Action Coaching: A different kind of stimulus … (Part 1)

Here’s an interesting take on the economy by former secretary of labor Robert Reich …

Reich’s Wall Street Journal Op/Ed …

It’s interesting to hear how a current economist and policy leader can be so myopic in his view and opinions on how to get the “jobs machine” going in the U.S.

I don’t know about you, but I’ve read the text and I find absolutely no mention in Mr. Reich’s column about the role of small business in a job-led recovery … or the ability of small business to create new and higher paying jobs.

Here’s another way to look at some of the numbers Mr. Reich has discussed …

While he points to “big business” showing profit at the expense of lower sales, he never mentions that
according to the most recent Small Business Association figures, “small business” actually accounts for for 99.7% of all businesses in the country.

This is a phenomenal figure, and translates into more than 27.2 million individual companies.

What would happen if each of these companies hired just one person this year?

Or, even if some of these companies are simply companies “on paper” or tax shelters … what if 10 million “legitimate” small businesses hired two new people this year?

I only make that distinction because some of Washington’s policy “experts” like to claim a majority of these “companies” are actually one-person firms with little revenue and no employees, the majority of today’s biggest businesses where once one-person operations with little revenue and no employees, operating (of all places) out of a dorm room.

Much like Michael Dell did years ago … right?

Anyway … REGARDLESS of the make-up of these companies … let’s consider a more conservative count of 10 million “legitimate” small businesses for a moment …

Just say 10% of THESE companies hired just two people over the next year. That means in one year, a single company has expanded its size by 200%, and added a total of 2 million jobs to the economy – a nice growth rate of more than 200,000 jobs per month.

Not quite up to Mr. Reich’s numbers … but pretty close … and we are making some pretty conservative estimates.

The other numbers Mr. Reich fails to mention are those involved in the business cycle.

Most U.S. recessions in the post-World War II era last an average of 10 months, followed by growth cycles that last an average of 50 months.

Coming out of those downturns, small business has always led the way – with entrepreneurs and innovators bucking convention to strike out on their own.

But this time, a series of obstacles, barriers and outright disincentives to ownership have clouded the future time-horizon for would-be entrepreneurs, making the risk of taking a risk more risky than ever before.

The new reality of “business” paying health care premiums takes on a new meaning when 99.7% of all businesses are small.

Talk of taking away tax credits and incentives to “businesses” means something different to a marketplace with a 99.7% saturation rate.

Policies that punish passing on the assets of “business” or the actual “business” to heirs has new consequences when it affects a percentage of the 99.7% of all of your tax-paying customers.

The flip side of risk is return, and many of the current owners I talk to and would-be owners see greater returns in other parts of the world than they do in the U.S.

In my native Australia, for example, the continuing (yet slower paced) growth in the Asia Pacific region has owners gearing up for the next growth phase; while in South America, the emerging, resource-based economies are still producing growth rates that are projected to significantly outpace the U.S. and Europe over the next decade.

Yet, while those countries with onerous restrictions have found ways to prosper in spite of the barrier and disincentives to success, the U.S. policy makers are bent on finding ways to make the country even more uncompetitive and returns to capital even less appealing.

Credit, for one thing, is still a major issue for the small business owner, who has had to resort to an underground and black-market style barter system with vendors, suppliers and even some customers to keep operations going.

But unlike the old western movies, the political class is not sending in help in the form of liquidity, marginal tax cuts, or credits for investment or innovation.

Instead, it is looking to impose higher tax rates, more regulation, more fees and more restrictions.

In Australia, this is called “cutting down the poppies,” meaning in order to equalize the size of all the poppies in the field, you take the tall ones down.

While that sounds great in theory, it’s one of the reasons our company moved headquarters to the U.S. in late 2004, thinking it was the best move we could have made.

Now, five years later, the surrounding business environment is starting to feel a little too much like home.

More on this tomorrow …

Jodie Shaw

Another CEO Blog?

Right!

So … you may not know me right now, but I’m hoping over the next weeks, months (and years!) we’ll start to develop a rapport about business, women in leadership, franchising and business coaching – the latter being the business I’ve promoted, strategically planned and led for the past five years.

I’m a huge fan and proponent of online media, web marketing, business and personal blogs and the like, so this seems to me the ideal medium to communicate and share with others my thoughts and perspectives … in a forum outside ActionCOACH’s more conventional forms of media.

So why another CEO blog?

A few things here I suppose …

First, I’m a relatively young Australian woman heading an organization that was previously led by the person who founded the company … so I think I have a somewhat unique and interesting perspective on business, leadership and how to aspire to a leadership position – and actually get there.

Second, I lead a very unique organization that is built around a very different idea about how business does – and should – work.

These ideas have not only helped me coach our network to greater success, they also help more than 15,000 businesses every week all over the world get more profits, more time for those company owners and better team members to help build better companies.

Third, I rose to the rank of CEO from the marketing department, a path that is a bit different from someone who spent their formative years in finance or operations.

Because of this, I think I have a different perspective on how a marketing “world view” in business is actually better and more oriented toward growth for an organization than one based on finance or operations.

I also think I have some different ideas on how marketing can drive both finance and operations better than those areas can drive marketing … (but, we can have some good back and forth on that one …)!

Fourth, I believe that profit is not only the most important thing in business, but it’s the only reason to be in business … and I can say right off the bat you will not hear many CEO’s make such a blatant statement about the need and value of profit, but after “being in the trenches” of small business for a number of years, nothing is more important (yet misunderstood) than the role of profit in business.

One of the things we pride ourselves on at ActionCOACH (and the main difference between our company and a conventional consulting company) is that we focus on business growth and profit as the ONLY way to grow a company, versus cutting expenses to the bone.

You can only ever cut so many expenses before you affect performance … but once you know “how” to grow your sales and profit margins, the sky really is the limit – for any business on the planet.

Finally, I don’t only believe … but I know as an absolute fact … that small-and-medium sized business is the driving engine and force of economic growth in any economy.

This is even true in heavily regulated and highly top-down oriented economies (Mexico being one example), where small business and the profit incentive is the only factor standing between a recession and complete economic collapse.

I think this is because there are certain people in any culture or marketplace (read:  small business owners and entrepreneurs) who have an innate (or yes, even learned) need to succeed … fueled by a desire and drive to produce a profit and the aspiration to build a better lifestyle for themselves and others.

This need that is found in a few benefits many … even those who are more comfortable with stability and “security” … and who are content just to have a job or live pay check-to-pay check (either in the public or private sector).

The dividends small business pays are incalculable … not only to owners of small business but to communities and countries in terms of employment, innovation … and yes, even taxes and other benefits (even health care!).

But that’s a rant (or a topic!) for another day … or week … and just one of the many I hope to explore through this blog and interaction with you.

It’s been an incredible journey to this point … and I hope you’ll join me as I share my thoughts on a very exciting world of global small business and a future that will prove very interesting for all of us …

Jodie Shaw
ActionCOACH CEO, USA and Canada