business climate

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Avoiding the Alternative Universe

Alternative Universe imageRecently, I made a mistake of omission which set off a chain of unforeseen events. These events caused a lot of problems for my client and resulted in a few dozen unplanned hours of problem-solving for myself and my company. Initially, it did not appear that there would be much of a disruption to the client’s service but things then began unraveling quickly with new issues seemingly arising out of nowhere. In my frustration, I found myself doing something that I absolutely loath when done by others. I started using the “alternative universe” excuse.

This is the practice of white-washing situations with hindsight justification. “If I had been told the facts of ‘B’, ‘C’, and ‘D’, then I certainly would have approached ‘A’ much differently and all these problems would have been avoided.” Now, this was certainly a true argument, as many of the subsequent problems could have been avoided if the client had disclosed all of the relevant information. Still, this was totally irrelevant to the subsequent situation, as it is impossible to jump into that alternative universe where all problems are averted.

This foray into the scientifically unproven domain has become a trend these days. You hear it often from the losing side of a sports contest, and most especially, in the political world. “If I had been in charge, we’d now be in much better shape right now…” or “…things may be bad now, but they would’ve been so much worse if not for my brilliant policies…” These statements are usually made as absolute fact and as a way to divert attention from the reality at hand.

The truth is, we only live in this one reality and we have to own the decisions we make here.This is especially true for small business owners like myself who don’t have much luxury for academic exercises and hypothetical situations. Not all our decisions will be correct, but once made they must be embraced either as building blocks for best practices or lessons learned for the future.

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Two Website Lessons from 2013

Free Website - not!If there are two lessons that everyone should come away from 2013 learning about websites, I would say it would have to be these:

  • 1. There is absolutely no such thing as a “free” website!
  • 2. A website should not cost over $600 million!

I will tackle the second point first because that is much easier to grasp. Of course, what I’m referring to is the “Obamacare” website Healthcare.gov, which amazingly did not work when it was launched on October 1st (it is now about 75 days later and the jury is still out on whether it actually works).

To be exact, it was reported by Digital Trends that the contractor CGI Federal received $634,320,919 to construct Healthcare.gov. Now to appreciate this amount, it is more money than Facebook spent in its first six years of existence (you know, the years went it went completely viral) and it is also more than the amount spent building two more recent services – Linkedin and Spotify – combined. All that money spent and it didn’t work for at the least its first two months of existence.

As a small business web developer, I’m sure I could have figured out a way to get competent developers to complete the site on time and working for, I don’t know, about 1/1000th of that cost! But they never asked me.

Now for the first point, the opposite end of the money spectrum. There is absolutely no such thing as a “free” website! Whenever you hear such a claim to “build a website for free”, what you are actually getting is a new example of an old trick that big companies do to try and squash small competitors (in this case, small business web developers like myself) by cleverly masking a false offer. You’ve surely seen or heard of these free website offers, many from three-letter companies that start with the letter ‘w’ and only disclose the fact that you have to pay a monthly fee in order to keep your “free” website in the cluttered disclaimer at the end.

For companies who are serious about starting and staying in business, such offers do not stand up in the long run for two primary reasons. First, you lose the ability to expand unless you pay the fixed price arbitrarily set by the company. This ties in well with the second reason, you ultimately do not own anything – neither content nor domain name. It is almost akin to those fake houses on a Hollywood set, nice enough to look at but totally impractical to live in.

So, if you’d like a website which is neither free nor $600 million, check out a quality website developer like 33 Dimensions and you will actually get what you pay for (if not more!)

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Small Business Saturday

Small Business Saturday logoThis year marks the fourth Small Business Saturday, a shopping holiday following “Black Friday” with a mission to steer holiday shoppers towards small and local businesses instead of national, “big box” retailers. The holiday was conceived by American Express in 2010 as a promotional campaign, but it soon took on a life of its own as thousands of small businesses and consumers joined in, and it has grown ever since. This is a very positive development, as Small Business Saturday brings awareness to businesses which often have limited advertising budgets.

Perception is very important in business. Customers and clients will make a decision on where they spend their money based on level of comfort or simplicity just as much as for reasons of value or service. Beyond mere comfort or simplicity, people tend to simply go with the choice that has been validated by others and this is one area where small businesses have to spend a lot of time and energy to improve their lot. For those consumers who do choose a small business, the rewards can be great, especially when it comes to great personalized service. However, there can also be a downside of this great service and that is when customers feel comfortable to the point that they forget it is a business arrangement.

And there are also economic benefits, as small businesses employ about 50 percent of all private sector workers, including about 40 percent of high tech workers. Over 60 percent of net new jobs created over the last decade have been by startups and small businesses.

