Is Kansas City the Entrepreneur Type?

Various surveys have shown that a majority of Americans believe entrepreneurship will play a significant role in shaping the 21st century. A new poll funded by the Ewing Marion Kauffman Foundation reveals, for example, an up-and-coming entrepreneurial generation of 18- to 34-year-old millennials—54 percent of them want to start their own businesses. On the other side of the generational divide, research suggests that the U.S. might be on the cusp of an entrepreneurship boom due to baby boomers who have started companies in record numbers. And an Against 2011 feature in the Wall Street Journal named Kansas City one of seven up-and-coming innovation centers in the nation.

Against this backdrop, Kansas City has recently announced the lofty goal of becoming “America’s Most Entrepreneurial City.”

So what does it mean to be an “Entrepreneurial City”? What characteristics must such a city possess? It strikes me that a city with such aspirations likely possesses some of the same traits as individuals with entrepreneurial ambitions. Let’s take a look at just a few of them.

Vision. An entrepreneurial type must be able to come up with new ideas, challenge assumptions, and shatter traditional ways of thinking to create new and innovative products and services.

Drive. Entrepreneurs are change agents. They see a problem or a challenge and set about to solve it themselves. They charge themselves with coming up with the solution, of making something happen.

Passion. Entrepreneurs not only have a vision, they have fire in the belly. And when they talk about their ideas, their passion comes through and infects others. That’s part of how they build followers and supporters.

To be sure, there are other characteristics to consider as well, but the bottom line is that most successful entrepreneurs share the ability to see opportunity where others see only risk. They possess the passion and drive to push through when the going gets tough. And they are an optimistic lot, believing they will succeed despite the nay-sayers and non-believers.

So what do you think, Kansas City? Does Kansas City have the entrepreneurial traits it takes to make us “America’s Most Entrepreneurial City”?

Higher Incentives for Hiring Heroes

Businesses can receive up to $9,600 in tax credits for hiring unemployed veterans.

This week, many veterans and their families will be giving thanks for just being home. With the majority of troops home from the wars in Iraq and Afghanistan, more soldiers will be celebrating Thanksgiving in the United States.

While thankful to be home, many former soldiers who left the military upon returning home are not celebrating new jobs. The sluggish economy and high unemployment mean a tough job hunt in the civilian workforce. The Obama administration and Congress are hoping a tax credit that is part of the American Jobs Act will help unemployed veterans and small businesses at the same time.

The Returning Heroes Tax Credit provides businesses that hire unemployed veterans with a maximum credit of $5,600 per veteran, and the Wounded Warriors Tax Credit offers businesses that hire veterans with service-connected disabilities with a maximum credit of $9,600 per veteran. Congress passed both measures apart from the American Jobs Act last week and President Barack Obama signed them into law on Monday.

Returning Heroes Tax Credit
The Returning Heroes Tax Credit provides a new credit of 40 percent of the first $6,000 of wages (up to $2,400) for employers that hire veterans who have been unemployed at least four weeks. Businesses can receive a credit of 40 percent of the first $14,000 of wages (up to $5,600) for hiring veterans who have been unemployed longer than six months.

Wounded Warrior Tax Credit
The Wounded Warrior Tax Credit doubles the existing tax credit for long-term unemployed veterans with service-connected disabilities. Under the existing Work Opportunity Tax Credit for veterans with service-connected disabilities, employers can receive up to a $4,800 credit for hiring service-disabled veterans. The new law allows a maximum credit of $9,600 (40 percent of the first $24,000 of wages) for companies that hire veterans with service-connected disabilities who have been unemployed longer than six months.

When he signed the bills, President Obama said, “Today, because Democrats and Republicans came together, I’m proud to sign those proposals into law.  And I urge every business owner out there who’s hiring to hire a veteran right away. “

At 7.7 percent, the unemployment rate among all veteran groups is actually lower than the 9 percent overall unemployment rate, according to the Bureau of Labor Statistics. However, start segmenting the veterans and the rates climb. For veterans who have served since 2001, the unemployment rate was 12.1 percent in October. The unemployment rate for veterans ages 18-24 was 30.4 percent in October, versus 15.4 percent overall. Nearly half (48.3 percent) of Black veterans ages 18-24 were unemployed in October, compared to 24.9 percent overall.

 “While we’ve added more than 350,000 private sector jobs over the last three months, we’ve got 850,000 veterans who can’t find work,” Obama said. “And even though the overall unemployment rate came down just a little bit last month, unemployment for veterans of Iraq and Afghanistan continued to rise.  And that isn’t right. These men and women are the best that America has to offer. They are some of the most highly trained, highly educated, highly skilled workers that we have.”

SBA Proposes More Increases in Small Biz Size Standards

Change would raise revenue limits for government contracting in 20 industries.

For the second time in two months the U.S. Small Business Administration is proposing changes to the definition of “small,” for small businesses seeking government contracting. The changes are part of an ongoing review of size standards.

