to secure permission to borrow money on the card as long as it's within your limit--encourages, or at the very least allows, unwise borrowing to take place. (Time to note that our sponsor is American Express OPEN.)

But what about credit card reform--didn't that law pass a few months ago, and so isn't it now be less dangerous to take out a loan on your card? Well, yes, that law did pass, but recall that credit card reform doesn't apply to you if you have a business card, or if you use your personal card for business purposes.

Which is why we'd like to echo the calls for further reform (like this one from Entrepreneur). Protecting small business owners from credit card companies is the right thing to do. It also might, eventually, encourage legitimate and reasonable business borrowing on cards--instead of forcing folks like us to warn entrepreneurs against it--which sure doesn't sound like it'd be bad for the credit card companies' business. Transparency has a way of making things win-win all around.

A recent post over at OPEN Forum (which is published by our sponsor, American Express OPEN), contains a lot of what's right--as well as a bit of what's wrong--when it comes to the debate among small businesses over the proper shape of health care reform. What's good about the post is it rather honestly lays out the conundrum facing small business owners, which we ourselves touched on in a previous post: namely, that a non-single -payer health care system that truly does cover most if not all Americans--and single-payer is a total non-starter at this point--would all but require an employer mandate, under which employers either insure their employees or pay a surcharge. The best minds of several generations have thought long and hard about this, and there just really isn't another way to square that circle. So the question then becomes: is it worth it for small businesses--including, in the case of this new post, franchises--to support reform that might ultimately make health care cheaper, and would certainly lessen any advantage one business currently has over another in this realm, but might initially cost more money?

Moreover, as the post ably points out, this is not exactly an issue that only small businesses should care about: rather, given small businesses' important role as job creators, societal pillars, and community contributors, just about everyone ought to be concerned with ensuring that reform is comprehensive and effective but does not put any of the good guys out of business.

The post dutifully argues that already-struggling franchise owners (and other small business owners) do not need yet more costs heaped upon them just as they are emerging from the past year or so of economic hell: "Their sales may be down, their margins may be lower than normal, and they may even be struggling to keep their doors open. Adding fuel to the fire is President Obama’s health care reform bill that may include a 'surcharge' that will affect small business owners, nationwide."

Yet the post maintains this tone of reluctance to support such reform even as it goes on to point out that most small businesses would not even be subject to the surcharge! Specifically (and this, too, we've covered before), businesses with payrolls of under $500,000 would be exempt from the surcharge. Right then and there, according to the House Ways and Means Committee, you're making sure that over 95% of small businesses will have to pay no surcharge; and even the small minority over that limit that do will still likely receive numerous tax credits to cushion the blow.

We're not small business owners ourselves--we just write about 'em!--but that strikes us as a deal eminently worth taking. The small-business community, though, seems more divided than ever, as Fortune Small Business lays out this morning.

The first step is to make it clear just how much--and, for the most part, how little--more small business owners will have to pay should the bill be passed. Let's not let this turn into some issue like the estate tax, in which the small business owner is turned into a political pawn to oppose a policy that is almost totally irrelevant to him. Because the fact is that with health care reform, as currently proposed, most small business owners stand to gain.

It's officially the last weekend of unofficial summer. Have a lovely one!

Toxic industries. We're generally in favor of folks starting whatever types of businesses they have their hearts set on. However, here are seven types that may prove...a bit more challenging than most. [bNet]

The cupcake wars. Daniel Gross tackles an issue near and dear to us. [Slate]

A different kind of stress test. How to relieve the inescapable tension of being a small business owner. [NYT]

Who is the NFIB? Robb Mandelbaum follows up on his earlier reporting on the National Federation of Independent Business (which we wrote about here). [You're The Boss]

Alternate credit round-up. We've covered these methods--peer-to-peer lending, Small Business Administration loans, credit unions, and microloans--before, but it's interesting to read about specific cases. [Fortune Small Business]

We recently touched on the profound idiocy of the self-employment tax, under which non-payroll income is subject to double the payroll tax of wage income. This falls heavily on the self-employed, many of whom correctly consider themselves small business owners. And it's not just a problem in and of itself: it is emblematic of a broader tendency that sees government policy simply assume that taxpayers' prime income comes from payroll jobs, and thus ends up profoundly screwing over those taxpayers whose prime income does not.

This week's New York reports on a similar disadvantage the self-employed suffer for their sins: the massive difficulty they face when it comes to securing mortgages, and how new (and otherwise sensible) rules instituted in the wake of last year's housing meltdown have made things even harder. The self-employed "lack the paper trail that is the backbone of mortgage applications," the magazine reports. "Banks like to see 'income velocity and regularity'...and freelancers often can’t give a clear picture of either. Some months can be leaner than others, even in a good year. And freelancers appear to make less than their W-2 counterparts, as their up-front income doesn’t reflect the business deductions that will lower their taxes later."

As with the self-employment tax, which requires that the self-employed pay both their share of the payroll tax and the share their "employer" would pay, this tendency in mortgage policy makes sense within the vacuum of its own internal logic. Certainly were a long-time payroll employee to have dodgy credit and cash flow, that would be ample reason to reconsider offering him a mortgage. But the self-employed person likely has perfectly legitimate reasons why she does not adhere to these standards. So the self-employed should be punished for being outside the norm? And being self-employed--including starting your own business--should be discouraged because it's not what most people do?

Labor Day was conceived to honor those who work for someone else, and they very much merit that recognition. But now that it's the day after Labor Day, maybe we can turn our attention toward those who work for themselves? They deserve fair policy, too.

We would love to add something to Robb Mandelbaum's post from last Friday afternoon, which concerns Sen. Ben Nelson (D-Fl.)'s denunciation of the current pace of America's Recovery Capital loans. But, honestly, he touches all bases, and we agree (and have agreed) with every word. He offers a partial defense of banks, who have little economic reason to make these loans, even if it would be nice if they pitched in; a sturdier defense of the federal bureaucracy, which really has nothing to do except faithfully implement the law; and a stern indictment of the law itself, and the lawmakers, for not giving the banks enough incentive and for making the ARC qualifications--a tricky balancing act between being both a struggling and a "viable" business--far too narrow. Do read the whole thing.

While we claim to be smart enough to tell you that cloud computing is the way to go (particularly if you're a small business), we're not entirely positive that we're smart enough to sum up this article from InformationWeek that runs down what makes cloud computing--which the highly technical article defines as "infrastructure as a service". (This definition itself is fantastically interesting, as the related quote from one cloud entrepreneur: "We think of cloud computing not as a new technology, but as a new purchasing paradigm," because how much you pay is dictated by how much you use it--by consumption.) If you're ready for a highly technical but really intelligent discussion of where cloud computing's going--and yes, we really did read the whole thing, and understood a good 78% of it!--then definitely give it a look.

Fortunately, they also have a handy chart that tells you all about 12 top cloud vendors. For the less-smart people.

The main reason that we are so upset that the credit card law passed a few months ago basically left most small businesses unprotected is that, as it is, credit cards are both 1) a very poor way for small business owners to borrow substantial amounts of money, since your credit line is subject to sudden shifts and high fees and rates; and 2) an increasingly utilized way for small business owners to borrow substantial amounts of money because the credit crunch has swallowed up a lot of the more traditional routes. (Time to note that our sponsor is American Express OPEN.)

