The Debt Ceiling and our Two Party System

Okay, so I can't keep my big, fat mouth shut on this issue any longer.  First off, please know that I am not affiliated with either of the major parties.  I am at times disgusted, yet find myself agreeing with some issues on both sides.  So I guess that makes me the definition of today's independent voter.

With all the gnashing of teeth in Washington on whether or not to raise the debt ceiling, it is plain to me who will be to blame if we get to August 3rd without coming to a resolution.  That would be the party of 'no', the Republican party.  Please don't get me wrong, I agree with many of the ideas regarding bringing the national debt under control.  Let's keep this part simple.  One party says yes.  The other says no.  It's the one that says no that keeps the ceiling from being raised and will be responsible for holy hell breaking loose in the financial markets.  So my message to the leadership of the Republican party - your legislative body knows that the real work happens in negotiating the budget, so do it.  Their is no upside to holding the debt ceiling over the heads of every American citizen, only downside.  Quit being childish and walking out of meetings.  By the way, this sets a great example for our children - if you don't like the game, you just take your toys and go home.  Real nice.

And here's the other part that the Republican party does not seem to see or hear - the middle class is suffering more than the 9% official unemployment rate indicates.  Many more are under-employed, using savings and scraping the bottom of the barrel just to get by.  Some economists are saying that we are really in a depression.  But that news doesn't seem to be getting to the GOP.  They steadfastly refuse to close loopholes for the rich and are willing to threaten any chance that we have for a real recovery in the short-term.  Yes, I understand the long-term goals of less government, less taxes and all.  We all want more in our pocket.  Yet, no one wants to pay for any of it, especially the rich ones who who paid for the loopholes and can more than afford some of it.  Remember this, 40% of the nation's wealth is held by 1% of the population (Wall Street Journal).

Oh and the Democrats are not without blame either.  Yes, some of the spending was necessary to keep the economy from falling into a 1930's style depression.  The money wasn't coming from the consumer or business sectors.  That said, now is the time for true long and short term planning.  Now is the time for real efficiencies to be put in place.  Now is the time to get rid of redundancies.  Now is the time to look at real cost benefit of everything, including defense and entitlements.  Unfortunately, a few got us into this mess, but all will have to sacrifice at some level.  Oh and by the way, what is really being done to keep this from happening again?  Not much I'm afraid.  Between the toothless SEC and the timidity of Congress to enact real reform legislation, we are in danger of all this happening again when real recovery occurs. 

True reform is going to take real compromise.  The majority of the country is in the middle.  I suggest that both parties meet us there.  It's only together - united we stand - that we will be able to get through these most devastating economic times.

Time to listen to Chicken Little?

Gas Prices Going Through the Roof!  Interest Rates are Climbing!  Inflation on the Horizon!  Social Security Going Bankrupt!  Health Care Unaffordable! Chicken Little Says, “The Sky is Falling!”

It’s bad enough that you are constantly worrying about the revenue side of your income statement when the expense side is just exploding.  The pressure from competition to keep your prices low and higher expenses squeezes your profit.  As a small business owner, you are left with trying to make hard decisions that affect your customers, employees and suppliers.  It’s times like these where it’s a good time to look at the overall strategy of your business.  So where do you start?

Taking a business plan approach to your business is a great place to start!  Look at your marketing plan to see if your strategies are still relevant.  Are your customer acquisition methods still working?  Is customer service still the best it can be?  Look at your financial plan.  Are your margins holding or are they under pressure from suppliers and vendors?  Do you have sufficient cash to meet your obligations?

Revenues are generated by demand for your product or service.  There are many questions to ask about what is changing about your customers during uncertain times.  We haven’t experienced inflationary times in a generation.  Price sensitivity is a key concept that will be talked about as if it is a new idea. 

As your costs increase, many businesses need to determine if some or all of those costs can be passed on to their customers.  You, as a small business owner, need to make the determination if you will lose any customers if you institute a price increase.  If you will lose a significant number of customers with small price increases, this means your customers are very price sensitive.  Also, if your product or service is not a commodity, odds are your customers will be less price sensitive.  Conversely, if your product or service is a commodity, the more likely that customers will shop around to find a better price, hence a higher price sensitivity.

What if your customers are very price sensitive and you cannot raise your prices because losing any customers would be a disaster?  Your only choice is to take a hard look at your expenses.  The trick to making these hard decisions is to minimize the affect on your business’s ability to service your customers while maintaining good relationships with suppliers and employees.  Unfortunately, the reality is that someone will not be happy.

With fuel costs skyrocketing, you may be able to get away with a fuel surcharge.  There are many businesses that are freight-oriented and are having to consider this change.  If you are considering a fuel surcharge, consider that it be used only temporarily.  When gas prices settle down (and they will), your customers will perceive that you should incorporate the added expense into your pricing.

Annual increases in health care costs have been outpacing increases in all other business expenses for quite a while.  Even large companies that spend billions on health care for their employees, are considering drastic measures to reign in the cost of this benefit.  You may have to consider health plans that are not as rich in coverage or require that your employees share in the premium cost.  If health care has been a bigger part of the overall compensation package, the harder it will be to make these changes and not affect the motivation of your employees.  One option that is becoming popular among small businesses is to offer a fixed dollar benefit for health care premiums and let your employees find an insurance plan that fits them best.  The general trend is that the more that employees have to pay for their own medical care, the more they will be discriminating with their medical expenditures and look to prevention options, such as a better diet and exercise.

With all the feathers being ruffled over changes to Social Security and the harbingers of doom being broadcast by both sides of the political fence, it is still extremely important to keep making contributions to your retirement plan.  As a business owner, if you feel that you have to cut back retirement benefits, one way would be to cut your match of the employee’s contribution in a defined benefit plan.  If you are considering eliminating a retirement benefit or plan, always consult your CPA and your financial advisor to discuss the ramifications, both with the IRS and with your employees.

If you got this far, it's hard to believe that I wrote most of this article for The Business Times in Grand Junction six years ago!  Yes, 6 years ago!!!  While things change, some things stay the same.  What's that tell you?  Keep at it!  Focus.  Know that you have control over some things, yet it doesn't pay to spend your energy worrying about others.