
Subject: Re: Cat Food Date: 6/25/2011 6:07 AM
Recommendations: 20

Running a small business is rough (ask me how I know :-). And yes, taxes are a killer as well as, in many cases, a lack of a business provided safety net (though I always made sure my employees were covered by health, retirement, disability programs, etc.).

That said, small businesses frequently have a number of problems from the get-go:

1) Poorly thought out business plan where the whole premise of that specific business, at that location, at that time doesn't fly (and the profits, if any, are "sub-optimal").

2) Originally well thought out business plans where things changed, but the business did not appropriately adjust. (I have "re-invented" my business on average every three or four years and completely re-aligned its focus. That's one of the reasons I just sold my business - it's time for one of those shifts and I didn't feel like making the effort again - the new guys will do fine).

3) The scale of the business (either due to lack of capital or lack of sales) is too small to allow employees to be hired so that "the boss" can spend time further growing the business.

4) A failure to differentiate your product to the point that you can sell it at a premium. Even in times of financial stress, some people are willing to pay for the best. Goods and services which are commodities have to compete for a shrinking market, but if you needed a brain operation, would you look for the cheapest surgeon? A small business cannot afford to compete solely on being the lowest priced and survive. In order to charge higher than average prices, they must deliver better product and/or services.

While it's obvious that a list of potential "business problems" can go on forever, the above four (far from complete list, but just some examples) have little to do with capital, but are structural flaws that all the effort and resources in the would have a hard time dealing with.

One of the problems in the US is that we have been exposed from youth to a constant stream of propaganda about what constitutes the American Dream, how corporations should act, etc,

Grow up - there is no social contract. When I grew up, nuclear energy was "the thing". It has taken decades and billions of lobbying dollars by the oil and coal industry to change our collective perceptions to the point that even the intelligent people we have on Metar are confused. Pension funds were started during WWII for a reason, hung around for a few decades (through inertia) and have been cut as too risky and expensive by corporations. When I calculate what an employee costs an hour, I add wages, pensions, health costs, labor/volume based insurance rates, etc. and frequently find that the additional cost of benefits ranges from 50-100% of wages. Personally, I don't care as long as I can pass the costs along to my customer at a profit. If not, then something’s got to go. If I still had a defined benefits pension plan for my company (threw it out about a dozen years ago), the events of 2008/9 would have demonstrated the strategic risk to the company and I would offload the investing decisions to the participants.

Those who do not realize young that they are going to be taken for a lifetime ride if they follow the game plan which is the low hanging fruit might fall into your cat food category, but those who think for themselves (and if you are reading this, at least you are making an attempt) can do fine.

I admit I never took a student loan. Instead of attending the Ivy League schools I was accepted to, I went to night school in an inexpensive City University system and worked during the day. I never owned a home and have always rented (with attention to keeping those costs moderate). We have been "savers" as well as cautious investors over the years and managed to avoid catastrophic market events (and, in some cases take advantage of them. I started a number of small businesses because I saw opportunity and ran the most important one successfully for over 30 years by making my customers (as well as, if possible, my employees) happy. I have never figured Social Security in my plans (in much the same fashion that I will not be applying for unemployment insurance benefits), though I probably won't turn it down if it's offered to me :-).

We all go through life making choices. Some are compromises, some are made due to ignorance (not the same as stupidity), training, peer pressure, assumptions, and so on. Each will have us walk a little further down the path of life, but we always have the ability to walk off the path we are on and find another one. In this Endeavour, one should expect no assistance from others. You may receive assistance (useful or not, friendly or malicious), but as it is unsolicited, it should be carefully evaluated as to why it was offered and whether it is truly helpful before it is accepted.

There is no social contract. (I use "you", but mentally substitute "I" or "me" in the following). There is nobody out there who is really interested in whether you eat cat food or not. An assumption that it is the responsibility of the taxpayer to do anything more than keep you alive and out of their collective hair if you are indigent is a request that they pay more in taxes than they otherwise would have to. Nobody really cares about whether you live or die in old age (dying is cheaper). Unless we are "grown up" enough to each make sure our individual finances are robust enough that we do not need the "charity" of our fellow countrymen, we are subject to the dole (in one fashion or another) and to the arguing of how to have someone else pay for it (and have someone else’s share cut rather than ours). It is sad that we, as a nation, have collectively been drinking the Kool-Aid all our lives and we believe the rhetoric. It's hard to stay seated at a sporting event when everyone jumps to their feet and cheers, but unless we, as individuals make our own choices, we are doomed to follow the choices of others.

And Dave, you are right, small businesses are being buried under new taxes. The trick is to pass those costs along to the consumer.

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