New Bankruptcy Changes Rules for Business

The new bankruptcy law does not just have an impact on individuals, but also changes the rules for businesses seeking bankruptcy protection. It seems that individuals weren’t the only ones trying to avoid the consequences of their actions. From the Tennessean:
“Businesses seeking to restructure their operations under Chapter 11 bankruptcy protection will face stiffer restrictions and limitations on their conduct. Among the more notable are tough limits on the retention and severance packages paid to the executives of companies who have filed for bankruptcy protection.”
While creditors were left wondering what if anything they could expect in payments, the executives of the bankrupt business were getting extra compensation to remain with the company. Too bad their own sense of responsibility is not enough for them to stay and help get the company through the mess they may have helped to create. It seems a bonus is in order for such actions.
There are times when bankruptcy is the only viable choice for a company. As we saw with in the aftermath of 9-11, for example, not all bankruptcies are predictable or controllable events. But many are, and the easier it is for managers and business owners to duck their obligations the more willing they may be to take make less than prudent decisions.
The current laws are structured to “provide protection” for business from their creditors. Now we have a little more protection for the creditors, who most often also are small businesses trying to stay afloat.

Small Business Bill of Rights

The house this week passed the Small Business Bill of Rights, sponsored by Ric Keller (R-FL) and Bud Cramer (D-AL). The legislation is meant to be a blueprint rather than introducing any specific legislation. This is more of a political than anything else, as no specific legislation or reform is part of the bill. It has some good ideas and some nice language, but not likely to lead to any real changes soon.
Here are the key components as reported by the National Association of Small Business:
The right to simplified tax laws that allow family-owned small businesses to survive over several generations and offer them incentives to grow.
The right to be free from frivolous lawsuits that harm law-abiding small businesses and prevent them from creating new jobs.
The right to be free of unnecessary, restrictive regulations and paperwork that waste the time and energy of small businesses while hurting production and prevent job creation.
The right to relief from high energy costs by reducing our nation’s reliance on imported sources of energy and encouraging environmentally-sound domestic production and conservation of energy.
The right to equal treatment with large businesses when seeking access to start-up and expansion capital and credit.
The right to open access to government procurement through the breaking up of bundled contracts to give small businesses the ability to compete for federal government business.

The last three provisions concern me somewhat as they could actually lead to expansionary governmental policies. The devil will be in the details on much of this, if it ever actually leads to any specific action.

Tax Code is Too Taxing for Small Business

Thomas M. Sullivan, Chief Counsel for Advocacy of the U.S. Small Business Administration testified before the U.S. House of Representatives Committee on Small Business telling them, “A confusing and complex tax code is at the heart of why the typical small business with fewer than 20 employees spends over $1,200 per employee to comply with tax paperwork, recordkeeping, and reporting requirements.”
He was testifying about the so-called ‘tax gap’ of uncollected revenue from small businesses. He asserts that much of the problem is a result of “uncertainty and confusion” caused by the current system.
Sullivan testified that small business face “a regulatory compliance burden that is roughly 60 percent greater per employee than that faced by larger firms, and a tax compliance burden more than twice as large.”
Sullivan concluded that the best way to fix the problem is to simplify the tax code. Sullivan has nailed the problem, but falls short on his recommendation. Every past attempt to “simplify” only created more complexity, confusion and uncertainty. They tax code is too complex to find meaningful ways to simplify. This is more evidence that we need to scrap the current tax code and start fresh with a truly fair and simple approach to taxation.
(Source: SBA Office of Advocacy)

Health Care Facing Globalization?

We Americans have been quite smug about our health care, and for a long time with good reason. Everyone in the world comes here when they really need the best care and can afford it. There has even been significant movement by several American health care companies to develop international markets. Well, according to this story from CBS News (via Ben Cunningham) global competition is here in health care.
“A growing number of tourists are…combining holidays with health care. And that’s because a growing number of countries are offering first-rate medical care at third-world prices.
“Many of these medical tourists can’t afford health care at home; the 40 million uninsured Americans, for example. Others are going for procedures not covered by their insurance: cosmetic surgery, infertility treatment.”

