Apr 222020
 


Saul Leiter Man in straw hat 1955

 

 

 

The following was written by Bruce Wilds, who runs the Advancing Time blog. Bruce is a small business owner in the Midwest.

I get lots of articles sent to me, but hardly ever publish any (sorry I can’t send everyone a reply) because they’re not what I think this site should be. But with this article it’s different. I think what Bruce describes is interesting, important even. The US has been losing small businesses for a long time, and the virus response is set to greatly accelerate the process. The huge stimulus plans will bypass most small businesses, because they are too small for governments to know what to do with.

The article was written before the latest round of handouts, but there’s very little reason to believe it will change much of anything. It’s not so much a grand plan or conspiracy, it just that the system has come to recognize only that bigger is better. America doesn’t like small. This is as true for banks as it is for various levels of government. But small businnesses have not only built the country, and are crucial for the faces of Main Streets and small towns, they also employ enormous amounts of Americans.

 

 

Bruce Wilds: The Paycheck Protection Program or PPP was funded with $350 billion in the last stimulus bill, this money is now gone. Of the thirty million small businesses in America, only 1.7 million received money from the 2.3 trillion dollar aid package passed to help sustain America during this difficult time. If the government blew through this money and was only was able to help only around 5% of small businesses. it is difficult to think another 250 billion dollars will set things straight. Clearly, because when the government made promises it delayed the wave of firing while companies waited for help.

The government has failed to keep its promise so now we should expect unemployment to soar as reality sets in. One of the largest problems facing small companies is they are often underfunded and have difficulty getting financing at reasonable rates. Banks find larger companies much more profitable. The sector of the economy most damaged by the covid-19 shutdown is small business. When this is over America will find many small businesses have been decimated and are not able to reopen. Others will never recover and be forced to close within months. Since small businesses employ over 54 million people in America and their importance in the economy should not be underestimated.

• Small businesses contribute 44 percent of all sales in the country.
• Small businesses employ 54.4 million people, about 57.3 percent of the private workforce.

Rest assured government employees and bureaucrats will still continue to get paid but small business, the most productive part of the economy has a knife to its throat. As a landlord and small business owner, I can tell you the program was structured in a way that will be of little help to most small businesses. The government slammed expensive legislation through with no idea of the damage they were doing and how it will cause hundreds of thousands of businesses to close their doors forever. Washington has become so attuned to dealing with lobbyists from mega-companies it has lost sight of the fact small is small, and when this comes to business, this means usually under twenty employees, not hundreds.

 

 

The government’s answer to keeping people employed was to promise small businesses an easy to get, rapid maximum loan amount of two and a half times a company’s average monthly payroll expense over the past 12 months. This loan would turn into a grant and be forgiven if a company did not fire its employees. Sadly, legislators failed to take into consideration that not all small businesses are labor or payroll intense. Some businesses with large or expensive showrooms are getting hammered by rent, others by inventory, or things like taxes, utilities, or even by having to toss products due to spoilage.

The PPP also failed to address the issue of what these employees are going to do while the company has no customers and business barely trickling. In the past, these employees were expected to pursue activities that earned revenue and garnered profits for the business but with no costumers, this is difficult to do. The PPP also ignored the fact that by keeping these employees on the payroll a generous employer is left open to the harsh mandates laid out in the government’s previous bill. The hastily drawn up 110-page federal covid-19 economic rescue package, which Trump fully supported dealt a hard blow to small business. For a small business this is a disaster, the bill requires;

• Employers with fewer than 500 employees and government employers offer two weeks of paid sick leave through 2020.
• Those same employers must now provide up to 3 months of paid family and medical leave for people forced to quarantine due to the virus or care for family because of the outbreak

As expected, this measure, named “Families First Coronavirus Response Act.” resulted in millions of workers suddenly losing their jobs. Ironically, it was held before the voters as proof lawmakers could work together during a crisis. By framing the poorly crafted pork-packed bill this way promoters positioned themselves to demonize those unwilling to support it. Remember, this bill is was in addition to the $8.3 billion emergency spending bill first approved to curb the spread of covid-19.

