$1.5 billion headed to states to help small businesses

Missed this late last week, but the Treasury Department on Friday announced a $1.5 billion lending initiative meant to help spur small businesses at the state level.

To receive funding, states have to demonstrate that for every dollar the federal government provides, they will generate $10 in new private lending, which will create an impact of $15 billion on the economy, the Treasury said.

Among the six states receiving the biggest allocations, California has the largest at $168.62 million, followed by Florida at $97.66 million. Michigan can receive up to $79.16 million and Illinois up to $78.37 million. Both New York and Ohio will each receive slightly more than $55 million.

This is of course in addition to the Small Business Jobs Act which went into law recently, creating a $30 billion small business lending fund for community banks and offering tax cuts for small businesses.

So is throwing more money at the problem a good idea? Let’s certainly hope so. As the old saying goes, you’ve got to spend money to make money.

Great news for those in the construction industry: A webinar on when the industry will rebound

It’s not often you have the chance to hear economic experts of your industry speak, so if you’re in the construction industry, mark down October 21st on your calendar right now. On that day expert economists from Reed Construction Data (www.reedconstructiondata.com), the Associated General Contractors (AGC) of America (www.agc.org) and the American Institute of Architects (www.aia.org) join forces to host After the Fall: When and Where Construction Will Rebound a webcast focused on key factors affecting the recovery of the construction industry. This is especially important with the industry currently sitting at a 17.2% unemployment rate.

The webcast will follow chief economists Jim Haughey, Ken Simonson and Kermit Baker as they discuss and analyze:

– In which geographic areas has the economy started to improve, and which areas will be next?

– What construction sectors are likely to see the most growth during the next upturn?

– When will the nonresidential building starts pipeline refill and lead to a pickup in jobsite activity?

– Will the November mid-term elections slow or speed the construction recovery?

– What has happened to Federal stimulus dollars and can contractors expect to see more?

The webcast will be broadcast live starting at 2 p.m. (EDT). Registration is complimentary for all participants; pre-registration is required. Moderators will accept questions during the presentation from the internet audience and the webcast will also be archived for later viewing. Registrants may also receive 1.5 AIA CEU credits for attending this webcast.

To reserve your space at the October 21st webcast, register at: http://www.reedconstructiondata.com/events/2010/10/after-the-fall-when-and-where-construction-will-rebound.

The recession is officially over, and has been for a while. But how are small businesses doing?

Research has come out recently from the National Bureau of Economic Research (NBER) that the recession ended in June 2009, which means we’re just over a year into the economic recovery of the United States. But how are small businesses doing? Well, that seems to be incredibly tough to answer. Scott Shane of Small Biz Trends, and Professor of Entrepreneurial Studies at Case Western Reserve University, looked into it over the weekend and the data he pulled was pretty scary when it comes to small businesses. Here is Shane’s quick summary about his study:

I’ve pulled together some statistics that show that:

  • Self-employment and new business creation are down
  • Fewer people are working at new and small businesses
  • Owner pessimism is up, with fewer business owners expanding sales and more experiencing cash flow problems
  • Fewer owners are making capital investments, hiring, or increasing compensation
  • More businesses are going under
  • Fewer businesses are having their borrowing needs met, and trade credit is down
  • Angels are financing fewer companies
  • Venture capitalists are investing less money in fewer deals
  • VC deals are smaller and valuations are rising at fewer companies
  • VC-backed companies are experiencing fewer exits and at lower valuations

His ultimate conclusion was pretty straightforward:

The story is very clear. Recovery or not, the economic situation for small businesses is still considerably worse than before the recession began.

Here’s Shane’s full PDF if you want to read the whole thing.

The problem is we’ve seen other studies that suggest pretty much the exact opposite thing. Intuit has a study saying there was modest growth in small businesses employment across most of the United States in September. Vistage, which is an organization of 14,000 small businesses CEOs, also had a study which said many small businesses are cautiously optimistic right now.

So who’s right? Every day we seem to get news that it’s one or the other. I think the problem is that it’s impossible to answer, but the good news is that the economy seems to be starting to move in the right direction. As that happens, the hope is that small businesses will follow suit. And with the increase in government loans, hopefully more and more small businesses will get jump started and back on track.

Construction Industry Hits 17.2% Unemployment Rate in September

Some sobering news for the construction industry has just been released. The number of people working in construction is approaching a 14-year low after the industry lost 21,000 jobs in September. The current unemployment rate for the entire industry is at a stunning 17.2% according to an analysis of federal employment figures released by the Associated General Contractors of America.

So how bad is it?

