The Real State of the Economy - Small Business the Economic Engine

The new economic report is good news for small business.

The National Association for Business Economics released a new report indicating that America's economic is continuing to recover. This is great news, especially considering recent uncertainties.

Here are the basic numbers.

- 31% of businesses increased their number of workers in the past quarter.
- 39% of businesses plan to increase workers over the next 2 quarters.
- 50% fewer companies reported layoffs during the past quarter compared with the same period a year ago.
- 52% of companies reported increased demand for goods and services resulting in improved sales.

But not all the news is good.

- The stock market continues to be unstable as it absorbs and interprets new regulations.
- The housing market and real estate in general continue to be sluggish.

This information is not just academic. There are clues here indicating how to best invest you time and money to take advantage of changes in the economic climate.

First, the stock market is a poor place for your money. This is no surprise to anyone who has lost half of their retirement investment in stocks or mutual funds. Unless you are a very adept trader who can capitalize on market volatility, the stock market should be avoided. But don't confuse the ups and downs of the market as an indicator of how the economy is doing. The stock market is largely driven by emotion and speculation. Economic data may fuel the emotion, but the market will almost always over react, then over correct. So if the market falls 2000 points, it is not an indicator that the economy has collapsed any more than its 2000 point climb late last year indicated that the economy was completely healed.

Second, real estate is not where you should invest - yet. Some apparent relief earlier this year was largely due to government programs that have expired. Now, foreclosures are continuing to climb, and there are fewer new home starts. Real estate will likely bottom out in a year or two, but recovery is likely to be slow as the huge foreclosure inventory is absorbed by the marketplace.

So where is the right place to invest? Consider new business investment. As the economy strengthens, companies will be hiring employees and contracting new service agreements. The technology and business services sectors are likely to recover at a faster rate than the overall economy.

Express Employment, a franchised employment services company, reported an all-time record for weekly sales volume in June.

Intel reported increased sales for server chips, an indicator that US businesses are spending money on improved technology. They are also predicting a 20% improvement in PC sales, largely driven by companies increasing workers.

The BNZ index, an index of the business services industry, rose 2.2 points in May (most recent data available). This indicates continued expansion in the business services industry.

So if you are considering starting a new business, or just looking for a place to invest your money, business services is worth a close look. Besides employment services and technology, consider starting a business that focuses on consulting, marketing, supply management, sales training, and facilities management and maintenance.

If you are nervous about venturing into entrepreneurism, there are franchises that will assist you in setting up your own business in each of these sectors. A franchise will also provide your new startup with an established name and 50 year reputation. These are big plusses when approaching businesses for new business. Also, each franchise has developed a proven success formula that can be verified by you during your investigation and validation period.

However you approach your investment, it is time to quit worrying about the future and start creating your future. The tide is rising. Catch the wave.

Ed Wills is a franchise and small business startup consultant with WFA Franchise Consultants. He specializes in helping people identify business opportunities that will help them reach their personal and financial goals.

The Current Economic Environment Requires Business Valuation Professionals to Stay on High Alert

The economy continues to dominate news headlines on a daily basis. The stock markets are extremely volatile, and even the most seasoned economists and financial experts remain at a loss for predicting when things will start to change for the better. As a result, many businesses have had to adjust their projections, lenders continue to place more scrutiny on borrowers, and the consumer is more cautious.

The business valuation community has had to respond to this turbulent environment as well, and analysts have had to pay special attention to the fluctuating market conditions when valuing an ongoing business enterprise. For example, if an analyst has decided to prepare a valuation of a company based on the income approach (one of the three generally accepted valuation approaches), the economic impact must be addressed. After the analyst has completed much of the necessary functions of the typical engagement, including analyzing the financials of the company, normalizing the earnings, assessing the economic and industry conditions, forecasting and evaluating the internal and external risk factors, and estimating the future benefit stream, the analyst must then determine the cost of capital for the company being valued.