However, as a valuable post on You're The Boss makes clear, there are ways for a business to use credit cards that are responsible. More than that: there are ways to use them that are smart. And it's not just about getting miles (although it is, also, about getting miles--and why shouldn't it be?). The author points out that he never carries a balance, but that still means that he can substantially enhance his cash flow temporarily when he needs to, whether because he has big payroll expenses or he's waiting for an invoice to be paid or what-have-you.

And because his credit card is in his business's name, not his own, his personal credit would not automatically be at risk in the event that he did fall behind. Of course, that also means that his card is not protected by that credit card law. But maybe that should be taken less as a sign to swear off credit cards and more as a sign simply to exercise caution concerning their use. Well, and also a sign that a complementary law for business cards is needed. A blogger's gotta dream.

Nothing can change the fact that designing an application for a larger, broadly used platform is something that both other large corporations do and something the proverbial tinkerer in his own basement can accomplish. And that's why there's a sense in which the iPhone app store is this great egalitarian thing for small businesses and entrepreneurs. But on the other hand, it is also true that the app store probably won't make you rich. The problem isn't just the extreme difficulty of successfully implementing a business model that demands high download volume but also plenty of revenue (e.g., not being free); the additional hurdle is getting yourself noticed amid a sea of tens of thousands of apps without a gigantic marketing budget.

Which is why we were extremely heartened by yesterday's Apple event (at which, yes, Steve Jobs made an appearance, among other things asking everyone to consider being organ donors). Amid TechCrunch's superb rundown, the blog subtly notes that it had called for something three months ago that Jobs actually announced yesterday: a Genius feature for the app store. Basically, the technology that's already used on the iTunes store--it anonymously compares your music library to that of other users, and recommends songs based on that; it also recommends songs based on specific songs and albums you purchase--will now be available at the app store. The effect of this is to level the playing field a little bit as far as app downloads are concerned, potentially bringing small, little-known apps to the attention of more and more of the users who own, as the number was announced yesterday, one of the 30 million iPhones that have been sold. Good news for the little guy, brought to you by one of the biggest.

What does the National Federation of Independent Business have to say about the state of small business owners' optimism as August closed? The group's celebrated monthly report shows a rise, even as jobs continue to decline. So, some slight good news! Interestingly, a majority expect improved business conditions even as a minority actually plan capital spending. Clearly, conservatism--business, not political!--is reigning (for this reason, loan demand is down, making credit availability far less relevant than it otherwise would be).

The organization predicts a better third quarter than previously had been thought (much as the second quarter saw the economy likely exit the recession, which was also unexpected), but also concludes, "the fundamentals are still weak." A final concern is continued consumer spending, particularly as far as the wealthiest consumers--the traditional drivers of the overall amount--go. As the NFIB warns, and as the Washington Post also reported today, both their actual finances and a stunned sort of psychology are likely going to coax big spenders into tightening their budgets long after other aspects of the economy have regained their strengths. Which may not be a problem for Wal-Mart, but it may be a problem for you.

So what did President Obama's health-care speech last night have to say about small businesses? Let's not waste time on preamble or third-person analysis; let's go to the tape (er, the transcript).

(And let's agree on one thing at the outset: Obama may be a politician, but he is not a liar.)

Obama made the case for a health-care system that guarantees insurance--in fact, his plan would guarantee insurance by requiring insurance, the so-called "individual mandate" (with subsidies and tax credits for the less-well-off)--on pro-entrepreneurship grounds: "The problem that plagues the health care system is not just a problem of the uninsured," he said. "Those who do have insurance have never had less security and stability than they do today. More and more Americans worry that if you move, lose your job, or change your job, you'll lose your health insurance too." That is: the way our health system is currently construed discourages you from changing jobs, or from ditching your job to start your own business.)

The insanely high cost of health care--which Obama wants to bring down by increasing competition and reducing inefficiencies in the general insurance market and in Medicare and Medicaid--also hurts entrepreneurship: "It's why so many aspiring entrepreneurs cannot afford to open a business in the first place."

Now, as for his plan itself. Part of the individual system involves a parallel mandate on businesses: so-called pay-or-play, under which businesses either insure their employees or pay a penalty for not doing so. (He made the case for this by pointing out that we all have to pay for a better health-care system, and because, currently, losing insurance is something that could happen to everyone, it's in all our interests to contribute.) However, "95% of all small businesses, because of their size and narrow profit margin, would be exempt from these requirements." And those who are not exempt but still finding it difficult will receive tax credits. Please remember this the next time someone tells you that substantive health-care reform will destroy small businesses.

Finally, he supports exchanges, under which disparate small businesses can band together and use the decreased risk to secure lower premiums.

The Republican response, given by Rep. Charles Boustany (R-La.), was much shorter. Its main mention of small business? "Individuals, small businesses and other groups should be able to join together to get health insurance at lower prices, the same way large businesses and labor unions do."

So! Looks like, barring total legislative catastrophe, we'll get some sort of exchange system. Whether there's a mandate, and a pay-or-play system to make the mandate workable, we will just have to wait and see. But we certainly like the vision of a country in which people with gumption and a great idea can leave their jobs and devote the time necessary to realizing their dreams without having to worry (or worry more, rather) about what happens if they--or their kids--gets sick.

You're The Boss provides a limited defense of banks, often thought to be the Hatfields to the small businesses' McCoys, pointing out that now is genuinely a tough time for them to be lending too much money; and they're not in the business of being massively helpful to small businesses. They're in the business of making money!

So You're The Boss sensibly suggests that banks do a better job of aligning their business self-interest with that of their lenders, mainly by getting more involved in the management of those companies--or at least making sure they are aware of borrowers' business and financial situations. Where does this leave small business owners? It seems like the sensible extrapolation from this advice for the banks is to actively seek to do business with banks that in turn take an active interest in the goings-on at your business. Don't look at it as prying; look at it as flattering. And now that a bank that knows more about you can help you more, and will be willing to help you more.

Football season is upon us! Hallelujah!

From unemployed to self-employed. A cheering slide-show of laid-off folks who went and started their own successful businesses.[Huffington Post]

Small business owners of the world, unite! Anonymous Banker says it's time to march. [Anonymous Banker]

Festivus for the rest of us. Robb Mandelbaum celebrates Employer Nation Day, a fake Republican holiday. [You're The Boss]

C, señor. All about C corporations, and why you should consider becoming one. [Entrepreneur]

"How To Start A Business". That's literally this article's headline. [NYT]

Let's start off this Monday morning with a video: Sen. Mary Landrieu (D-La.)--the chair of the Small Business & Entrepreneurship Committee, and a classic moderate "Blue Dog" Democrat--discusses small businesses and health care in the wake of President Obama's address last Wednesday (which we looked at last week). Note her emphasis on the fact that most small businesses actually would not be subject to the "pay-or-play" provision of the Obama plan, under which businesses would either have to insure their employees or be docked a surcharge.

