Friday, January 16, 2009

Short Circuit City

Circuit City isn't closing just a few stores; it's closing them all.  It announced today that its efforts to reorganize/sell the company have failed, and it's going to liquidate.  30,000 jobs gone.  567 more dark anchors in strip and regional malls.  Well, Best Buy must be happy.  At least for now.

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Wednesday, January 14, 2009

Small Business Status

Things are definitely rough out there for small businesses.  The Zions Bank Small Business Index has dropped to its lowest point ever, and everyone expects things to get rougher this year.

But as I've pointed out here and in Utah CEO, just how secure is your job?  Look at the big companies closing down.  Flying J is the 16th largest privately held company in the country, but it was forced to file bankruptcy because its creditors started calling in their markers.  Job cuts can, and will, strike anywhere.  Build an ark now.

Lots of people are starting their own businesses, typically out of necessity (such as the most recent position on their resume being at Lehman Brothers).  They identify something they can produce or market that people will pay for, and they go for it.  You should too.

Try to keep the start-up borrowing as low as possible.  Shoot for zero.  If you need some, it's out there, but it's getting scarcer, so expect to fight for it.  For example, Zions has been the biggest small business lender around here, but it also is Flying J's biggest creditor and owns the mess that is SunCrest, and that just can't help the loan pool any.

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Bankruptcies Build Up

Bankruptcies went up 47% in Utah in 2008.  That's still just half what they were before Congress granted the credit card industry its wish and locked the courthouse doors to most people, but given the new barriers for filing, it's a graphic representation of the dismal state of affairs.  It doesn't promise to improve soon, either.  Where the traditional cause of a bankruptcy filing used to be a specific event (divorce, job loss, hospital stay), it now seems to be systemic.  Households and businesses alike have simply accumulated so much debt over time that it's crushing them.  And the triggering element in that debt load is more frequently real estate, with debt service going through the roof and value going through the floor, be it personal residence or investment property.

And what if you're one of the millions being crushed.  Bankruptcy is not the end of the line; it's a new beginning, at least if you get smart about your finances.  I took a construction company into Chapter 11 bankruptcy (used for reorganizing businesses) in Fall 2007.  Normally you have to file a plan in Chapter 11 explaining how you're going to reorganize and operate the company.  We didn't need to get that far.  We negotiated away a few problem debts, and were able to dismiss the case.  The company emerged stronger, and today, in spite of the construction climate, the company is still making its way.