The latest proposed changes would increase the revenue limits for small businesses in 29 industries in one sub-industry in two broad categories of businesses, ranging from real estate and property management to formal wear and costume rental. The changes are based on annual gross revenues (averaged over three years) and delineate how large a business can be and still qualify as small for federal government programs.

Last month, the SBA proposed changes to the size definition of small businesses in 52 industries in two broad categories of businesses, ranging from travel agencies and movie production to waste management.

The adjustments are part of an ongoing comprehensive review of all size standards as required under the Small Business Jobs Act of 2010. The SBA is evaluating all industries in these sectors that have revenue-based size standards to determine whether the existing size standards should be adjusted.  The last overall review of size standards occurred more than 25 years ago.

The proposed changes take into account the structural characteristics within individual industries, including average firm size, degree of competition, and federal government contracting trends.  This ensures that size definitions reflect current economic conditions within those industries. 

The upward revisions would allow some small businesses that are close to exceeding their current size standards to retain small business eligibility under the proposed higher size standards, and give federal agencies a larger selection of small businesses to choose from for small business procurement opportunities.  The SBA estimates that an additional 14,500 small businesses could qualify for SBA financial assistance under the increased limits.

The government is accepting public comments on the proposed changes at www.regulations.gov and all comments will be posted to that site for public review.

For more information about SBA’s revisions to its small business size standards, click on “What’s New with Size Standards” at www.sba.gov/size.

Health Care Reform Heads to High Court

U.S. Supreme Court will consider constitutionality of Affordable Care Act.

There was little doubt that the Affordable Care Act—health care reform—would ultimately be in the hands of the U.S. Supreme Court. After more than a year of conjecture, it’s official. The Court will consider three cases challenging the constitutionality of the Affordable Care Act.

Since being passed in March 2010, the Affordable Care Act has been the target of more than 20 court challenges, as well as Congressional repeal efforts. One of the most significant court challenges was made by a consortium of 26 states. The lower courts have split on the various cases. Two of four appellate courts have upheld the law and one said the court challenge was premature because it hadn’t yet taken effect. Only the 11th Circuit Court of Appeals in Atlanta has struck down the law.

Most of the court challenges have focused on whether Congress has the power to require individuals to purchase insurance or pay a penalty. Now the Supreme Court will decide that issue as it hears the cases during the spring session. Although many issues were contested in the various cases, the Court will consider only four:

• The constitutionality of the Affordable Care Act’s provisions requiring virtually all Americans to obtain health insurance (known as the “individual mandate”).
• If the individual mandate is unconstitutional, is the entire law invalid or do the remaining portions of the law still stand?
• Is the law’s expansion of the Medicaid program constitutional?
• Does the Anti-Injunction Act (AIA) bar challenges to the individual mandate (the AIA prevents federal courts from striking down tax laws before they take effect.)?

While the Court will review the individual mandate, it has not agreed to consider the Affordable Care Act’s employer provisions, which will require employers with 50 or more employees to provide affordable minimal essential health coverage to their full-time employees or pay a penalty under certain circumstances.

The Supreme Court is taking up the case in the midst of the presidential election. Oral arguments will likely begin in March  2012, with the Court issuing its opinions by late summer.

House Approves Repeal of Tax Withholding on Government Contracts

Senate can permanently halt rule diverting 3 percent of invoice payments to IRS.

It may not sound like much, but for a small business, 3 percent on an invoice can mean the difference between making payroll or not. It can be the cash you need to pay a vendor or make a loan payment. For a small business, 3 percent can be the proverbial straw that breaks the camel’s back.

The 3 percent we’re talking about is the amount the IRS would withhold from payments on government contracts beginning in 2013. For example, on an invoice of $100,000, the government would pay the business $97,000 rather than the full amount, with the rest diverted to the IRS to cover the company’s tax liability.

The U.S. House last week provided some encouragement to opponents of the requirement, however, when it voted 405-16 vote to repeal the rule. The repeal measure now heads to the Senate for consideration.

The 3% Withholding Tax was part of the Tax Reconciliation Act of 2005 and was originally scheduled to be implemented Jan. 1, 2011. That date was pushed back a year by the 2009 economic stimulus law, and the IRS announced this summer that it would delay implementation until 2013.

“Compliance with this withholding tax will impose significant financial burdens on both the public and private sectors, adversely affecting job creation and economic growth at a time when we can least afford it,” said Rep. Sam Graves (MO-R), chair of the House Small Business Committee, in a statement. “It will also further limit the cash flow of small companies that operate with thin margins in a difficult economy. Startups and small firms with a high volume of government contracts will be particularly disadvantaged.”

The withholding mandate is intended to fight tax evasion by companies selling to government entities. A 2004 Government Accountability Office report found that more than 27,000 defense contractors owed about $3 billion in unpaid taxes. The 3 percent withholding mandate would help the IRS close that gap and raise an estimated $7 billion by 2015. The provision applies to Medicare payments to medical professionals and farm payments, as well as sales of other goods and services to governments by businesses of all sizes.

