Dashboard: Why Business Owners Don’t Like This Economy

[Music] welcome to another 21 hats dashboard brought to you by our sponsor the great game of business I'm Lauren Feldman and I'm here with Gene marks welcome Jean hello Lauren how are you doing I'm doing great great to have you here very happy to be here well thank you Jean you recently wrote about how the economy is doing pretty darn well but business owners don't seem to realize it why do you think that is well I think there's a reason why I mean it's been this ongoing sort of debate um you know yeah the the the economy it's going good Lauren right I mean we have record low historical low unemployment we have pretty strong GDP uh retail sales are are up you know they they're they're higher highest levels that I just read all the manufacturing is struggling construction you know you know residential construction has its issues um commercial construction is doing well I mean there's all these different factors that like the economy is in itself doing okay meanwhile you make a good point it's not great for everybody there are trouble spots and interest rates are high inflation has come down um which is a good thing but but there are people who are struggling there are absolutely so and that's always going to be the case because it's America and we're a big country and you know there's a lot of diversity or so but even so like the you know you the nfib the national Federation of Independent businesses they come out every month with their small business confidence or optimism index they've been doing it for like decades and you know although it ticked up a a little bit this past month it's still like historically low it's like close to a 10-year low so you're like why you know if the econom is are doing all right why are small businesses at least their members and let's Bear In Mind by the way I mean I think they skew a little bit to the right their members so you know it wouldn't surprise me if some people were just saying it's just because they're not politically aligned with you know what's going on in Washington I don't know the hyper partisanship definitely has an influence on this yeah me there's always that there's there's always that but the bottom line is if you take the numbers at face value you say like okay so why is optimism so low and I dug into it you know I talked to my clients you know I talked to some of my readers and then I did some research and you know some of the Federal Reserves data and there are a few things that are are concerning businesses right now and it it all comes down to Capital and financing I mean you mentioned about interest rates I mean you know put aside mortgage rates I mean the average prime rate across the country now is is 8.5% so you know when people are going out to get loans if they're given loans which I'll get to in a minute um they're paying significantly more than they were you know a year two years ago like three times the amount that's having an impact on their plans for spending and investing and um getting working capital buying property and equipment I think that's kind of bumming some business owners out on top of that the Federal Reserve has reported that now 50% of banks um are restricting loans to small businesses they're they're giving less loans to small businesses or none at all and that's compared to 22% uh just a year ago and on top of that do you know what restricting means yeah it means that they're approving less loans for small businesses it they they are they have higher standards the bar to entry is higher um well there's there's a couple reasons one is um there's some instability in the banking system as we saw earlier this year so Banks Silicon Valley Bank correct so the banks themselves are feeling a little bit tenuous and on top of that when you when you increase financing costs like we've seen so quickly a lot of banks are looking at new loan applications and being like does this company have the ability to pay back this loan I mean given you know the higher cost to do that and it's it's it's causing a lot of Bankers to pull back on that decision so it it's having an impact and by the way it's not just regular loans um a great number of banks it's something like now like 40% of banks are now doing the same thing with credit card loans they're approving less credit card financing or lower lower financing amounts and people think like oh it's credit cards are for consumers but no it's not the case I mean you know there was a study done by JP Morgan a few years ago it's like 80% of small businesses use credit cards in some way or form to help with their working capital you know and um when you're restricting credit cards that restricts their working capital their ability to do that so all of that do you think there do you have a sense of that 80% seems like a a large number is is that just for the convenience of paying with a credit card or are they you need do they need credit to handle their day-to-day uh obligations so of course with any question like that there's always multiple answers so the answer is yes I you for some businesses you know yeah it is convenient for them to use credit cards um a lot of them run up credit cards during the month then pay it off the next month you know so they they avoid paying the credit card interest but a lot of uh I have a lot of clients that do overseas transactions and using credit cards makes them you know makes those transactions a lot easier to use as well and you know as opposed to getting working Capital Loans to do that or letters of credit so there's a whole bunch of different reasons why people use credit cards of obviously there's startups that use it as a primary form of financing because they can't get any other so there there's a myriad of reasons um the bottom line is though is that there's less availability of credit card financing now um and it's happened pretty quickly over the past few months and because of that there's another chart from the Federal Reserve that shows overall loans given to all corporations and I looked at that over the past year and that's down like 3% um which is pretty significant you want to see you know we live in a capitalist economy and you want to see financings and Loans you know you know go up commensurate with the growth in the economy as businesses use that money to finance their their expansions and it's going the opposite direction so what I what I'm reading into that data is that a lot of small and midsize businesses although the economy has been good um they're concerned about the future and they're definitely concerned about capital and the availability of it