“It has taken less than four years to erase a decade’s worth of job gains as the industry suffers from declining private, state and local construction demand,” says Ken Simonson, the association’s chief economist. “No other sector of the economy has suffered as much for as long as construction.”

Simonson also said that the 5.6 million people working in construction today is barely higher than the 5.59 million people who were working in construction in August 1996. Not much to show for in 14 years.

Most of September’s construction job losses came from the nonresidential sector as demand for commercial facilities and infrastructure projects remains weak. Residential construction lost 2,500 jobs last month while nonresidential construction lost 18,100 jobs. Nonresidential specialty trade contractors were the hardest hit, having lost 19,500 jobs in September.

While federal rollouts have assisted the construction industry, their benefits are basically temporary, and questions remain about when and if construction companies will start hiring again.

“Construction firms aren’t going to start hiring again until they can predict how busy they’ll be,” says Stephen E. Sandherr, the association’s CEO. “Frankly it is hard for contractors to make any business decisions when they don’t know how much they’ll make or how much they’ll owe.”

There was additional bad news in San Diego at the 11th annual survey of owners conducted by the Construction Management Association of America and FMI. According to the survey, America’s construction owners have significantly reduced their in-house design, engineering and construction management staffs during the recession, and don’t expect to return to prior staffing levels for many years, if at all.

This is without question a very difficult time for the construction industry and begs the question, what can the industry do?

Construction Employment in US Near 14-Year Low [California Construction]

17,000 more businesses are now eligible for SBA programs

Some tremendously good recent news for small business owners. Yesterday, the Small Business Administration instituted changes in small business size standards for the retail, hospitality, restaurant and “other services” industries. This change will make 17,000 more businesses eligible for SBA programs, including loans and preferential treatment for federal contracts.

According to the Washington Business Journal, this change in small business size standards for the service industry is a part of the SBA’s new approach in better defining who exactly is considered by the federal government to be a small business. Over the next two years, the SBA will complete its update in the rules, which have not been overhauled since 1980s.

The question now is who is going to benefit the most from this?

According the Journal, car dealers will be a major beneficiary of the change in size standards. The standards for dealers will be shifted from a maximum sales-based measurement (previously $29 million in average yearly sales) to an employee based number of 200 workers. The Journal estimates this will make 5,700 more dealerships across the country eligible for the SBA’s programs.

The SBA has also adjusted upwards the size standards for hotels, (limited-service) restaurants, cafeterias and food service contractors with the effect of making more than 2,000 businesses in these sectors into eligible small businesses.

So what does this all mean? Well, more more money for more businesses means more hiring and more growth. That’s always excellent to see.

[At the SBA, Size Definitely Matters]

More good news. Another study says small businesses are concentrating on growth.

A day ago we took a look at stats compiled by Intuit which made it clear that small business job growth – although modest – is continuing. Today there’s more good news. MSNBC spoke with Rafael Pastor, CEO of Vistage (an organization which is comprised of more than 14,000 CEOs in 15  countries), and Pastor said that small businesses are now concentrated primarily on growth. 66% of small business expect to see increases in revenue in the next year and nearly 90% of small business don’t expect there to be a double dip in the economy.

There are several concerns though. Small businesses are closely following whether tax cuts will be extended and there are about how about potential increases in healthcare costs. But the overall outlook remains positive, and it appears the economy is continuing to slowly get back on track.

Unfortunately, WordPress doesn’t let you post MSNBC videos on its blogs, but I highly recommend viewing the video here.

Is social media helping your small business?

One of the hot topics in any line of business right now is social media. We’ve taken a look at it a few times already. While there are certainly pros and cons to social media, the general reaction to it seems to be primarily positive. But what are your thoughts on it?

Well, you now have the chance to weigh-in on it. Symantec is currently running a quick 10-question survey that let’s you answer questions about how social media is going for your small business and how productive you feel it has been. Symantec has said that they will post the results on their Social Media Center page once the survey is complete. We’ve already taken it and will post the results once they appear.

[Symantec Small Business Social Media Survey]

Modest growth in small business employment in September

We keep hearing about how the economy is maybe, possibly sort of beginning to turn around. But are small businesses turning around too? Judging by a just released study about small businesses by Intuit, the answer is yes.

According to Intuit’s study, 27,000 small business jobs were created in September.

The monthly report found that small business employment grew by 0.14 percent in September, equating to a 1.6 percent annual growth rate. The revised growth rate for August shows that jobs increased more than previously reported – a 0.19 percent increase instead of 0.13 percent, or 2.4 percent on an annual basis.