The U.S. Chamber of Commerce has said the 3 percent withholding would reduce capital that small businesses need for day-to-day operations, and companies would need to develop new internal accounting systems to track, handle, and reconcile these payments. The additional personnel and system costs will increase bids rates on government projects in order for businesses to maintain profit margins, the Chamber said.

The amount withheld also could exceed a company’s actual tax liability, according to the Chamber.

“The 3% Withholding Tax essentially provides the federal government with an interest-free loan and will especially have a negative impact on small businesses as resources are shifted to handle the administrative burden on tracking and reconciling transactions as well as securing capital for day-to-day operations, job creation and business expansion,” the Chamber said in a statement posted on a website it set up to oppose the mandate.

A coalition of more than 125 organizations is lobbying against the withholding requirement. In its statement to the House subcommittee earlier this summer, the coalition said the mandate is already causing problems despite the fact that implementation has been delayed. Because government contracts often cover five years or longer, companies entering into long-term contracts must be aware of the change now and consider additional administrative and financing costs of the 3 percent withholding in future years.

Cream or Sugar?

“No, thank you. Black’s fine.”

I eat in restaurants several times a week. I order coffee with nearly every meal. And every one of those meals involves the “cream-or-sugar-no-thank-you-black’s-fine” exchange.

I’m a straight up, brew it strong, several cups a day, just inject it into my veins kind of coffee drinker. No flavors, no froth, no foam – just strong black coffee, and preferably from The Roasterie. That’s been my coffee drinking preference for more than three decades. I’m not going to change.

Yet every time, and I do mean EVERY time, my coffee comes

accompanied by a little silver or china pitcher bearing cream, or a small bowl teetering with plastic half and half packets!

Now it’s perfectly OK to ask me whether I want cream or sugar. But WHY do they even bother to ask me if they’re going to bring it anyway?

How many times a day do restaurants across the country literally pour pennies down the drain serving cream to customers who don’t want it? Not to mention what it costs them to buy the extra inventory of little pitchers they need to keep around the kitchen to serve the unwanted cream. Maybe it’s not enough of an extra expense to curdle the bottom line, but my point is this:

How often do companies decide to add to their customers’ experience, but end up offering them something they don’t want? For example, I have more return address labels than I’ll use in a lifetime, courtesy of my insurance agent who feels compelled to include them with every mailing he sends me. I don’t want them and I don’t need them. So, they get tossed in my recycling bin. He wastes money sending them to me, and I spend money for the recycling service. Who wins here?

The restaurants are doing at least one thing right: they’re asking whether I want the cream. They just aren’t listening to my answer. My insurance agent doesn’t even ask about the labels. They just arrive.

It’s always good to follow the rule of underpromising and overdelivering, but not if your customers don’t want what you’re delivering. Does your company waste money, and possibly even annoy your customers, by guessing wrong about what they want? Or, do you ASK your customers how you can better serve them, and then LISTEN to what they tell you?

Cream or sugar? Listen to what your customers are telling you, and your company will rise to the top.

Regulations Crush Small Biz Confidence

Survey says smaller government key to helping small business.

Small business owners in this economy have a lot to worry about, and a lot to complain about. Regulatory burdens, however, topped the list of small business challenges in a recent Gallup poll.

Twenty-two percent of respondents cited “complying with government regulations” as the most important problem facing small businesses today, followed by “consumer confidence” at 15 percent and “lack of consumer demand” at 12 percent.

“There is always a debate to be had and a balance to be struck between the public benefits associated with government regulations and the cost of those regulations on business,” said Dennis Jacobe, chief economist at Gallup. “While regulatory change can have a big impact on individual companies and industries, most often it does not have a major impact on the overall U.S. economy. However, these are not normal economic times, and small-business owners seem to feel government regulations are making their difficult operating environment even more challenging.”

As they look to 2012, more than one third (36 percent) of small business owners said they are very or moderately worried about going out of business. A similar number (37 percent) are worried about not being able to compete with large or global competitors. The ability to hire the number of employees they need is a concern for 36 percent of respondents, while 32 percent are concerned about meeting payroll and 30 percent are worried about staff reductions.

“Growth in sales” (15 percent) was most often cited by respondents when asked what they need in order for their business to thrive in 2012. “Job creation” was the next most common response at 14 percent, followed by “fewer government regulations” at 12 percent. An “improved economy” came in at number four, with 8 percent.

Job creation is getting a lot of attention these days by politicians on both sides. When asked what would motivate them to hire new employees in 2012, 27 percent of small business owners in the Gallup survey said an increase in revenue or sales. Twenty percent are waiting until the economy improves and 17 percent said they would hire to support growth or expansion plans.

Results for the total dataset are based on telephone interviews with 604 small-business owners, conducted Oct. 3-6. For results based on the total sample of small-business owners, the maximum margin of sampling error is ±4 percentage points with 95 percent confidence.