Two surveys released this week paint a very interesting economic picture.

Entrepreneurs are still creating new jobs.  ADP’s Small Business Report for September shows that small businesses (fewer than 50 workers) created 28,000 new jobs last month while corporate America is hemorrhaging jobs, losing more than 170,000 over the past six months.

However, a new survey of 500 US small business owners conducted by Harris Interactive for ING DIRECT found that entrepreneurs are very worried about their current situation and about the future.  Specifically the survey found that:

• 63 percent say are either very- or extremely-concerned about the future of the economy

• 57 percent see developing new business as their number-one challenge through the remainder of the year and “access to cash” ranked number-two at 18 percent

• 56 percent are now saving less money for personal and 53 percent are saving less for retirement savings compared to a year ago

• 40 percent see the current financial state of their business as worse than a year ago

The march toward socialism was slowed down yesterday with the courageous vote in the House.

Things will get worse before it finally gets better.  But, if we let the market work, our economy will come back stronger than ever.  And entrepreneurs will be at the heart of this economic resurgence.

We have now peeked behind the curtain and seen the truth about the Wizard of Oz that is our federal government.

Still confused about what has actually happened?  Wonder how we got into this mess to begin with?  Here is one of the best explanations of how we have got into this mess that I have seen direct from Bird and Fortune.

Always remember — the same politicians now working hardest to pass a bailout are the very ones who created the mess by meddling with the housing market as part of their grand plan of social engineering.

For now remember that cash is king, debt is your enemy, and patience is a virtue.  Stay on track.

If you haven’t seen the video “The Call of the Entrepreneur,” I strongly suggest you tune to Fox Business Channel this weekend.

It will air from 5:00 to 6:00 p.m. EDT on Saturday 9/27/08 and from 12:00 to 1:00 a.m. EDT on Sunday 9/28/08.  I have my TIVO set up to record this one!  We hosted one of the premier showings last year here at Belmont — it was truly inspiring.

You can find your local channel for Fox Business at their channel finder.  If you do not have access to this channel you can click here to learn how to set up your own viewing.

As you watch, think about how Wall Street and Washington are trying to strike a deal that will erode the free enterprise system in America.

Although the ADP jobs report that I blogged about yesterday showed some job growth in small businesses, the NFIB’s monthly survey is not as rosy.  Here is a statement from William C. Dunkelberg, chief economist for the National Federation of Independent Business on August job numbers based on NFIB’s monthly economic survey that will be released on Tuesday, September 9. The survey was conducted through August 31, 2008 and reflects 812 small business owner respondents:

 

“Seasonally adjusted, small business owners reported basically no new job creation over the past few months in the August NFIB survey (an average loss of -0.04 workers per firm, essentially no change). Eleven percent of the owners increased employment by an average of 5.7 workers per firm, and 15 percent reduced employment at an average of 3.7 workers per firm. Overall, this was a better performance than in recent months, but job growth will be negative again, and the unemployment rate will rise.

 

“Forty-six percent of the owners hired or tried to hire and 76 percent of those trying to hire reported few or no qualified applicants for the job openings they were trying to fill. Fifteen percent (seasonally adjusted) reported unfilled job openings, well below the 34-year average of 22, and down two points from July, suggesting a higher unemployment rate for August. Nine percent of the owners reported that the availability of qualified labor was their top business problem, well below last September’s reading when openings were reported by 25 percent of all firms, and 17 percent complained about the lack of qualified labor.

 

“Over the next three months, 13 percent plan to create new jobs, and 10 percent plan workforce reductions yielding a seasonally adjusted net 9 percent of owners planning to create new jobs – a solid improvement over recent readings. 

 

“Not seasonally adjusted, more owners plan to cut employment than planned to increase jobs in the retail trades, agriculture and construction industries (winter is coming). Job creation plans are most frequent in professional services and manufacturing businesses. Regionally, more firms plan cuts than increases among firms in New England, the East South Central states and the Mountain states.   In the Mid-Atlantic and Pacific states, about as many owners planned to cut jobs as planned to increase employment.”

Some partially good economic news for a change.

The August ADP National Employment Report and ADP Small Business Report showed that small businesses (businesses with fewer than 50 workers) added 20,000 jobs during August.  

If we look at just the service sector, we see an increase in 36,000 jobs. 

However, of some concern to me is that goods-producing small businesses lost 16,000 jobs.  These jobs tend to be better paying.

My column in today’s Tennessean examines risk in these difficult economic times:

Risk. It seems to be at the heart of entrepreneurship. Whenever I ask a group to describe entrepreneurship, the word risk is always one of the first things people mention.

Most often people associate risk with failure. This is commonly called “sinking-the-boat risk.” It is the risk of putting your money, your time and your reputation into a new business only to have it fail.

Continue reading Two Sides of Risk in Current Economic Conditions

The news yesterday was that inflation is heating up faster than expected.  What adds even more concern is that inflation is now getting much broader than just energy and food.

I know many of you who are a bit younger believe that inflation is manageable — I get your e-mails and comments that wonder why I am so worried about it.  I just raise my prices to reflect my higher costs and everything will be OK.  Right?

The problem is that smaller businesses are less able to adjust to inflationary pressures.  It is not a smooth and orderly increase in prices for every business in the economy. 

If you have big suppliers or customers they can tie your hands.  Your costs go up, but you are unable to pass along these costs with higher prices.

An additional worry this time around is that we have a weak economy with inflation — this is called stagflation.  In this scenario, customers begin to sit on their hands.  When you raise prices they either buy less from you or even decide not to buy at all.  We go out to eat less often and when we do we buy less expensive meals.  We travel less and choose cheaper options.  We postpone buying new goods.  But, we also postpone taking care of old things.

As I have been saying for many months, it is time for entrepreneurs to hunker down.  Build up cash, cut overhead, and reduce debt (interest rates will soon spike).  Position your business to meet the new economic reality.  Focus on value to your customers.  While doing all of this, you still need to treat your customers well and keep communicating with them through marketing.  Bootstrap your marketing efforts, but stay in front of your customers.

The National Federation of Independent Business Index of Small Business Optimism fell again in July, establishing one of the longest strings of recession-level readings in the history of the survey.  Half of the decline was due to weaker capital spending plans–the lowest reading since 1975.  Lower earnings, fewer job openings and lower inventory satisfaction also posted substantial declines.

On the upside the survey found gains in expected real sales, business conditions, and the percent of owners saying this is a good time to expand.

When I was up in Cleveland conducting a workshop at John Carroll University I heard a word running throughout the city that I did not expect — entrepreneurship. 

Cleveland and other rust belt cities are looking to bolster their entrepreneurial economies.

More and more are looking to non-profit incubators to help.  From Philanthropy News Digest:

One such nonprofit is five-year-old Jumpstart, Inc., which provides seed money to entrepreneurs with promising businesses in the Cleveland area. Like a venture capital firm, Jumpstart identifies companies to invest in and advises them on their next steps. But in a departure from the traditional venture capital model, Jumpstart relies on charitable donations, many of them from the private sector, for its financing and does not return a share of profits to those who provide the investment dollars. Instead, returns come in the form of satisfaction derived from boosting the region’s economic standing and future.

This is a much more prudent strategy than throwing money at corporate relocations that rarely offer the economic return they promise.

(Thanks to Jose Gonzalez for passing this along).