and the cost of it and I think that is why you're still seeing this you know confidence and optimism lag uh behind how the economy is doing that was my conclusion the thing that stops me is just you know has there ever and you this is what you said before has there ever been a time when there is no reason for concern I mean I know it's funny I mean you know for it's funny we we can go off track on the all the surveys and confidence and optimism because like so many companies do it and everybody's got their own agenda we just said at the beginning of this conversation I mean again the nfib I don't really care what they think when I say this but they do skew a little bit to the right so there's always reasons behind the numbers and the methodology but in their defense they have been consistently doing this survey among their members for like 40 years so I feel fairly confident you know you know that at least it's consistent um and listen like you said confidence among business owners are never going to be like perfect there's always uncertainty and problem it's the whole point in running a business you take risk and there's reward you know sure so um but it's just you know it's been low it's been low and and it's just you scratch your head you're like does it have to be that low and the economy seems to be doing pretty good and I think that's the reason why or Reason yeah what what would happen if we actually got that recession that we've been promised for the last year I know I think there will be a really I'm expecting all of this to turn into a Slowdown in the economy I don't think we're looking at any catastrophic reason to Panic or about you like a 2008 thing but I think we're looking in the next three to six months of of you know recessionary territory um only because I see Capital availability and the cost of it um having an impact and reverberating so we'll see I think you've given me the same answer several times over the last year over the last five years I think actually so at some point it's G to come it's all cyclical so at some point I'm going to be right right I mean even a broken clock all right next topic um you wrote recently about tax credits that many small businesses don't realize they can claim want to mention a few favorites yeah I would uh there's you know I this is in the Philly inquire this past week and just to make sure I'm insulting the intelligence of your audience um a you know there's tax deductions which reduce your taxable inome come and then whatever's left gets taxed and then there's tax credits which you literally apply against the taxes that you owe we like tax credits more than tax deductions okay tax credits we'll take them both right we'll take them both but tax credits definitely better and there are a number of them out there that so many of my clients and business owners aren't even aware that they exist and it's like Big Time Savings and I've talked about some of them before in the past we've talked about the employee retention tax credit and I think everybody knows about that one at this point because they get they get 20 phone calls a day from scam shops yeah yeah exactly so there's that and there's the work opportunity tax credit and there's the research and development tax a lot of people know that let me just highlight two that I people don't seem to know about and I think they're really important to know one has to do with giving your employees paid time off now we all know that the federal law says that uh if you have more than 50 employees you have to offer 12 weeks of unpaid leave uh to your employees if they need to leave for a medical issue family problem pregnants you know whatever um you know that unpaid leave itself is not required if you have less than 50 employees so that's you know it's up to the businesses however there's a tax credit available and it's been available for a few years since 2017's Tax Act that if you make at least half of it paid in other words like if you say to your employees look you can take six weeks off or 12 weeks off and even though don't have to pay you anything it should be it can be unpaid um we're still going to pay you 50% of your salary there is a tax credit available that can that can apply up to 25% in taxes saved um for just allowing just doing just that so you're saying like I'm going to pay my employees and that's going to be expensive but the government is basically saying yeah we realize it's going to be a cost to you we're going to give you a tax credit to make that cost uh more palatable so you know if you thinking talk to your tax count about that that's one okay it's one big tax credit that's out there that and the goal in doing that I I mean you're not obligated to do it the goal is to keep employees happy at a time when there's still something of a labor shortage and to compete with the bigger companies that are providing paid leave you know so you know here you've got the ability to provide that paid leave and get help from the government in doing it so definitely consider that the other one is U which is it's it's it's has to do with disabilities if you spend money say you've got a retail shop I don't know or maybe you're B2B whatever but you've got something where your employees uh you you want to invest money and make it um more accessible to to handicap people this goes for your website too because we're all in violation of those you know ADA rules about making our websites accessible well guess what if we upgrade our websites or we put in ramps or we put in bars or uh we make our menus Braille menus for the blinds that are you know that that we can hand out um and we spend that money we can get up to a $5,000 tax credit for doing that every year for doing that so if you're ever you know you know you want to do to obviously to not only be in compliance with the law but also to uh make yourself more accessible to disabled people you know that's a great thing um the government is basically saying hey yeah uh we we'll help you now you have to have less than 30 employees and I think a million dollars or Less in profits um but a lot of restaurants are like that and a lot of retail shops so you should take advantage of that and anyway I mentioned a bunch in this article it's in the Philly inquire you can find it but talk to your accountant as well because I guarantee you there's some credits there you can be taken advantage of that you're not and um you know it'll it'll save you a lot of money you know I'm really glad you mentioned the disability one uh I I actually have a friend who runs a business in Philadelphia probably just down the street from you who un fortunately he