First, a very important announcement. In the next four months NAPL/NAQP (along with my company QP Consulting) will be publishing two key studies on behalf of our industry—one dealing with wages & benefits and the second one dealing with key financial ratios. Normally, these studies sell in the $155-$225 range and are worth every dollar, in my estimation. But if you participate by completing a survey you get a copy of the final study absolutely free!
The first survey is already in the mail as you read this column. Check your email. We just sent out close to 30,000 emails announcing the 2012-2013 Wage & Benefits Survey. If you did not receive an announcement, please go to: http://www.surveyadvantage.com/2012NAPLWages.
This site contains both the worksheet and the actual survey. Unlike many of our studies, this survey is simple enough that it can be filled out online without even completing a worksheet. The survey is the most comprehensive ever, and covers 19 key positions in the industry. The new Wage & Benefits Survey has also expanded its coverage of compensation practices for outside sales representatives, as well as examining key questions addressing the size and impact of healthcare costs within our industry.
Future Industry Profitability
The second industry study to be published this year will be the 2012-2013 Financial Benchmarking Study. This study will explore, like never before, industry profitability and where it is going in terms of profit leaders and profit laggards. The initial survey will be distributed in mid-February under the same terms and arrangements as the Wage & Benefits Study mentioned above. You participate, send your survey in by the deadline, and you get a free copy. It’s as simple as that! Look for more details next month.
A Study in Contrasts
I just finished up with two company valuations and the differences between the two companies are stark and shocking. There’s not enough space to answer all of the questions about these two different firms.
One thing I can tell you is that the owners of Mike’s Digital are going through a divorce. The unusual twist here is that the least experienced spouse has sort of been stuck with the business while the other spouse is pursuing other interests. Note that regardless of what this business might end up selling for, there remains approximately $412,000 in debt that needs to be settled up and paid off at the time of sale.
What about Triangle Impressions? Wow, with only a couple of exceptions (one being the place is messy and needs a thorough cleaning), this business is outstanding in almost all respects. Its SPE is $170,000 and it runs very smoothly. It has all the right ratios and is very healthy.
Oh, one last thing I forgot to mention. Remember Bob from my December 2011 column? Bob had made a promise to God that if he would spare his son who had been involved in a terrible car accident, Bob would dedicate the rest of his life to paying God back. Well, Bob is the owner of Triangle Impressions and as soon as he sells this business and the house, he and his wife are headed to a small town in Ecuador, where he intends to begin fulfilling that promise.
Blaming Government Regulations for Low Profits?
Some of you may remember my October 2011 column where I chided folks who seem all too eager to blame most of their business problems on the government—specifically rising healthcare costs, illegal immigration, and the all time favorite target these days, “increasing government regulations.”
Interestingly enough, there are two groups that most often cite these issues as the cause of most problems facing business. First, there are the conservative politicians. Despite the fact that the vast majority of these politicians have never run a small business themselves, they love to cite increasing government regulations because they know a good sound bite when they hear it. The second group that loves to complain about government regulations, etc. is small business owners, who always seem eager and anxious to blame their current crop of problems on anyone but themselves. They’ve been doing this for years, during good times and bad, and during Republican administrations as well as Democratic ones. They are always complaining!
As I noted in October column, in all the years I have been consulting and analyzing this industry, I have yet to meet an owner who could look me straight in the face and suggest that items like healthcare costs, immigration and increasing government regulations were putting him out of business. Although I have encountered thousands of troubled print shops over the years, I never encountered a single printing firm where burdensome government regulations were the root cause or even a secondary cause for their problems.
Nightmare Stories do Exist
Now, make no mistake about it. I will acknowledge and admit there are indeed some nightmare stories out there involving OSHA inspections, COBRA regulations, fire inspections, inheritance taxes, etc.
After my October column appeared, I heard from one reader named Jim, who complained vociferously against all the regulations, state and federal, that he has had to battle.
Interesting to note is that Jim’s business has annual sales in excess of $5.5 million, and when I do hear stories about unreasonable and expensive OSHA and fire inspections, etc. they tend to involve larger firms like his. Why? I suspect that it is their size that makes them show up more on government radar screens, but I really don’t know.
