There is a new law that will have a profound impact on small business known as the “Check 21” banking law. For a full analysis of the pros and cons of this law for small businesses StartupJournal has a very thorough summary.
What jumped out at me is that the law changes the way checks are handled in the banking system (thanks in part to 9/11). Here is a summary from StartupJournal:
“For those unfamiliar with Check 21, the law was designed to facilitate the way banks move checks around the country. Currently some 40 billion paper checks are shuttled between banks each year by airplane and ground transportation before being cleared and returned to check writers in the mail.
“But the grounding of airplanes after the terrorist attacks of Sept. 11, 2001, underscored the need to make the nation’s payment system more flexible. So rather than require banks to transport original checks between institutions in different states, Check 21 will let these lenders transfer and print electronic facsimiles of the checks instead — otherwise known as “substitute checks” or “image-replacement documents.”
“When the law takes effect Oct. 28, it could theoretically cut the time it takes a check to clear from days to hours. “
This looks like the end of check floating, which was always one of the most creative aspects of being an entrepreneur! How many days would it take for the check to the telephone company to clear? How many days would it take for our payroll all to clear? The art of float financing may soon be sunk!
Private Companies are different
If you’ve ever even thought about taking your business public, or wonder why I rant so often about the beauty of staying private, check out Rob’s post over at BusinessPundit about Cargill. This is a private, family owned company that would be one of America’s biggest 20 companies if it were taken public.
Private companies are, indeed, different. Entrepreneurs make a huge mistake when they assume that an IPO is simply a financing mechanism. It begins a process of change the will forever alter the company culture and its purpose.
Cargill’s Staley is an amazing CEO and has a unique challenge being an “outsider” CEO of this family business. I had the priviledge of getting to know him when his son was one of my students at St. Thomas. You could see how well he fit into Cargill’s culture. It was clear that he was being groomed for the CEO role as much for his character as his business acumen.
latest economic report
The latest economic report is again quite robust. Here is the full report issued by the Joint Economic Committee.
Here are the highlights:
* Payroll employment rose by 248,000 in May, the ninth straight month of gains. Manufacturing jobs grew for the fourth straight month, and unemployment held steady at 5.6%.
* The economy grew at a 4.4% annual pace in the 1st quarter. Private forecasters see growth of 4.6% in 2004, the highest in 20 years.
* Energy prices, including gasoline, remain elevated and are expected to remain high at least through the summer diving season. Oil has rise to around $40 per barrel.
* First quarter productivity growth was revised up to 3.8%, accelerating from 2.5% in the 4th quarter of 2003. Real hourly compensation for the 1st quarter was also revised up.
Global Opportunities
Not all is bad with globalization. This article
from Foreign Policy shows some potentially underserved opportunities in foreign markets.
culture and economics: the missing link
I have written from time to time about the need to look beyond the government controls versus free markets debate. Culture is an even more powerful force that can provide a context for our economic system that grounds it within a moral foundation. Here is an interview with Peter L. Berger on this topic that is fascinating. Prof. Berger is director of the Institute for the Study of Economic Culture and professor of sociology at Boston University. It was posted at the Acton Institute’s web site.
Berger states the following:
“I think cases exist where there are tensions that individuals who are in positions of responsibility have to work through. That is the subject matter of business ethics, which is a complicated and I think worthwhile undertaking. But there is a primitive business ideology that being good, being morally virtuous, will always lead to economic success. That is simply not true. The life of Jesus of Nazareth if nothing else would indicate that he did not start a successful corporation.
“So I think the relationship is not that easy. It does not mean on the other hand, that in order to succeed in business one has to be a brutal, immortal person. No. But there is a tension there. I don?t think there are any easily formulated general rules on how to resolve that tension, but I know many religious people in the business world who will struggle with this and sometimes come up with creative solutions.”
Your comments are welcome!
After a few weeks of waiting for some software fixes to be put in place, my blog site is now open for comments! I felt badly about having to shut off the comments, but we were getting some really nasty Spam attacks. Let’s just say that they were links to sites that are not what a Baptist university would want to see on one of their hosted blog sites!!
So, please have at it. I missed hearing from all of you.
Even Business Week gets it!
Business Week recently spotlighted its “100 Hot Growth Companies”. My favorite part of the article was the acknowledgement by this bastion of the old corporate economy that it is the small companies that are driving things these days:
“Over the past few years, smaller companies generally have played an outsized role in bolstering a shaky U.S. marketplace. Strengthened by low interest rates on their borrowings and a focus on consumers who kept on spending, smaller players were vital to the overall economy in the recent down years. “Small businesses have been a source of stability to a very troubled economy, and more recently a key source of growth,” says Mark Zandi, chief economist of consulting firm Economy.com Inc. Just as important, the group has been an incubator of new ideas, some of which will undoubtedly change our world. Alumni of our Hot Growth list include network titan Cisco Systems (CSCO ), video game leader Electronic Arts (ERTS ), and such familiar names as Black Entertainment Television (VIA ), Papa John’s International (PZZA ), and eBay (EBAY ).”
My personal favorite Reaganism
President Reagan was once asked the difference between a big business and a small business. He said that a big business is what a small business wants to become if the government would just get out of the way.
Rest in peace. His journey is now complete.
Carnival of the Capitalists
Here it is, Carnival of the Capitalists for this week at the Window Manager. A great set of posts again this week. A couple to make sure to look at:
Professor Bainbridge (a very thoughtful and well-written site, by the way) looks at family business succession using the Mondavi wine business as a case study.
Small Business Trends has a post about the knitting boom going on today. Who knew?? A great example of how the simplest ideas are often the best. “Swing easy and it will go farther.”
More good news on employment
There were a quarter of a million new jobs new jobs last month!
Here are the details:
“The Department of Labor reported today that payroll employment increased by 248,000 jobs in May following even larger job gains in both April (346,000 new jobs) and March (353,000 jobs).
“Highlights:
* Over 1.1 million new jobs have been created in 2004. If this pace of job growth continues, over 2.8 million new jobs will be created this year.
* Since August 2003, payrolls have risen by 1.4 million jobs.
* Employment continued to expand in manufacturing, rising by 32,000 jobs in May. There have been 91,000 manufacturing jobs created in the past four months.
* April statewide data from the Department of Labor also showed that the unemployment rate has fallen in 47 states over the past year.
Here is the full report and here is a quick look at the trends.
The entrepreneurial economic recovery rolls on!