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Policy Matters: Doing The Right Job
a weekly column
I've been doing this for almost a decade now and, during that time, I've heard any number of reasons why nobody should pay attention to microbusinesses.
Most of those reasons are variations on a theme.
Microbusinesses are too small to matter.
There are a number of different ways to respond to that, most of which are also variations on a theme.
A grain of sand is too small to matter, too, until you find yourself in the middle of a windstorm in the Sahara.
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This week's news briefs
Second Wave of Foreclosures Threatens Micros
New research released by the National Association for the Self-Employed last week found that approximately 3.8 million microbusiness owners hold an estimated 93% of so-called "toxic mortgages" that put them in immediate danger of foreclosure and homeless in the near future. Not only that, but mortgage brokers evidently deliberately targeted prime or near-prime microbusiness borrowers who (as they have often complained) lacked access to traditional small business financing products.
Experts predict a second wave of foreclosures when another set of "toxic" mortgages begins to reset, starting in the current quarter, and homeowners find their monthly payments shooting through the roof. In addition to the expected distress to households hit by this expected second wave of foreclosures, there is the small matter of the impact of all this on the labor market at a time when the country stands at the brink of what some analysts are predicting will be a long and difficult recession. If all the microbusinesses involved were forced to close their doors, approximately 1.3 million jobs would immediately be lost. Clearly, some sort of targeted relief is in order for all the small businesses embroiled in these exotic mortgages. Beyond that, policy makers need to craft a rational access to capital program for microbusinesses, so that their owners are never desperate enough to be vulnerable to this sort of toxic financing again.
Holiday Shoppers May Forecast Early 2009 Economy
Last week, the Commerce Department announced that the economy contracted a bit more than originally estimated during the third quarter of this year. Naturally, that has made a lot of people very nervous. Right now, all eyes are on the 2008 holiday shopping season as the closest thing to real-time economic indicators as we are likely to get, because the third quarter saw a steep drop in consumer spending and consumer spending makes up 70% of the U.S. economy.
Taking the broad view, there is cause for cautious optimism. Consumer confidence is up and gas prices are down. Those two facts may well counter ongoing bad news on the unemployment front as well as that decline in consumer spending. Early returns from the Black Friday shopping weekend are promising, as shoppers hit the stores in droves, driven by low prices and pent up demand. The question now is what happens if the Treasury Department follows through on its plan to increase liquidity in the consumer credit market? Will consumers, made wary of credit by the events of the last few months, ignore a newly unfrozen credit scene? And if so, what will that do to our consumption-oriented economy? The way the holiday shopping season shapes up may provide our earliest clue.
Microbusiness Profile: Treasured Locks
If you were able to cull all the standard advice in order to design the perfect online microbusiness retail outfit, you will end up with something very much like Treasured Locks . Treasured Locks is an online retailer selling "high quality hair and skin care products, predominantly for the needs of African Americans and people of color." The business is owned and operated by Tywana and Brian Smith out of their home in Westchester, Ohio, not far from Cincinnati.
Treasured Locks is actually a rather amazing operation. Tywana, her husband and four "very part time" workers manufacture their three in-house hair and skin care brands, sell an additional 18 brands by other manufacturers, and process between 30 and 35 orders per day. Tywana, who started out in 2001 planning a little part time venture that would provide "babysitting money and a chance to go out once a month," now has a thriving business earning a six-figure income for her family and a textbook, classic online retail success story. Yet she struggles with the challenge of where to take her business from here. She and her husband would like to grow enough to free up their time but not so much as to change the way they do business. And there is too little support for mezzanine level microbusinesses like Treasured Locks, just because too few seem to understand or appreciate microbusiness growth.
Read the entire profile
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