 

 

As government has grown larger it seems to have become totally oblivious to the fragility of many small businesses and how much it can cost a community when they close. By framing these pork-packed bills as bipartisan their promoters imply they are fair and balanced. This is not true, small business is the big loser and hundreds of thousands will soon have to close. With so many tenants looking at foregoing rent small landlords that don’t have deep pockets also face huge problems. We have our heads in the sand if we think companies that exist on events where people gather will overnight regain their luster. It is not like someone can simply flick a switch and things will return to normal.

Reality undercuts the idea of the “V-shaped recovery” theory and the idea after the economy has come to a dead stop it can quickly reboot and be back at full speed in a few months. The government has presented us with an extension of crony capitalism structured to throw just enough to the masses to silence their outrage but in the coming weeks, we will see it failed. Large businesses with access to cheap capital are the winners and the big losers are the middle-class, small businesses, and social mobility. All those people that want a higher minimum wage can forget that ever happening if we don’t have jobs.

As for just how much small business owners make, according to figures from 2015 from the Small Business Administration the median income for self-employed individuals at an incorporated business was $49,804 and $22,424 for unincorporated firms. According to PayScale’s 2017 data, the average small business owner’s income is $73,000 per year. But, total earnings can range from $30,000 – $182,000 per year. This means it varies greatly depending on where and just how big the business is. However, it is important to remember these people have “skin in the game” and most risk losing everything if their business fails.

 

It is important to recognize that starting your own business has always been about the opportunity to design and build your own future. It is a symbol of freedom not a guarantee of wealth. Many people choose this path proudly, not to make more money but as a way to express their individuality. For these competent and talented people, a job in government or at a large company often offers more security and benefits but far less freedom. Do not underestimate the value of small business and what it contributes to our society. Companies such as Amazon are the anti-thesis of small business making their workers a cog in a machine and stealing their soul.

Based on the government’s promise to small businesses a great many held off on letting employees go but with each passing day in order to survive they are now in the process of letting hundreds of thousands of employees go. This is a ticking time-bomb. By telling these businesses to close and then through its failure to carry out its promise of helping them the government has created a situation with massive negative economic ramifications. To make matters worse, people going on unemployment look to get almost as much as those that do work. Why will anyone want to work, especially government workers when they can get paid to stay home? This is not about wanting more money for small business, it is about the reality that the firings are just beginning.

 

 

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Home Forums Small Business Firings to Start

This topic contains 7 replies, has 6 voices, and was last updated by  V. Arnold 5 months ago.

Viewing 8 posts - 1 through 8 (of 8 total)
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  • #57706

    Saul Leiter Man in straw hat 1955       The following was written by Bruce Wilds, who runs the Advancing Time blog. Bruce is a small bu
    [See the full post at: Small Business Firings to Start]

    #57710

    D Benton Smith
    Participant

    The World Health Organization wants to help fight the pandemic, Fine and good. All real help is appreciated. However, they are asking for funds in order to provide this twice-promised twice-betrayed help from their previous position of Authoritative Responsibility. This shall not be. They have betrayed trust and performed badly at a time when implicit trust and selfless performance were vitally necessary.

    Yes their help is acceptable, but NO; it shall not be from a position of leadership of any kind.
    It will only be accepted in the form of good results produced as tangible contributions by individuals at personal risk and no thought for personal gain.

    I understand that Dr Tedros Adhanom Ghebreyesus (Director General of the World Health Organization) wants a job . Good. He can scrounge up PPE from where ever he can find it and serve in the Intensive Care unit of a hospital in a hot spot. Somewhere in Ethiopia would be a good choice. I am not joking in the least. If he will serve with his life on the line then I will consider trusting him. Otherwise, no, never.

    If the WHO wants to regain the world’s trust trust then it’s individual employees will have to earn it with good works and good faith. No more cash in advance.

    #57713

    zerosum
    Participant

    If you are not scare enough then read the following, WHO experts are telling us.