Cost of capital is a key factor when determining the value of an ongoing business enterprise. Cost of Capital can be defined as the expected rate of return that the market requires to attract funds to a particular investment. When the valuation analyst determines the cost of equity capital, he or she typically employs what is referred to as a "build-up" method. Basically, the analyst takes the "risk-free rate", or the yield on long term U.S. government bonds plus a risk premium, or rate of return expected for taking on additional risk. In addition, the analyst will consider an industry risk premium, a size premium and company-risk premium for the particular enterprise. The formula is as follows:

Ke = Rf + ERP + IRP1 + SP + SCR

(Where Ke = cost of equity, Rf = risk free rate of return, ERP = expected equity risk premium, or the amount by which investors expect the future return on equity securities to exceed the risk free rate, IRP1 = expected industry risk premium reflecting the relative risk of companies in that industry (if appropriate), SP = size premium, SCR = specific company risk)

As a business valuator applies this formula, he/she typically refers to databases, government publications and other resources to capture relevant data. Needless to say, that data may warrant extra scrutiny in the current environment.
First, due to the extreme volatility in the stock market, money has flowed into treasury bonds causing the yields to drop down to zero and even below at times. If these low yields are used as a proxy for the risk free rate in the build up method, the result will be an unusually low cost of capital. Likewise, as a result of the poor stock market performance, the equity risk premium (which is based on the long-term average of the S&P500) has declined recently. However, the risk associated with holding stocks has clearly not declined.

Third, additional risk premiums, including those for size, might be somewhat unreliable due to recent events. For instance, the theory that a large company is less risky as a result of its size and market share must be questioned now that we have seen so many "too big to fail" companies collapse. Overall, the simple application of the traditional cost of capital calculations will likely result in misleading conclusions due to recent events.

Now more than ever, a thorough business valuation analyst needs to employ his/her judgment when valuing an enterprise. For example, the valuation analyst's experience educational background, insight and peer resources are going to be critical resources. Simply relying on published data points and previously decided case law alone may not be enough. If the valuation analyst chooses to rely only on these traditional methods of analyzes, he/she will likely be subject to skeptical inquiry.

We are in the midst of a very difficult economic environment. Therefore, it is critical that the valuation analyst be alert and well informed about this constantly changing market. In so doing, the valuation analyst's clients will be appropriately served.

How to Weather Bad Economic News When You Own a Small Business

If you live anywhere but under a rock it's hard to avoid the recent economic reality we find ourselves in as a nation. Regardless of your political affiliation it's overwhelming trying to decipher what it all means and stressful wondering if it's going to be OK. Try as I do to monitor how much media I allow myself to consume, it effects me as a citizen, but even more as a small business owner.

As a small business owner you rely on a certain set of conditions to remain stable. You learn to count on what's worked in the past as you make decisions moving forward. And, typically, you don't have a lot of reserve on hand to weather the dark days of any storm.

When all these factors go up for grabs in a faltering or depressed economy it can reek havoc on the well being of your business, which is directly connected to the well being of your life.

So, what's the savvy small business owner to do to sure up the boat and ride the wave through these choppy waters? Especially given the reality that some businesses WILL do better than others. As much as I favor optimism, some businesses will hurt, BUT - regardless of a worse case scenario, there are things you can do to increase the odds of making it and that will empower you to take an active role in determining your own outcome.

Here are 5 important perspectives and actions that work for me as I face the uncertainly of what's to come:

1. Get perspective and knowledge. Find out where you stand with your own personal finances. Make an appointment with a trusted financial advisor and get the low down from someone who an expert in the field. I know when I rely on the news for all my information, I don't know what or who to believe. Get reassurance that you are positioned as well as you can be, or if you're not fix it! And remember, take the long view. As a country we have weathered many an economic down turn and eventually things do come back into balance.

2. Reevaluate everything. Take this opportunity to look at your business with a fine tooth comb. Could you cut expenses? Are your operations as productive as they can be? Nothing should be a sacred cow. Be willing to make tough choices - trade stress for peace - even if they're not your preference -for now.