The fact is, when it comes to reforming our health care system, the ways in which existing small businesses are going to be 'helped' are less ostentatious then the ways in which they would be hurt if whatever final legislation doesn't contain the right mix of exemptions and easing tax credits. The fact is, for any number of reasons--to help entrepreneurship, yes, but also out of moral obligation and a need to maintain global economic competitiveness--the U.S. must substantially reform its health system; and almost any way that happens is going to involve a mandate on businesses. So the trick for existing small businesses is less to overtly help them (though they will be helped in the long run with saved costs) and more not to hurt them unduly. If that's why it seems hard to get enthusiastic about the prospect of reform, that's why. But Landrieu's point is that small businesses should see the bigger picture: real reform is good for the country and for its small businesses, too.

Say you’re one of those individuals who has recently parted ways with your former employer, and you’ve decided to start your own business. Money may be tight, but you do have a sizable account in your retirement plan from your old job.

Someone tells you that he heard about a program that lets you use retirement -lan money in order to buy a business, such as a franchise. You're informed that the program is structured something like this: the new business owner rolls his account from his former employer’s plan into his new retirement plan, and then uses the funds to buy stock in his new company. In that way, the new business is capitalized with tax-deferred money.

If it sounds too good to be true, it may very well be. It’s one of the transactions right on the IRS’s radar screen for abusive tax schemes. The IRS calls these transactions ROBS: rollover for business start-ups. So you kind of get the drift of their view.

ROBS was the subject of an October 1, 2008 memorandum that Michael D. Julianelle, IRS Director of Employee Plans, penned. The memo alerts IRS agents performing audit reviews and determination letter approvals to study each of these on a case-by-case basis, in order to verify if rules are being violated. Here is how the memorandum concluded:

ROBS transactions may violate law in several regards. First, this scheme might create a prohibited transaction between the plan and its sponsor. At the time of the exchange between plan assets and newly-minted employer stock, the value of the capitalization of the entity is equivalent to the value of all plan assets, when in reality, the entity may be valueless and asset-less for an indefinite period of time. Additionally, this scheme may not satisfy the benefits, rights and features requirement of the Regulations. The primary utility of the arrangement may only be available to the business's principal individual."

Specific facts will need to be evaluated on a case-by-case basis in order to make a proper determination as to whether these plans operationally comply with established law and guidance. Technical advice requests may be submitted after consultation with group managers. For this reason, employee plans specialists are directed to resolve open ROBS cases as described herein.

In other words, not all ROBS are illegal, but more are than you would probably think. So if you are approached about one of these, it’s worth the time and money to seek an opinion with a tax advisor who is not associated with the transaction. It may sound like a great deal. But the cost of adverse tax consequences resulting from an abusive tax transaction can be significant.

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.

So apparently swine flu is going to be back and open for business this fall, to the point that the Department of Homeland Security is preparing guidelines for how small businesses should deal with the threat, and the likely consequence of decreased employee availability. Actually looks like this happened about a month ago, and that the guidelines themselves are under the purview of the Centers for Disease Control. No matter. Check out the DHS press release here.

Basically, for an employer "preparedness" is actually two-pronged: most obviously, for the sake of your business and the general public, you don't want anyone in your office who happens to contract H1N1 to spread it to others; and you want to be ready for the prospect of, yes, several people in your office contracting H1N1 and thereby being unavailable for a time, at the same time.

As for the former, we did a post last May on the subject (and I'm sure we'll do more as more experts weigh in). First, it seems obvious, but if one of your employees feels ill, not only should you be okay with them staying home, you should actually encourage it. To that end, to the extent that your business operations allow it, you should make telecommuting as easy and friction-free as possible.

Also: hand-washing! Clean surfaces! The simple stuff really does work best. Canceling non-essential travel is also a good idea, one that would save money anyway.

From the human resources side of things, more flexible leave policies are in order. It's probably not asking too much that employees be treated the same way you would want to be treated should you be unfortunate enough to be put out of commission for a few weeks by the flu.

Speaking of which! There is actually a website called flu.gov. Unsurprisingly, it's a good resource.

The point is that business should by no means come to a halt. But still, what's that saying? Ah, yes. Hope for the best, plan for the worst.

Over at You're The Boss, they crunch the numbers and find something interesting: over the past year and a half, as far as small businesses (under 50 employees) on non-farm private payrolls are concerned, those companies producing goods took a far larger employment hit than those producing services. Specifically, the service sector has 97% of the employment it had in December 2007, while the goods sector has a more meager 85% of it. (In fact, a similar discrepancy exists among big firms as well.)

In part, as You're The Boss points out, this gap reflects the inclusion of the hurting manufacturing and the nearly K.O.'d housing sectors in the goods-producing one--in other words, in part this has to do with the goods sector's bad luck vis-a-vis the services sector for non-structural reasons. (Although given that these numbers are restricted to private payrolls, the employment juggernaut that the state and federal governments remain is not a factor in boosting the service industry's payroll.)

One heartening take-away is the relative durability of the service numbers. Down only 3% employment from the economy's pre-recession peak? That's not bad! And it suggests that burdensome, credit-dependent inventory has not been the burden to small businesses that some of us have feared; that, rather, service businesses have been able to liquidate efficiently. It strikes us that service-oriented small businesses find themselves very well-positioned to grow with the economy in the coming months and years. Goods-producing small businesses, meanwhile, are clearly struggling. Targeted policy to level this field a bit may be in order.

At least as far as small business policy is concerned, the results appear to be in: February's stimulus, by and large, improved the credit situation. In addition to the America's Recovery Capital program, which has done less well but was also quite cheap, the stimulus took several measures to make it easier for small businesses to take out Small Business Administration-backed loans, and for banks to make them. You're The Boss reports that loans have regained their volume of $320 million to $400 million in approved loans per week; Entrepreneur adds that sales of pooled loans on the secondary market--a crucial figure, since it lets banks know how safely they can make further loans--are also back up (You're The Boss notes that secondary-market sales were definitely helped by the government's increased guarantee, which helps reassure potential buyers of these loans that their investments are not going to completely default).

The catch in all this? The various features that the stimulus enacted--raising government guarantees, eliminating fees--are not permanent. Rather, they are slated to expire when the stimulus money runs out.

These numbers tell us a couple things. First, it seems increasingly clear that ARC--the microlending program created by the stimulus--probably didn't need to exist, and that the money allocated for it could instead have been used to add to and prolong these great features.

Second, they tell us that the economy is finally starting to move again. Remember that while a lot of the reason that lending fell was the lack of credit, another reason that lending fell was the lack of demand for credit (which is why we used to suggest that maybe the credit situation should not be the government's top priority in trying to help small businesses).

Finally, they tell us that, assuming demand stays constant, the government ought to extend its lending stimulus a bit longer. While there can be too much of a good thing--when there is, it causes value-destroying inflation--we're nowhere near that point yet.

Twice before--here and here (in a post we subtly titled "Our Idiotic Visa Laws")--we've complained about overly restrictive U.S. immigration laws. Though this issue might seem like an odd topic for a blog devoted to covering small businesses, you have to remember that a ton of U.S. small businesses, from local laundromats all the way up to Silicon Valley tech start-ups, are founded by people who were not born here.

Over at our sister site Slate, Farhad Manjoo focuses on that latter group: it turns out that fully one-quarter of U.S. tech companies are founded or co-founded by foreign nationals; in actual Silicon Valley, it's over 50% (Manjoo cites several examples, perhaps the most memorable being the Russian-born Sergey Brin, who co-founded that search-engine company).

