Sunday, February 20, 2011

Small Business Is In Great Shape

Just ask the Wall Street Journal and the Chamber of Commerce. According to an article this week in the Journal, business bankruptcies are down, so things must be improving for small businesses. The Chamber of Commerce chimes in with this line, with the C of C VP for small business offering the usual pap about small businesses being better positioned to recover than the big boys because they are more nimble.

First, let me say that anyone who uses the word "nimble" in a business context should be punched in the face, preferably by someone wearing a chain mail glove. It is a noxious, marketing buzzword from Dot Com Daze, when investors deliberately checked their brains at the door so they could avoid noticing the hucksters were making their sales pitch with a shovel. I was there, I remember. There was a poster that consisted of a picture of a blow dryer, an arrow pointing at the ON switch, and the caption, "Press here for marketing presentation." Unless you're talking about cutting horses and herding dogs, there is no place for "nimble."

The Journal and the C of C can allege all they want that the bankruptcy drop shows a small business recovery. I would submit it shows something else: Small businesses are finding some financing. Oh, not enough to make a difference. Not enough to restructure, right the ship, and set a new course. No, money like that is reserved for the big boys. The C of C conveniently ignores that, if you own the game, you don't need "nimble." If a small business owner tries to raise meaningful capital, he inevitably violates a securities law, and the federal and state regulators swoop down, shut him down, take everything, and still make him do the perp walk. That's what they spend 99% of their time doing. Meanwhile, the big boys can raise billions through outright fraud, squander it through more outright fraud, and get no more than a slap on the wrist (I'll blog about the Friday night dismissal of all charges against Angelo Mozilo later.). So no, folks, I do not believe prosperity is just around the corner in small business world. Quite the contrary.

What I do see is small businesses getting just enough financing or payment deferrals to play kick-the-can. The business owners who are coming to me are no longer talking about recovering, turning things around, or riding out the downturn. They're talking about "surviving until." Until the last kid graduates next year so they can permanently downsize. Until they qualify for Medicare and Social Security in two or three years. Until the paperwork on their visas goes through and they can dump what's left of their lives and move away (Yes, it's gotten to that point.). They're at the ends of their tethers, and they're hoping to kick that can far enough down the road to salvage something, for their kids if not for themselves.

They know bankruptcy can't help them. Another inconvenient truth the C of C isn't letting on is that Lloyd Blankfein doesn't have to personally guarantee GoldSacks' loans; small business owners have to personally guarantee everything. It doesn't do any good to put the business in bankruptcy; the creditors will go after them personally. If they file personally, the business is cooked anyway, and it's over. It's hard to be "nimble" when the bank has sunk your feet in a tub of concrete.

So they try to stretch it out. Until. That's the state of the American Dream.

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