While growth was not as high in September as it was in August, the fact that small businesses are seeing continued growth – however modest – is a good to see. The September and August employment growth translates to approximately 66,000 new jobs nationwide. Since the growth trend first began in October 2009, small business jobs have increased by an estimate of 430,000.

While jobs are slowly increasing, hours worked and compensation remained relatively flat. The average weekly hours worked by employees was at 105.3 hours (+0.03%) and average monthly compensation dropped to $2,602 (-0.15%).

If you want to see how employment was spread out throughout the US, here’s a slide from Intuit’s study broken down region.

[Intuit Study on Small Businesses]

Can social media usage become profitable for small businesses? Yes, it can.

It’s only a natural question that small businesses would ask themselves “Does it make sense for me to get involved with social media?” It has the potential to pull you away from other work that needs to done, and sometimes it leads you down a rabbit hole.

But a new study seems to suggest that social media usage can in fact be profitable for small businesses.

Via Small Business Trends:

In June of this year, they [Network Solutions] worked with the Center for Excellence in Service at the University of Maryland’s Robert H. Smith School of Business to survey 500 small business owners by telephone.

According to the Small Business Success Index (download PDF report here), 20% of businesses actively use social media.  The top 3 social sites they use are Facebook (82%), LinkedIn (38%) and Twitter (30%).

Of those who use or may use social media, it’s roughly a breakeven proposition for at least half of them today.  But they have positive expectations for the near future, when 57% expect to profit from their social media activities within the next 12 months.

Here’s a graph of the expectations by these small business, in terms of what they expect social media use to result in after another 12 months.

Whether or not these profits through social media come to pass, one thing is quite clear: Social media is not going anywhere and it is not a fad. Small businesses see social media as a way to market themselves, make connections, and even make sales. And it makes sense. If social media is done properly by a small business, it is not a time suck, it costs almost no money and it can greatly expand your influence. It still has its pros and cons, but social media is something all small business should be getting involved in.

The pros and cons of small business email marketing

Over the last two days we’ve been taking a look at what small business can do in terms of marketing themselves. Our initial focus was on very traditional forms of marketing, like trade shows and word-of-mouth before we moved on to internet marketing. Today we’ll take a look at the last method that small businesses can use: email marketing.

Email marketing

There are two common ways to create an email marketing list. One is to organically grow the list – generally done by asking people directly for their emails or providing them with a newsletter if they give you their email (slow process) – and the second way is by actually obtaining email lists of a potential customer base (fast process). There are a number of sites out there where you can purchase hundreds of thousands of emails that are very focused on specific fields (like construction) for several hundred dollars.

Lets look at the pros and cons of an organic email list.

  • Pros: Most companies offer a newsletter or some kind of information update to people who give them their emails. And when people voluntarily give their emails to you, you are guaranteed to get their attention when you send emails out. The reason why is that these people already recognize your company and are aligned with it in some way.  As you build up this list of people who want to remain abreast of what your business is doing or the valuable information it’s providing, the more powerful your business becomes. You can now reach a large loyal group of people at the drop of a hat.
  • Cons: While the benefits of organically growing your email list are great, it takes a very long time. There is also the danger that once you actually achieve a large email list, people will become annoyed if you try and change whatever message you are generally sending them. Example is if you provide them with a weekly update on the company, but then suddenly begin directly requesting that they buy your new product, you may anger them.

The second way to reach people through email marketing is by purchasing emails, usually ones that are specific to a certain audience, like construction.

  • Pros: This style of email marketing is a quick way to reach a massive amount of people in an extremely short time period. Done correctly, it can also help you build up a large database of users who you can alert to anything at anytime.
  • Cons: This type of email marketing is difficult for small businesses for three very specific reasons.
    1. One: You must first have the capability to send out thousands of emails at once. This is necessary because the clickthrough rate on most cold emails (meaning this person is unaware of your business and has never used it before) is very low, usually from 1-10%. So even though you may send out 10,000 emails, only 100 people may actually read it. It is also not simple to send out a massive amount of emails and avoid being labeled a spammer. A small business could dedicate people at the company to email marketing (but this could pull resources away from where they are need) or it could use an external company to send emails (no concerns about spamming or lost resources, but it can be quite expensive).
    2. Two: You need to go through analytics to determine how the email campaign is doing in order to improve on it. This is time consuming.
    3. Three: There’s a trial and error process to this game. One email may be opened by only 2% of people while another may be opened by 8% of people. In fact, the biggest danger is that it can become an extreme time suck. I was once at a company where three out 15 employees were dedicated to email marketing. Needless to say, the company did not succeed.

That concludes our series on small business marketing. Thanks again for reading.

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