Manjoo's article provides a sophisticated discussion of why the tech industry in particular is so dependent upon foreign talent--among other reasons, we actually, believe it or not, don't have enough qualified people who are born here for the type of industry we strive to have. It also offers a couple elegant solutions, including one proposal that would actually reserve a myriad of visas annually for people with specific business plans for their own new ventures.

His point also applies more broadly, and goes all the way down to the local hardware store and deli. Whether or not the appeal to the United States being a "nation of immigrants" actually stirs you (and we see no reason it shouldn't), this is about money and global economic competitiveness. While concerns about homegrown labor and talent should certainly be attended to, we are not currently at equilibrium: rather, it is currently unduly and unwisely difficult for foreign talent to start their companies here, because of our immigration laws*. Until we make them more sensible, we will not be achieving our full economic potential, specifically in relation to other countries.

*Well, and also because we don't have an inexpensive and easy way for the self-employed to obtain health insurance.

What shape does a small-business "disaster" tend to take these days? While earthquakes and the like certainly aren't out of the question, you need to think more along the lines of "data theft" and "accidental data loss" and a bunch of other problems having to do with data, including, potentially, data lost due to earthquake.

The New York Times's small-business disaster guide reports, "The most common business disaster is data loss." The solution? Backing up, both holistically (know, basically, what you have!) and technically: "Your backup must be offsite, secure and available for recovery 24/7."

The realm where natural disaster actually can play a larger role is in disrupting communications, if only temporarily. If you need to evacuate your office, you still want to be able to contact other businesses as well as customers, and you want them to be able to contact you. Here, among other places, is where the cloud can come in handy.

Finally, there are disasters that involve the incapacitation of employees. Actually, we discussed one such potential event earlier this week in our post about swine flu.

The guide's advice is mostly common sense, but it may contain stuff you haven't thought of--defiinitely give it a look. And don't forget: practice makes perfect! Go ahead and pretend that that earthquake hit, and see how well you hold up.

It's been almost one year since I wrote to the New York Times's Joe Nocera and predicted that the Worst Is Yet To Come, and specifically pointed to the economic risks posed by the credit card industry. I'm saddened to say how accurate that prediction was. The banks did, in fact, come back to the Federal Reserve with their hats in their hands, and the Fed duly assumed their exposure from sub-prime credit card debt, disburdening the banks on behalf of the taxpayer. This program, among others, is considered by many to be the government intervention that saved the economy.

In truth, without the bailout of Fannie Mae and Freddie Mac, and without the TARP funds handed out to recapitalize many of the leading banks in this nation, and without the increase in FDIC insurance and the Money Market Mutual Fund Stabilization Program, our entire financial system and the very core of our economy would have been shattered. I do not dispute the necessity of these programs.

However, to declare victory--to even allude to the hope that, as Treasury Secretary Geithner stated, "We are back from the edge of the abyss"--is a tremendous miscalculation of what our future holds, and more importantly how the future is viewed by the people and small business owners of this nation. For above all confidence is the necessary ingredient, and it simply does not exist out here in the real world. Without a feeling of hope in our future, consumer spending will continue to lag, putting a tremendous strain on our nation's small business community--on which there has been little, or dare I say, no focus by our government leaders.

While there is much rhetoric around programs to promote small-business lending, know this: the granting of SBA loans is in the hands of the very banks that have tightened credit until the small business owner cannot even breathe. The SBA has lending guidelines that the banks are ostensibly supposed to follow. But in the institution where I am employed, whenever I submit an SBA loan, it is declined. And when I inquire as to why it has been declined, I am given reasons that the loan does not qualify under the "bank's" lending criteria. When I ask why they are holding the credit to the bank's criteria and not to the SBA criteria (which is somewhat less restrictive), I am consistently told that the bank has a right to hold the credit to a higher standard than that imposed by the SBA. The banks that are given the authority to grant these loans have simply refused to apply the less stringent SBA criteria to the underwriting process!

Additionally, Congress would do well to implement regulations protecting business owners from deceptive credit card practices, deceptive merchant service credit card practices, usurous credit card rate increases, the passing of FDIC insurance premiums onto business banking accounts, the cancellation of credit lines when business borrowers have not missed any payments, and the increase in bank fees across the board for services such as wire transfers, checkbooks and ACH services.

Back to the banks. Of course they need to tighten underwriting standards. But most bankers state that the key reasons for making less loans is twofold: (1) lower demand for loans because borrowing needs declined, and (2) deteriorating credit quality of applicants.

Well, golly-gee-wiz! If the banks measure credit quality, as they do, by analyzing revenue and income trends, then clearly few applicants will qualify for loans during this economic depression! But I see business owners taking extreme steps to reduce expenses, commensurate with reduced revenues, and demonstrating their ability to manage their companies through this crisis. They still need fundinfg, though, and there is simply no place for them to go since the banks have abandoned their fundamental obligation as lenders.

The lack of available capital to support our nation's businesses has a direct impact on unemployment: if the business owner does not have confidence in his ability to obtain reasonable levels of financing, there will be no new job creations, and worse, an increase in unemployment.

Do I really need to spell out the domino effect that invariably ensues when that happens? Just one reason why I predict that unless there is a reasonable focus on small business lending, we will continue to totter on the edge of the abyss. The SBA has been known to lend directly in emergency situations, such as 9/11 and Hurricane Katrina. Is this economic crisis, combined with the banking industry's general reticence to lend, perceived as less of a crisis than these events? Personally, I am not confident that our government will enact the necessary legislation to stimulate lending. I hope my prediction in this regard is less accurate than the one I made last November on the credit card bailout.

Anonymous Banker is a 35-year veteran of the banking industry who has spent much time as small-business banker and credit underwriter. He blogs at anonymousbanker.com.

As unemployment hovers near double digits, the New York Times's David Leonhardt takes a look at an interesting and encouraging phenomenon that has nonetheless persisted namely, rising wages! (Well, for those who still have jobs, anyway.) "Between the collapse of Lehman Brothers last September and this June, the average weekly pay of rank-and-file workers (who make up 80 percent of the work force) remained stuck at about $612," he reports. "Since June--with the economy apparently starting to grow again, as Ben Bernanke noted on Tuesday--the workweek has grown and hourly pay growth has accelerated." (He also notes that, since inflation has been extremely low, real wages--that is, wages taht areinflation-adjusted, and thus represent actual purchasing power--have risen even more.) "Even though unemployment has reached its highest level in 26 years," he concludes, "most workers have received a raise over the last year."

How to explain this? Actually, it looks as though business owners have been following advice we've offered in the past: while they are looking to cut unnecessary payroll costs, mainly by laying people off, they are if anything all the more desperate to keep the talent they have retained happy and productive. According to Leonhardt, this is known as the sticky-wage theory: "executives of companies don’t cut pay, even when demand for labor has fallen," he explains. "They worry that employees will become less motivated or start looking for another job."

From a macro perspective, this combination of layoffs and wage raises has had the effect of concentrating the recession's worst consequences. If you're out of a job, it's harder to get one, and in the meanwhile your comparative purchasing power grows ever weaker; but if you still have a job, then you're likely to keep it, and to prosper.