    Second wave example – Spanish flu January 1918 to December 1920

    https://en.wikipedia.org/wiki/Spanish_flu

    #57714

    zerosum
    Participant

    https://www.cleveland.com/metro/2020/04/citing-coronavirus-costs-university-hospital-cuts-pay-hours-of-employees-uninvolved-with-patient-care.html

    Citing coronavirus costs, University Hospital cuts pay, hours of employees uninvolved with patient care
    Updated 12:25 PM; Today 11:21 AM

    The decision for the cuts was made after the hospital reviewed its expenses and realized that any additional relief money it received from the federal government would not cover its financial losses.

    UH estimates that Ohio hospitals are losing $42 million day during the coronavirus crisis. They’re also spending $5 million more a day for additional supplies.

    ( read the article to find out how the will save money)

    #57719

    WES
    Participant

    The so called small business rescue plan was specifically used by big business as an opportunity to put many small businesses permamently out of business!

    Afterall less competition is good for big business!

    The initial political intentions may have been good, but one needs to understand how the sausage (nod to Bismarck) is actually made!

    The actual legislation is not written by the politicians but delegated to the lobbyists via the Chamber of Commerce. So who might these lobbyists be? Small businesses can’t afford lobbyist. So that leaves the only lobbyists in town, big business, to write the legislation!

    And well connected big businesses like Shake Shack, Harvard University, got most of the small business’s money!

    This reminds me of what Germany did to France’s businesses after conquering France in 1940. The Germans decreed that no business could layoff any staff and had to continue to pay them despite having no business! Most quickly went bankrupt and then the German bankers swooped in and legally bought those businesses they wanted for pennies on the dollar!

    Economic warfare by any other name!

    1940/2020. Sound familiar?

    #57723

    Huskynut
    Participant

    One of the largest problems facing small companies is they are often underfunded and have difficulty getting financing at reasonable rates. Banks find larger companies much more profitable.

    Having owned and worked in several small businesses, that’s been exactly my experience. Around 2010 during the GFC I went to bank to borrow a modest sum to invest in some promising R & D for which I’d secured 50/50 matched funding from a government agency. The bank turned me down flat.

    So I went back to them with my partner, and we spun a story that we were going to get married and wanted to borrow the same sum for our wedding. Since her family was all based in Europe and we wanted to do it right, the wedding was going to be really expensive, yada yada yada. Personal loan approved on the spot (we never did get married..).

    I’ve been working corporate rather than small business for quite a while now, but from that kind of experience, I’m still hyper-sympathetic to the needs and impacts of small businesses. And unfortunately, the careers of most government decision makers have never included a stint in small business. If you’ve never lived it, it’s possible to sympathise, but almost impossible to grasp the realities of trying to hold everything together whilst at the bottom of the economic foodchain.

    #57724

    V. Arnold
    Participant

    Yesterday I went out for the first time in more than a month; I had to go to immigration for my 90 day report.
    First we went to Tesco, to go to our bank; it (our bank) was closed until the 30th. But then, so were all the island stands (selling gold, watches, jewelry, clothing, etc.) every one of them numbering roughly 50-60 stands.
    Also closed were most of the actual stores, common to malls like this. The bank branch being closed, we had to go to a main branch, which we did.
    On the way we drove through the city, and shop, after shop, after shop, was closed.
    It really brought home the impact of the virus on so many businesses; many times many people and families out of work/no income.
    Damn!
    I had to wear a mask for the first time; suffocating best describes that; especially in tropical heat (37°c).
    Small problem when compared to the financial toll this is taking on the average person…
    I cannot believe this will not have a profound effect on society everywhere…
    We’ll see…

    #57725

    V. Arnold
    Participant

    Addendum:
    There is an upside to this; Thailand’s numbers are quite low, especially for a country of 63 million people.
    New cases yesterday 15, no deaths (49 total), total cases, 2,826, recovered 2,352.
    The daily count has been going down for over a week.
    It would seem the government has done quite a good job so far…
    We’ll see what the coming days and weeks look like…

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