Countries such as India and Thailand are leading the way. For example, in these countries heart by-pass surgery costs $12,000 rather than the $100,000 one would pay in the US. These procedures are being done in foreign hospitals that often rate as high as most US facilities. Even with airfare and hotels it can be a huge savings.
Such alternatives may add an interesting twist to the growing trend toward consumer driven health care plans among US small businesses. Watch for active marketing of health care tourism as these plans sweep the nation.

College Entrepreneurs Honored

We honored students who pursued their entrepreneurial dreams while attending school here at Belmont University.
Our Regions Bank Outstanding Student Entrepreneur of the Year Award went to Matt Sells, who owns Transformations Landscaping. He received a $5,000 award sponsored by Regions Bank. Matt has worked hard to develop his business, and intends to continue improving and growing it after he graduates next fall. Presenting the award is Allan Joiner from Regions Bank.
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We also honored eighteen new students who are practicing entrepreneurs. They have started a gymnastics business, a retail clothing store, music related businesses, graphic design, a coffee shop (in Montana) and a sign company just to name a few. Here are several of them who were able to attend our ceremony.
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Having begun my own entrepreneurial career while in college, I can assure you that being a collegiate entrepreneur is no small accomplishment. And what they are doing is what makes me so optimistic for our future.
Congratulations to all!!

Small Business Poll Released

American Express has released their annual poll of small business owners. Here are the highlights:
– 85% expect to grow — this is a sharp increase from the last poll six months ago showing a dramatic increase in optimism
– 57% expect their revenues to exceed last year’s and 35% expect revenues to remain steady — that results in 92% expecting to as good or better than last year!
– 50% have cash flow concerns — this is down from 62% a year ago. How will they address their cash flow management? 28% will use personal or private funds , 18% will put off purchases, 18% will use a line of credit.
– 66% plan to make capital investments in the next six months
(via National Dialogue on Entrepreneurship)

Doing the Right Thing

I found an interesting perspective on the ethical challenges faced by entrepreneurs in an opinion piece by Jack Roseman published in the Pittsburg Post-Gazette.com.
“(W)e give up our principles in painless little slices. Each lapse doesn’t seem so bad. It’s only in retrospect that we see how slippery the slope really was.
“Tugging us down that slope is greed, our insatiable desire for more money, more power, etc.
“Someone said the reason time seems to accelerate as we age is that each year we are living out a smaller proportion of our total life span. I think something like that goes on with ethics. The more material wealth we have, the less we value it, and so the more we are driven to attain even more.
“My theory is that the more you make, the greedier you become.”

My co-author Mike Naughton says that this becomes the problem when we view wealth as the singular, ultimate goal in a business rather than as an important outcome of the pursuit of good and moral ends. Wealth is not a bad thing; quite the contrary. The ability to pursue wealth is essential in a free society. But to view wealth as the only outcome of our entrepreneurial activities can cause us to eventually corrupt our souls: with each decision, with each non-decision, with each action, and with each inaction.

Mortgage Company Encourages Integration of Faith and Work

I have written several posts about the ability and the responsibility of entrepreneurs to integrate their values into the businesses that they build.
My daughter Maggie suggested I look at what a mortgage company out of Georgia, HomeBanc Mortgage Company, is doing to integrate their values and their faiths into their company. She heard about this business this past week while attending a large retreat for Fellowship of Christian Athletes (she plays volleyball and will be transferring to Belmont this fall). HomeBanc Mortgage sponsored the entire weekend for these students.
HomeBanc Mortgage is a company that recently went private through a leveraged buyout from its former parent company. Their vision statement, their statement of values, and their faith-based statement all set the tone for the values that shape how this company will be run and how all that work there will do their work. Their statement of ethics gives specific expectations of how management and other employees should integrate their shared values into how they do their work.
Many get nervous when we speak of integrating faith and work, and indeed some companies have become too prescriptive about what faith people should follow. While predominantly Christian, HomeBanc Mortgage takes great strides to be inclusive:
“As a faith-based company, HomeBanc Mortgage Corporation believes that associates should not have to check their spirituality at the door. We recognize that spirituality is deeply personal – we do not seek to impose any particular faith or doctrine upon any associate. We welcome people of all different beliefs into our family, treating each associate with dignity and respect. Regardless of our differences, we all share the common commitment to putting the needs of others ahead of our own. By serving others with the heart of a servant, we strive to enrich and fulfill the lives of our associates, our customers and our communities.”