But from the perspective of the individual small business owner, it seems clear that a bit of an investment in keeping your best talent around is well worth it. And since everyone else seems to be doing it, you won't really lose ground, either.

We've talked about business incubators--many of which use government and private, non-profit funds to give up-and-coming businesses places to locate near each other--in Brooklyn, in Detroit, in Youngstown, Ohio, and elsewhere. We've seen them as great ways to facilitate a process by which exciting, dynamic new endeavors invigorate as well as economically aid cities in decline. But never did we imagine that placing so many small businesses in close proximity to each other would be so good for the businesses themselves!

Yet, as this post over at the great Creative Class site explains, that is exactly the case: co-working--that's what it's called when numerous sole-proprietor or very small endeavors work in the same physical location--does wonders for everyone.

"Office-mates provide clients," the author relates. "An architecture firm I know leases empty desks and offices to complementary individuals and micro-sized businesses. These include: a real estate development company (which has hired them to do most of the architectural drawings and consulting work), a web company (that in turn gets business from the development company), and an interior design firm." And there's the networking opportunities: "If the web designer in the above-mentioned office does great work for their office mates, the clients, competitors, and friends of these businesses will notice and could look to hire him for their own work. He might otherwise never have thought of marketing himself to real estate-related firms."

"Look for shared office space arrangements to grow in the coming years," the author predicts.

We can talk about the cloud and the office-less office til we're blue in the face--and no doubt we will!--but it's good to know that, ultimately, there's no substitute for getting talented, energized people physically together and seeing what happens.

Guess what type of worker is the happiest type of worker in America? Yup, business owners! According to Gallup (via the New York Times's Economix blog), over the first half of this year it has been the self-employed who have been the happiest (second place belonged to the professionals; on the other end, transportation and manufacturing workers brought up the rear).

What does this reflect? Probably not lifestyle, exactly--after all, as Economix points out, the self-employed also scored the highest in numbers of hours worked. Rather, our best guess is that this figure reflects a sense of control over one's own destiny. Those workers in manufacturing and transportation are working in industries burdened by great uncertainty and relatively poor job security. So it's not that they don't have jobs; it's that they could work incredibly hard and perform their jobs incredibly well, yet they still lack total control over their own futures. The self-employed, by contrast, can put in those extra hours--and, apparently, they do!--and know they stand a reasonably good chance of surviving and thriving as a result. Control thus leads to happiness. So smile, you're a small business owner!

We definitely want to direct your attention over to this brief interview with Karen G. Mills, the head of the Small Business Administration, over at the OPEN Forum (which is published by American Express OPEN, our sponsor).

We were especially heartened by this response of hers: "The number one concern of small business is access to affordable health care. Many small businesses do not provide health care. Presently, they pay up to 18% more for the same coverage as big business does. In his health care speech, President Obama outlined the exchange which will bring down costs because it pools more people and would permit small businesses to avoid the premium they are now paying." We're very pleased to see that the emphasis is no longer on things so explicitly under the SBA's purview--e.g., increasing the flow of credit to small businesses--and is now more broadly defined so that the SBA exists to give small businesses a voice in the executive branch. (Now if only President Obama would make her position Cabinet-level!)

As for health care, we discussed the speech here. And yesterday, in a much-anticipated move, Sen. Max Baucus (D-Mont.), who chairs the Finance Committee, introduced his health-care bill--among other things, it would create exchanges, starting with all businesses with under 50 employees. (We'll cover this more soon.)

There's something that both makes sense and is completely paradoxical about the sentiment, reported here, that "Small-business owners have been begging for changes to the health care system, but they believe they have the most to lose when and if reform materializes." Their concerns, specifically over their lack of lobbying power (at least as compared to Big Business, doctors, and particularly the insurance industry), certainly seems well-founded. But have they forgotten that any bill--including the one recently introduced by Sen. Max Baucus (D-Mont.)--is going to exempt businesses with under 50 employees from a pay-or-play mandate? (Incidentally, we're going to spend the weekend mulling Baucus's bill; we'll write about it next week.) And: have they forgotten that any bill will not force anyone--or any employer--to change their current insurance if they don't want to?

Change is always somewhat disruptive, but what's so remarkable about the current push for health-care reform is how little even those more ambitious plans would really change. A single-payer, "Medicare-for-all" system is off the table (as, of course, is genuine socialized medicine)--whatever we end up with post-reform is going to be, at most, a more efficient and cost-effective version of the system we already have. Moreover, given that small business owners probably don't have the "most to lose" form reform--if only because, as Bob Dylan said, "When you ain't got nothin', you got nothin' to lose"--they should take a deep breath and realize not only the ways they stand to gain, but the steps being taken precisely to prevent them from getting unduly injured.

To those of you celebrating the new year this weekend, l'shanah tovah! For all of you, here's your good reads.

Caveat customer. Why not every client is a client you want to have. [NYT]

Why can't we be friends? Believe it or not, basic likability might actually be a crucial thing to look for in prospective employees. [Fortune Small Business]

Stuck in the middle. The new niche to find is the one between vendors and customers. [Entrepreneur]

Newt!Congratulations on your forthcoming dinner with the former Speaker of the House! [You're The Boss]

Accounting for idiots. Basic things even you need to know about keeping track of your books. [FastUpFront]

For your Monday morning video, here's a lawyer/law professor explaining three big, obvious things that any small business owner needs to address, preferably as early as possible in the business's formation. Incorporate; sign a shareholder's agreement with any partner(s); and when divvying up the business with partners, investors, and the like don't automatically assume a 50/50 split. How do we know this is good advice? Because it appears in easy-to-digest video form! (Also, it makes lots of sense, particularly the point about incorporation.) Do give it a watch.

So, after months--literally, months--of promising one, Sen. Max Baucus (D-Mont.), who chairs the Finance Committee, has released his health-care bill. This is not what any final law will be: the next step, assuming the committee passes it, would be to compromise with the more progressive House bills to craft something likely to pass both chambers. But it is nonetheless an extremely important development, and it is worth taking a closer look at the bill itself.

Most notably for small businesses, the bill provides for exchanges, or government-regulated marketplaces in which disparate businesses can band together to negotiate collectively for insurance rates. Under Baucus's bill, all businesses with up to 50 employees could buy into the exchanges, and individual states can increase that number to 100 employees; the House bills, by contrast, cap the exchanges, at least initially, to those businesses with under 20 employees. (Eventually, in a decade or so, the exchanges would become open to all businesses.) As Time's Swampland blog points out, this is a pro-small business move: by allowing more businesses into the exchanges, it makes the exchanges more powerful in terms of bargaining with the insurance companies.

The bill, like others, carries an individual mandate: if you are an individual without insurance, you must buy insurance or pay a penalty. (The least-wealthy are exempt.) Any useful bill will have something like this.

The Baucus bill does not provide for a public option.

Most troubling is its employer mandate. President Obama has called for one of these, and indeed, it's generally agreed that any system that even approaches universal health coverage will need a "play-or-pay" mechanism under which employers either provide insurance or pay a penalty; even so, under Obama's proposals, and many others', small businesses would be exempted, and even many bigger ones would get compensating tax credits.