Of course, the more employees, the more like you are to have some rotten apples and the rotten apples are often the first to complain about the smell in the barrel. Is it fair that the government seems to target larger firms? Of course not, but at least the larger firms are in a better position financially to weather these regulation storms when they occur.
Jim wrote me a lengthy email detailing his frustrations and, to be honest, I had great sympathy with many of his complaints. At one point in his email, Jim noted, “In New Jersey I pay such taxes as the Right to Know Tax, the Hazard Occupancy Tax, the Litter Control Tax, and the Catastrophic Illness Tax, along with the most expensive real estate taxes in the nation. As far as I can tell, most of these payments that I make don’t do anything other than support a bloated bureaucracy.”
At first I thought Jim was pulling my leg with some of these taxes, but when I checked them out I found, yup, they exist. Two other things I noted as well. First, many of the taxes in New Jersey and other states often tend to exempt small businesses, but they do hit larger businesses pretty hard. Second, many of the situations and regulations being complained about exist at the state and not the federal level. Even in the case of federal regulations, they are often subject to enforcement by state agencies, so it is a bit difficult to know where to lay the blame.
Regulations Strangling Business?
Less than two weeks after writing my October column, CNN Money ran a fascinating article titled, “Regulation: Not the job killer GOP says.” The column targeted the argument that asks, “Want to help the economy and create jobs? Well, roll back those government regulations! It’s a talking point trumpeted by nearly every Republican politician. But, would less regulation really spur hiring?”
In the CNN story, the author refers to the often-quoted argument that says, “Thanks to the Obama administration, a wave of new government regulations are strangling business to the detriment of hiring and economic growth. But in an economy with serious structural problems, a crippled housing market and slack demand, is government regulation really holding back the labor market?”
CNN’s answer? Not so much, at least according to government data and surveys of business owners and economists. According to the report, only a small percentage of employers list government regulations as a reason for laying off workers. According to data on mass layoffs published by the Bureau of Labor Statistics, only 2,085 new unemployment claims in the first two quarters of this year were attributed to government regulation, while 55,759 were tied to insufficient demand, notes the CNN story. According to the Quick Consultant’s little calculator, that means that less than four percent of unemployment claims were the result of government regulations!
The story goes on to note that “less than 20% of small business owners cite government regulations as their most important problem,” according to a survey by the National Federation of Independent Business. Poor sales, notes the NFIB, were a much bigger worry. CNN Money also went on to report in its story and that only two (less than 13 percent) of 16 economists questioned for the survey said that government regulation was the biggest drag on the labor market. 0:00 / 3:37 Gas pipeline CEO backs more regulation Gary Burtless, a labor economist at the Brookings Institution, said there is little evidence to suggest that government regulations are killing jobs, added CNN Money.
If It Isn’t Government Regulations…
So if it’s not regulations—what is the biggest problem, asked CNN. One prime suspect is a lack of demand for the goods and services that businesses produce, notes Burtless. “I think it’s pretty plain that there hasn’t been a robust rebound in consumer consumption.” According to CNN, Burtless said complaining about regulations is not something new for the business community… “There are certain businessmen who say regulation is an issue, but they also said the same thing when the economy was robustly growing.”
Who is Strangling Your Business?
As I argued in my October column, I find too many printers, especially my more conservative friends, telling me that Obamacare, burdensome government regulations, and illegal immigration are the primary causes of their problems. To be honest, I don’t think those complaints pass the smell test.
Just because politicians spout off cute phrases about the burdens of excessive government doesn’t make them true. Just because political pundits on radio and TV argue that rising healthcare costs are at the root of our current and future financial status doesn’t mean it’s true.
Send me your financial statements and underline all the items and costs that have been imposed by government regulations and demonstrate to me how these expenses are adversely impacting your profits. If you make a good case, I will prepare and post a video on YouTube demonstrating how to eat a hat!
You can fax them to: 321-727-2166 or email them to me at: firstname.lastname@example.org.
Senior contributing columnist John Stewart is president of Q.P. Consulting Inc. Contact him at 2110 S. Dairy Road, West Melbourne, FL 32904, call 321-727-2444, email email@example.com. Be sure to visit John’s website at www.quickconsultant.com where you can find his blog and six different videos ranging from SPE and Chart of Accounts to Valuing a Business and Key Financial Ratios.