Working in concert with the small business movement is the “buy local” movement. Here, you have what is called the “local multiplier effect” where buying from a local, independent small business creates a ripple effect which helps to strengthen the local economy at a much higher rate than larger corporate chains. Further, independent businesses help keep communities distinct and unique, with products tailored to the interests and needs of local citizens.

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Death, Taxes, and Social Media

Facebook public launchNews broke last week that, despite bring in over a billion dollars in profit last year, Facebook owes no taxes for the year 2012. Actually, the company will be getting a refund of close to a half billion dollars. This is due to a provision in the tax law that allows companies to discharge all previous losses, from their date of inception, during the year that the company goes public, as Facebook did in 2012. However, this is not necessarily a one-time windfall as Facebook may continue to get monster tax breaks in the coming years. And Facebook isn’t the only major social media company with no federal tax liability. This week it was revealed that LinkedIn has paid no federal income tax over the past three years, in spite of an estimated $160 million in profits over that time span.

The irony here is that much smaller businesses and/or individuals who promote these large companies through their social media services get no such tax breaks. In fact, I know of fellow small business owners who are struggling to meet their tax obligations at this time. Of course, social media is just one example, as similar situations exist in all trades and industries.

Politicians try to exploit such unfairness with lofty talk of “ending tax break for millionaires and billionaires.” The richest of the rich, such as Bill Gates and Warren Buffet, often avail themselves as props for such proposals. After all, who has more to lose than the richest of the rich? And if they are in favor of higher rates, why shouldn’t we be?

But when the rubber meets the road, such as in the fiscal cliff agreement less than two months ago, these same politicians advocate that the top tax rates be raised on those who make $200,000 per year (hardly millionaires or billionaires). So the brunt of the burden is carried by the small businesses on the lower end of the spectrum and, even for those of us who don’t quite make $200K, many of our clients and customers do. As for the likes of Buffett, such rate increases make no difference because these wealthy entrepreneurs have armies of tax attorneys to offset any meager rate increase. In fact, Buffett’s Berkshire Hathaway has been fighting the I.R.S. over an estimated $1 billion in back taxes for over a decade (how many small businesses can afford to do that?).

The only real solution is to throw out the current tax system, which is loaded with loopholes for the crafty and traps for the less-connected, and replace it with a simple and straight-forward system for absolutely everyone. Such a common-sense solution will be vehemently opposed by tax attorneys and politicians who rely on the current convoluted tax system to grant special favors, but it would unleash an era of growth and certainty for everyone involved in commerce. Then even Facebook could “invest” in the infrastructure of our country.

~ Ric Albano

Sources:
NY Post
Yahoo
Mother Jones
Huffington Post

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The Uphill Battle Facing Small Business

Next Saturday, November 24th has been deemed Small Business Saturday, positioned between Black Friday and Cyber Monday in the post-Thanksgiving shopping spurt. On the surface, this is a very good thing. It brings widespread awareness to small business in general and should cause consumers to think of the little noticed shops they may routinely pass on their way to the big box store.

I must admit, however, that I have some skepticism about this initiative. First, it was launched by American Express, a multi-billion dollar, multi-national, corporation that may be about as far from “small” as one can get. AMEX has also registered the terms “Shop Small” and “Small Business Saturday”, which means that an actual small business may get into trouble if they used these terms in this context without permission or sanction from AMEX. I don’t mean to dump too much on American Express as I still think this is a great awareness campaign for small businesses, but let’s be frank; it is a big advertisement for their financial services.

There is also a bit of cynicism with the term “small business” itself. It has been volleyed around the political world in recent times as a mere catch phrase, well focus-tested and positive. In a way, saying you’re in favor of small business is like saying you’re for “world peace”, a great sounding concept, but totally meaningless unless you’re willing to look at the finer details needed to achieve such a lofty goal.

In the past political season, we’ve heard both sides speak how they were in favor of “small businesses” or the “middle class.” But when you look at some of the finer details, you see that the opposite is true. When the IRS audits a large corporation, they receive an average of $9,173 per man hour in recovered tax revenue. When small and medium size business are audited, that figure is only $702 per hour, a ratio difference of about 13 to 1 in actual dollars for the U.S. Treasury. Yet small-and-medium-sized-businesses are audited about 30% MORE than large corporations. Why?

The answer is that small businesses are easier targets. They don’t have the resources to properly fight these audits, so they are “low hanging fruit” for bureaucrats who are more concerned with their own success rates than actual dollars recovered for the taxpayers and, of course, this proves devastating for many small business owners. This stat alone should make you furious but there are many more examples of the deck being stacked against small business.

The point is, small business is a great attribute in a free society but there are many unnecessary burdens that inhibit our growth and survival. Most people agree that they want small business to thrive and it is time we all take some responsibility in challenging these burdens.

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