had a detached retina recently and had to have surgery and has had problems with his eyesight since then and his firm actually builds websites so he's been aware of this issue but this obviously caused them to be more aware of it you're right I mean everybody has a website most of them are not in compliance and the he made a great point in a LinkedIn post which is that you know there there is a significant population that has trouble uh getting access to a website it's not that expensive to fix it and deal with it and that's a percent of the population that you want to be able to come to your website and find what they're looking for why would you not want that business and not only that I mean there there's actually an army of um nebulous lawyers that are out there that do class action suits against you know a lot of small businesses shake them down uh because their their websites aren't in compliance a lot of businesses don't even realize what they have to do or that they're not in compliance and then when they do find out you know that it's going to cost them a grand to update it or whatever they don't want to spend the money and I'm saying like spend the money and it'll work into the formula and you can get a tax credit so it won't be that full amount it'll be something a lot less than that and it's not that complicated or expensive right I mean if if somebody wants to check have their website checked do you have a suggestion for the the kind of uh consultant firm that they should turn to yeah I mean there's there's any web designer who's up on the ADA rules should be the ones that you want to reach out to um and good website web design firms are aware of those rules because they're selling their services to make sure their clients are in compliance uh with the ADA rules that's the that's probably the best advice I would have all right next topic um I'm curious how you view this I it it seems like every day now we're getting another story about insurance companies that are refusing to write business um especially happening in California and Florida uh especially homeowners and to some extent uh business owners a lot of it's related to um you know disasters climate issues fires do you think this is a topic that is only of concern to people in California and Florida not that that wouldn't be worth discussing or do you think this is becoming a bigger issue that business owners should be thinking about I mean I I think that it's a trend that we're seeing and when you look around the country and I want to like this isn't a climate change conversation it's just there are parts of this country that are prone to uh hurricanes and tornadoes and there are other parts of this country that are prone to flooding uh California is going through I think there's like a tropical storm heading to C first one in like 30 years is heading its way to California uh during the week or something so I guess my point point is like it it a lot of this can apply and if insurance companies start pulling out in some of these states um they can make the case in other states as well and and that is a problem where it's going to you know what's going to happen in California and Florida is that if there's not enough coverage or affordable coverage the states are going to have to step up and provide their own coverage which basically now you've got State mandated employee cover sort of like workers comp um which isn't the best situation because you're not going to have a Marketplace then you're going to have uh you know a state plan that is going to be set by Regulators um without any negotiation or back and forth so it's definitely a concern definitely a trend I think something that we're going to see you know continue to happen around the country I saw a story about a condo in Florida I it was South Florida I forget exactly where where they just instituted like 100 to $200 a month uh sear charge for insurance on everybody who owns a condo there was that in uh was that in bokeh o v i don't I don't think it was in bokeh um but it was south Florida so it could have been that's a problem but you know you are talking about a lot of people who are on fixed income and a sudden bill you know increase of $200 a month would concern anybody actually it's funny I mean I I don't I don't blame the insurance companies they're running businesses and they have to you know do risk assessments and right they look at different states and they see the different you know you know uh challenges the states have whether it's wildfires or hurricanes or flooding or whatever and you know they make their they got to make their I really I don't blame him for that um so you know it's it's a problem that's I think it's driven more so by data than anything else and I think a lot of these um a lot of the insurance companies that they gotten Smarter with their data over the past 10 years really uh they really are you know better able to assess their risk and reward for them to pull out entirely is pretty brutal you would think that they could at least come to some compromise where they would still be charging premiums although higher but at least you can get coverage there saying they won't write the insurance at any price they won't do it at all so again the state's going to have to you know step up which basically means it's going to be funded by taxpayers unfortunately just seems like a warning we should pay attention to Gene marks is a CPA who writes weekly on small business for the guardian the hill the Philadelphia inquire the Washington Times the Chicago Daily Herald Forbes an entrepreneur you can also hear them on ABC radio's eye on the world with John Bachelor Jean hosts two small business podcasts with paychecks Corporation and the Hartford Jean do you have anything coming up uh this week that we should be looking for I'm going to write uh I'm writing a piece on offering some metor tax advice interviewed a few local CPAs and then also for the inquire I'm working on a collection piece you know you know economies slows yeah for accounts receivable what's new in the world of collections so I'm going to write about that is that a technology story or just strategy haven't decided yet I've got a bunch of I've interviewed like four people I got to figure out what I I'm going to take check in with me uh later in the week and I'll let you know we will look forward to that this episode was brought to you by the great game of business which helps businesses use an open book management system to help build healthier companies you can learn more at Great game.com thank you Jean thank you Lauren we'll speak to you soon have a great week everyone