According to Ezra Klein, the Baucus's mandate--which isn't even really a mandate, exactly--is its most disastrous element. Instead of an up-or-down play-or-pay system, with exemptions and tax credits, Baucus calls for a byzantine system of subsidies and penalties, the upshot of which is that employers will be encouraged to hire either rich people or illegal immigrants, and will be discouraged from hiring poor people, particularly those with families. Um, oops?

Klein's main problem with this provision is, of course, the radically retrogressive nature of it. Certainly we're not unsympathetic to that appeal. But it also strikes us as bad for small business. From the perspective of a small business owner struggling to make sense of these new regulations, simplicity is an inherent virtue. A system that tells you clearly if you are exempt or not and, if you are not exempt, enforces clear and attainable obligations, is most desirable; a system that requires deep knowledge of all your employees' personal finances, varying penalties, and God knows what else, is not desirable. Part of the result of good health reform should be to get small businesses either out of or at least more detached from the health care business. This provision in Baucus's bill, by contrast, would seem to enmesh them ever more deeply in it. Hopefully it will die off on the path to a compromise bill. As they say: developing...

Scott Shane over at You're The Boss takes this entrepreneurial stuff pretty seriously--so seriously that, along with a couple other scientists, he has investigated the possibility of a genetic basis for entrepreneurship. And guess what? They've found one! Basically, he says, entrepreneurship, and various traits associated with entrepreneurship, are "heritable," or passed on in our genes. So, for that matter, is self-employment income.

The study has not been completed or peer-reviewed, but one hypothesis is that entrepreneurship is encouraged by certain traits--extraversion, the desire to seek out new opportunities, etc.--and that these traits are the things that are heritable; and then these things in turn encourage the holders to be entrepreneurs. If this hypothesis proves to be the explanation, then its greatest insight, we think, has nothing to do with genes and everything to do with personality. For if certain personality traits so strongly promote entrepreneurship that their heritability can correlate with the heritability of entrepreneurship, then it suggests a real advantage, as far as entrepreneurship is concerned, for those who hold those traits (whether or not they hold them due to genetic factors is beside the point). People may or may not be born entrepreneurs, but once their personalities are formed, it might be easier to tell if the entrepreneurial lifestyle is a good fit for them.

The Entrepreneurial Mind's Jeff Cornwall notices an interesting dynamic in American Express OPEN's latest small business survey (OPEN is our sponsor, by the way). Namely, Gen-Y entrepreneurs--so current young people--seem more likely to hire, make capital investments, and in general pursue more optimistic business policies than either Baby Boomer entrepreneurs or even Gen-X ones (indeed, there is no clear corresponding pattern that finds, say, Gen-X entrepreneurs seeming more optimistic than Boomers). Not only that. Gen-Y entrepreneurs have--or, at least, claim they have, which could be the real difference--less severe business problems: they're less likely to have cash-flow problems or to be stressed out. Gen-Yers are also more likely to say they are willing to take financial risks in their business right now.

Cornwall, who teaches this stuff at Nashville, Tenn.'s Belmont University, hypothesizes that this generational discrepancy is less a reflection of reality and more a reflection of perception--and, specifically, the Gen-Yers' jaded, youthful perspective. "One of our learning goals in our program is to bring undergraduate students down to a more realistic understanding of the challenges and struggles they will face," he writes.

Isn't there another possibility though? Isn't it instead possible that, instead of all of the Gen-Yers' traits being correlated with each other, some of them have causal effects on each other? What if being more willing to take financial risks is actually the smart move, and is causing young entrepreneurs less stress because they are happier doing what they do? We don't know that that's the case--Cornwall could be right. But we are a bit more open-minded as to just what is driving the 20-somethings' youthful idealism.

The economy is beginning to get to the point where hunkering down and merely trying to survive is not only no longer necessary--it might actually be a bad business move. That's because, as Entrepreneur's Daily Dose is only the latest to remind us, when the economy starts drizzling money again, you need a big enough bucket to capture it all. That means having enough employees; that means making the investments now to update and expand your business. When consumers want to start spending at post-recession levels, a recession-ready business is not going to be able to exploit that new climate and accomodate its would-be customers. And this is not merely about lost opportunity cost. If they don't patronize you, they will patronize someone. We're talking lost market share here!

Obviously, it's a fine line between overcautiousness and foolhardy growth. Surely the danger of spending too much has not disappeared just because the economy is showing signs of life once again. But at the same time, it's not that fine a line. If you're still inhabitating a cautious, bunker-type state of mind, consider this your wake-up call.

Last week, the Labor Department formally killed a Bush administration regulation (which it had already placed on life support) that would have permitted mutual funds, brokers, and the like to hire advisers who could in turn consult with 401(k) plan providers. The back-story is an important one that impacts both employers sponsoring 401(k) plans and their employees who participate.

In December 2006, the Pension Protection Act, signed into law by President Bush, allowed 401(k) service providers or their affiliates to provide investment advice to 401(k) participants if certain conditions were met to avoid conflicts of interest. Independent investment advisors have been providing investment advice for many years, so no special legislation was needed. In the final days of the Bush administration, the DOL adopted an investment advice regulation to implement the law change. The rule, like many Bush administration regulations, was initially put on hold by the new Obama administration.

Now flash forward. About two weeks ago, Phyllis Borzi, assistant secretary of labor and head of DOL’s Employee Benefits Security Administration, which regulates fiduciary aspects of retirement plans, said:

We believe the final investment advice regulation published in the January 21 [2009] Federal Register went too far in permitting investment advice arrangements not specifically contemplated by the statutory exemption. We are taking a fresh look at the regulation that was issued and are working to bring it more closely in line with the [Pension Protection Act's] statutory language.

The issue is an important one, because studies show that investment education programs simply don’t work. Actually, in real dollar terms, they're a disaster. One report, which examined the returns investors actually realize and the behaviors that produce those returns, showed that equity, fixed-income, and asset-allocation fund investors experienced average annual losses for all time periods examined except the longest (20-year) time frame--and even those positive returns did not keep pace with the average inflation rate. While the S&P 500 earned an average return of 8.41% from 1988 to 2008, the average equity investor earned a mere 1.87%. The study refers to that gap as the "cost of uninformed investing." I call it the "cost of going it alone."

That's exactly how many retirement plan sponsors are viewing the problem. They are adding an investment advice component provided by an independent registered investment advisor. "Independent" means exactly that--no ties to the fund provider.

There usually are two options in a managed account service:

The first option is one in which the investment advisor provides personalized one-time investment recommendations. After that, participants are responsible for ongoing account monitoring, rebalancing, and management. This appeals to participants who like to take an active role in managing their retirement account, and there is usually no cost.

The second option is for participants who don't have the "3 Ts"--time, talent or temperament--to actively manage their account. The investment advisor provides ongoing discretionary investment management for a fee, paid for by the individual participant.

With both options, an independent investment advisor generally assumes fiduciary responsibility for managing participant accounts--not a bad arrangement for the employer from a risk-management standpoint. Of course, the employer still retains the responsibility for monitoring the service provider.

The managed account service can appeal to both types of employees: those who feel most comfortable handling everything themselves, and those that don't. In the words of the usual caveat, the investment advisor's past performance is no guarantee of future results. But then again, how's that investment education been working out?

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.