3. Get creative. As Kelly Spors, journalist for the Wall Street Journal suggests, "This could be an opportunity to make inroads on competitors' turf (think Dunkin' Donuts taking on Starbucks in the coffee market). Big companies often reel in their marketing budgets in bad economic times, leaving room for small companies to make a bigger splash. It can also be a good time to introduce new products into the market that address today's economic realities." What could you change about your business that might make an economic downturn turn into good news for you?

4. Be nimble. Adapt rather than stay stuck in old ways of thinking or doing business. This is where it's to your advantage to be a small business in a bad economy. You have more control and can make changes.

5. Use the tools you already have. Whether it is yoga, mindfulness, or bubble baths, now's the time to rev up your spiritual or personal wellness practice and really connect with the big picture. Stay centered and focused on what really matters to you. In the end, I know whatever circumstances may befall me, if I have a strong sense of self intact, my health, and people around me I love - I know I can survive anything.

To summarize, in order to weather any storm in life you have to feel empowered. Empowerment comes from knowledge, inspiration and action - and regardless of your external circumstances, empowerment is something YOU can go after. In reality, you may or may not get the outcome you desire, but at least you know you gave it your best.

Read Business News Daily To Keep Up With the Markets

The net worth rich companies are called blue chip stocks in the market, they are always in the news on Business News. Gillette, Microsoft, Wall Mart and Citigroup are some of them, which usually outperform the market expectations.

These companies are reported for their sales, marketing strategies, product launches, global investments and profits & losses. Each of these can trigger a rally, push the market indices and generally add to economic prosperity. Business News also provides the government's perspective of the economy, which in turn helps the investor to weigh the risk as per the market sentiment.

Not many can read between the lines of Finance News flashed or published in the media. It's an art in itself. The knowledge of going beyond the text to know what is really happening in the market or in the economy or with a stock requires an analytical mind. Suppose you read a banner headline of Facebook to launch a mobile device in the midst of Facebook IPO crisis, a discerning reader need to ask, is it a diversionary tactic employed by the smart PR or is it truly a new development that will enhance the market value of the scrip. Questions like these are hidden in most of the news items that we see in Finance News.

What role do the latest stock market updates play in the life of an average investor? Does it matter to him when stock market declines? Does it matter when stock market shoots through the roof?

The question becomes especially important in light of news items appearing in press - investor lost millions as markets decline by 200 points- which show the mass effect of the rise and fall of the stock markets.

A speculative investor gets directly affected by these fluctuations; however a committed investor books a notional loss. The latest stock market updates in a sense gives an approximate valuation of the holdings we have thus helping to assess our future investment strategies.

The latest stocks news carry news item such as quarterly results, stock analysts ratings, trader's recommendations and stock quotes . It also has features such as opening and closing stock rates, a yearlong individual stock data and the news of major global indices such as Dow Jones, Nasdaq, London stock exchange etc. Latest stocks news narrates the status of global economy and indicates future growth prospects for an individual investor.

Stock market news is a communication about the latest happenings in and around stock markets.

An investor gets to know the market trends through this medium upon which he places orders for buy and sell. In a way, stock market news feeds the market sentiments.

Most active stock is followed by the investors for their capacity to propel the bullish or bearish sentiments in the market. Most active stocks are the most preferred for they pay back the value in both the phases.

Analyst ratings are a re-commendatory feature which suggest the credit worthiness of a given stock in the market. Every investor keeps an eye on Analyst Ratings for they are based on the market positions taken by the big funds and wealthy investors.

Sam Richard Nicholson is a freelance writer and finance adviser, in this article he is centering on reading Market News daily to catch the regular market updates, which indeed helps in better decision making while investment in market. Importance of Stock Analyst Ratings, updates on Most Stable and Active Stocks, news from different stock exchanges. An investor can sound market trends and can follow his marketing strategies on product launches, global investments and profits & losses.