What happens when a recession produces massive layoffs, and 78% of those laid off are men? You have, as the New York Times reports in an excellent article, an influx of women entering--or, in most cases, re-entering--the workforce. This has applied particularly to talented, well-educated, and affluent women. It typically works like this: woman has been out of the workforce while husband works in high-paying job that brings in enough for family. Recession causes husband to be laid off, or the couple's net worth to fall precipitously, or both. Woman realizes she needs to earn, too, and sends out resumes.

Of course, a tight job situation remains a tight job situation, and in fact, the increase in applicants--which is atypical; usually applicants fall during periods of protracted high unemployment, as the jobless become discouraged--only makes the job scene that much tighter.

Which brings us, of course, to the alternative: starting your own business! In fact, Nada Jones and Michelle Briody, authors of Sixteen Weeks to Your Dream Business, have written for us about the advantages for women who start their own businesses in the midst of recession. "With the economy in shambles, many women and mothers are trying to think of ways to help their families stay afloat," they argued last December. "At the same time, big companies are tightening their belts, cutting budgets and jobs, and it is that much harder to get back into the workforce. So there’s no place to go--but out on your own."

Do check out their post. And if you see the inevitable "Recession Causing More Women To Start Their Own Companies" trend story before we do, please let us know.

According to the Washington Post, bank industry watchers are predicting the rapid growth of peer-to-peer lending, in which Websites facilitate the borrowing and lending of money between individuals (we wrote about it here), to the point that next year almost $6 billion will be loaned that way.

Have you borrowed or lent money this way? Please email us, and maybe we'll relay your story or write something longer on the subject.

There's a whole heap of good advice the New York Times provides here for those small businesses--and the article is geared toward small businesses--who are curious about getting in on text-message marketing. If that at all piques your interest, the whole thing is definitely worth a read.

However, we were struck by one particular tidbit in the article, which, we think, provides a much larger marketing lesson. One of the biggest and most prominent mass texts ever sent out, as some of you may remember, occurred last August, when the Obama campaign told folks that it would announce the then-senator's choice for vice president via text. (Actually, CNN ultimately got the scoop: we remember reading about it a little after midnight, and not actually getting our Joe Biden text until even later. Wait, hold on ... we just checked our phones, and it was at 3:06 A.M., August 23, 2008.) According to the article, roughly 3 million people registered to receive the text.

That is the coup. All of a sudden, the Obama campaign had 3 million cellphones-numbers belonging to users were interested in hearing more about the campaign, and so the campaign obliged, duly sending out periodic dispatches and calls for donations. The hook of the VP announcement got a whole lot of people to bite, creating a wonderful promotional plateau for the campaign to build on.

The lesson is that, for something like text-message marketing--or e-mail marketing--you need a teaser: something that is going to entice even casual fans to sign up in the first place. A big piece of news; a contest. Get creative. One you have potential customers hooked, your marketing will be that much more successful.

Okay, so here it is: the Federal Deposit Insurance Corp. has a new advisory committee on community banking. Except for one professor, it is made up entirely of Presidents and CEOs of community banks. A small problem with this set-up is that there should be one or two regional or national bank representatives to give perspective to the discussions. But what strikes me even more, is that there are no people on the committee whose job it is to actually go out and meet business owners, kick the boxes, and feel their pain. There should be folks on the committee that mix and mingle with the businesses they serve, directly, and that do the credit analysis and can see and comment on where the industry is falling short in meeting the borrowing needs of the small business community. But there aren't.

There was an opportunity here that I don't think the FDIC capitalized on (no pun intended!) as well as they could. Instead, given the mix, the agenda for this committe will not be improving lending in the markets these community banks serve; rather, it will be on improving these banks' balance sheets and positioning these banks to take advantage of some of the bailout opportunities and improve their share prices.

What's wrong? What should an FDIC advisory committee on community banking be dealing with?. How about the two-faced message regulators are sending to the banking industry, with one group yelling "lend, lend, lend" while the second group holds the banks' working capital lines to an ever higher debt service coverage ratio and requires them to reserve for loan losses before the approval signature is dry on the offering sheet--thus making it very difficult indeed for them to "lend, lend, lend". The lenders are getting their direction from the folks that are serving on this committee. Yet its very composition limits the type of dialogue so desperately needed within the group, and between the group and the regulators.

I hope I am wrong. I always seem to hope I am wrong.

Anonymous Banker is a 35-year veteran of the banking industry who has spent much time as small-business banker and credit underwriter. He blogs at anonymousbanker.com.

Via You're The Boss, we see that the Small Business Administration has decided to revise its earlier proposal to cap the amount of "goodwill" that it was willing to guarantee when backing the financing of business acquisitions.

Basically, earlier this year--as we reported at the time--the SBA announced that it was considering a rule that would allow it to guarantee only up to $250,000 in goodwill financing when helping someone secure loans in order to acquire a business ("goodwill" refers to a business's intangible assets--everything from the power of its brand to its potential for future earnings). At the time, we said that while we understood the decision--since goodwill is the most difficult thing to place a value on (since it's not really liquid), it is therefore the riskiest thing to underwrite--it would mean that it would be more difficult for people to buy businesses. Given that acquiring your own company is, in effect, a way of gaining employment, we suggested that in a time of rising joblessness, this was a bad idea. Especially since, particularly for small and young companies, goodwill can represent most of a company's worth.

The new rule will see the SBA fund good will up to $500,000. (In the event that goodwill exceeds that, the SBA will recommend that banks--who make the loans that the SBA guarantees--require more equity in the company being acquired.) The change was made after a study found that the average goodwill of an acquired company was worth roughly $400,000.

We have to admit, the added risk in guaranteeing goodwill financing makes us wary, too. But we'd rather see the SBA put some skin in the game here than in those insipid America's Recovery Capital loans. At least this sort of financing is likely to lower unemployment, promote economic activity, and generally make for a more dynamic and productive small business scene.

Last week, we wrote that we felt lots of small business owners' fears regarding health-care reform, while not entirely unfounded or unwarranted, are ultimately overheated. Our main reason for believing this is the extreme likelihood that the great majority of small businesses would either be exempted altogether from an employer mandate--the play-or-pay scheme under which businesses would have to either offer their employees insurance ("play") or pay a surcharge ("pay")--or receive tax credits to ease things along (we didn't even mention that, by leveling the playing field, an employer mandate would help small businesses in their perpetual war of hiring with larger companies).

But Robb Mandelbaum has an even more ambitious and compelling case to make: that even those small businesses that do find themselves subject to an employer mandate may not have much to fear.

Last week, he took a look at perhaps the broadest employer health-care play-or-pay scheme currently in place in America, in San Francisco (via this excellent NPR report), and found that, according to experts, the mandate has had little to no discernible impact on employment--despite the fears of many that an employer mandate would prompt mass firings and even business failures at small companies throughout the country.

And in a follow-up post, Mandelbaum notes that none other than the Congressional Budget Office--the nonpartisan scorer of all federal bills--has concluded that an employer mandate tends not to cost employers any extra money, as the extra costs genuinely fall to the employees.

In fact, it's not difficult to envision a scenario where an employer mandate helps small business owners, particularly those who are themselves "employees" of their company: effectively reduced wages could slow inflation and leave little to no mark on purchasing power, all the while making health insurance more prevalent and eliminating the advantage that big corporations enjoy over small ones when it comes to hiring. Doesn't sound so bad now, does it?

Happy autumn to all!

7 Quick Swine Flu Tips. Ooops, we're supposed to start calling it H1N1, out of deference to the good pigs of America. [OPEN Forum]

Web 2.5. The new type of Internet start-up. [Slate]

Good times at--and for!--family-run amusement parks. One area where small is big. [NYT]

Why you didn't get that loan. Ten common reasons that small businesses' requests for credit don't succeed. [FastUpFront]

Mompreneurship. How to achieve work-life balance when the work and the life so often collide. [Entrepreneur]

Small Business Development Centers. Learn them. Use them. Love them. [Rieva Lesonsky]

This week, debate will begin in earnest on Capitol Hill over legislation that would reverse some or all of the thousands of car dealership closings that took place several months ago as a part of the federal government's bailout of Detroit's Big Three, or would at least give shuttered dealerships certain recourse, such as a right to appeal. Many dealerships are family-owned small businesses, so we have taken note of their struggles in the past.

The fact is, many car dealerships are not "small businesses" in the typical sense: they are too big, and too closely allied with the gigantic auto companies that, in a limited sense, back them. On the other hand, they are economic multipliers and community pillars, on which many genuine small businesses do directly or indirectly depend for continued business. Because we're unsure about what exactly would be best when it comes to the dealerships, we'll be paying lots of attention to the debate that takes place this week and in the near future. That's why we have these debates in the first place, right?

President Obama's Federal Trade Commission is formally advocating rules that would institute "net neutrality"--essentially, a requirement that all Internet carriers provide equal access and functionality and speed to all (legal) Web traffic, regardless of its content, its provider, or its consumer. Net neutrality is perhaps the ultimate cause célèbre for the Net-savvy; and it's also something that, in theory, is good for small business, as it would ensure that big corporations with big money and big lobbying efforts couldn't secure better Internet access for themselves, and use that advantage to put the little guys out of business.

But Jonathan Weber, the small business columnist for our sister site The Big Money, is not quite as sure that net neutrality is an unalloyed good for small businesses. His concern is that dogmatic net neutrality has the potential to stifle innovation and lower the carriers' profits, ultimately leading to worse service for everyone--which you have to think hurts the small guys, with less margin for error, more than it does the big ones.

The concerns he raises--and Weber ultimately is ambivalent about net neutrality; he's certainly not against it--make sense. Still, we ultimately must conclude that, even if gigantic companies like Google and Amazon are for net neutrality, small businesses probably should be, too. Small businesses play on an unfair playing field to begin with, so that leveling it is almost always good for them. We don't see why the Internet--increasingly the center of all commerce--should be any different.

The simple fact that, almost alone among big banks, Wells Fargo is still making lots of Small Business Administration-backed loans is interesting, but little more. The statistics are pretty noticeable: while almost every major small-business lender--J.P.Morgan Chase, Comerica, TD BankNorth, to say nothing of on-death's-door CIT--has cut back on SBA loans drastically, Wells Fargo's $605 million in 2009 SBA-backed loans represents a 4% increase over 2008. That's worth flagging, especially given that not only supply of but demand for credit contracted over the past twelve months.

But what's really worth understanding is why Wells Fargo finds itself in this position, and Fortune Small Business does a good job explaining this, too.

No reselling. Unlike most lenders, Wells Fargo tends not to sell its SBA-backed loans on the secondary market--you know, the one which totally seized up roughly a year ago. This enabled them to continue collecting payments on their loans, in turn giving them the capital to continue making new ones.
Stick to 7(a). An unusally high percentage of Wells Fargo's SBA loans were made under the agency's flagship 7(a) program, which features higher government guarantees than other types of agency-backed loans. Because 7(a) loans tend to be much bigger, they receive much higher scrutiny; because of the much higher scrutiny, they tend to default less. Combine a lower default rate with a higher government guarantee, and you get a much more functional lending system.

The lessons, for both lenders and the small businesses, are self-evident.

We have one final note, and this time, it's a concern. Wells Fargo and Wells Fargo-owned Wachovia combined over the past year to lend $742.3 million in SBA-backed loans. The second place bank made one-third that amount: a little under $250 million. For Wells Fargo to have too much power--and, in fairness, we may not be currently at that point--over this single lending market is probably not a good thing. That dynamic, in other words, bears watching.

In the 2004 movie In Good Company, Dennis Quaid plays a middle-aged ad exec who gets a new boss: an MBA who's nearly half his age, played by Topher Grace. While Quaid’s character gets clients the old-school way, through relationships and handshake deals, Grace’s character cross-promotes their magazine with the cell phone division and snack food owned by the same company. And oh, yes, he also happens to become involved with Quaid’s character’s daughter.

This is not exactly the generational observation my editorial leader, Marc Tracy, was making last week when he introduced us all to Generation Y. But it does illustrate that today's is more of a multi-generational work force than ever before. In fact, it is the first time in our history that there are four generations in the work force.

In purely demographic terms, they are:

Veterans: 1922-1945

Baby Boomers: 1946-1964

Generation X: 1965-1980

Generation Y: 1981-2000

Employees from each group have different attitudes, behaviors, and expectations, predicated in part on the common experiences of their respective generations. You'd better figure out how to manage and communicate optimalyy with the members of each of them if you want your business to succeed--especially in today’s economy.

Melissa Proffitt Reese--an attorney and fellow blogger--lays out five tips for doing just that a recent article, which, instead of spoiling, I'll just encourage you to go read yourselves.

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.

Seriously, this New York Times article on the resilience of family-owned amusement parks puts us in mind of a Bruce Springsteen song (happy sixtieth, Boss!). Certainly it's interesting, though, that even as Six Flags finds itself filing for Chapter 11, those little groupings of concessions and games on beaches and boardwalks up and down the coasts, as well as other and more formidable places inland, are doing just fine. Their advantages are those that small businesses across industries enjoy: they tend to be less expensive to patronize; they're not facelessly corporate; they're unique; and they have strong ties to their own pasts, and a concomitant nostalgic appeal (one park tries to add one new attraction ever year, but still has its ancient bumper cars).

There may be an extra bonus to being family-owned, a Wharton professor notes: “In many cases, these are seasonal businesses. And in the summer, the whole family would participate. In difficult economic times, particularly, a family committed to a business will sacrifice in deferring compensation and bonuses.”

Summer may be gone. Good to know that lots of these businesses aren't, though.

Is CIT up the proverbial creek, sans paddle? The small-business lender, which avoided bankruptcy this summer only by cobbling together a last-second $3 billion loan package, has been the subject of numerous rumors and stock-market swings in the first half of this week. First came optimism: we heard that CIT was likely to secure an additional $10 billion credit deal. Then came news that credit was likely not to be forthcoming, and that CIT would be forced either to enter bankruptcy or turn itself over to its bondholders tomorrow, when much of its debt comes due. And then it was revealed that CIT in fact has been having productive conversations with its creditors after all.

Of course, for small business owners, the real question is not whether CIT will be saved, but whether a saved CIT will begin lending to small businesses--something the financial company has not been doing as of late. Compassionate creditors can't fix that problem.