I am sure many of you will be shocked to learn that estate planning is an issue small business owners are concerned about! Warren Buffett and others would have us believe that estate taxes and estate planning is not something small business owners concern themselves with. This article on estate planning from the New York Times simply reinforces that estate planning is a major issue for small business owners.

The article discusses some excellent planning tools, and reminds small business owners that the estate tax comes back in full force in 2011. Entrepreneurs need to begin planning now to ensure they have a good estate plan that minimizes taxes, and gets the business to the next generation!

Given the recent spate of product safety issues from Chinese imports, it is fair to ask if China is suffering from a public relations issue. As a strong supporter of manufacturing in the U.S., I would say yes they are, and I hope they can’t fix it. However, it strikes me that China’s issue is not just a public relations issue, it is a process issue. The image problem is an outgrowth of a monumental system malfunction.

China’s competitive advantage in the global manufacturing arena is price. They have an industrial infrastructure designed to be the low cost producer. The challenge is Chinese manufacturers need to keep reducing costs to stay competitive, even as their labor rates slowly rise due to a burgeoning middle class. This forces manufacturers to look for other cost reduction opportunities, and production short cuts are generally the result.

Great public relations may be able to disguise the product safety issues China has, but it does not fix the overall process issue. Unlike the public relations expert in this Fast Company article, I will be checking labels this Christmas. The safety of my children is important!

The U.S. Federal Reserve Chairman Ben Bernanke telegraphed his openness to further interest rate cuts in comments he made yesterday in regards to a slowing economy. The downturn debate is now whether the glass is half-full or half-empty. Is this slowdown a long-term “bear” economy, or is it simply the sign of a new cycle of economic growth?

The Fed believes the economy will slow in the coming months due to a slowdown in consumer spending, and continued turmoil in the credit markets. The challenges of a tighter credit market, lower asset prices (houses and stocks), and higher energy prices are weighing on consumer sentiment. The concern is that a slowdown in consumer spending is the weight that will tip the economic scale into recession.

None of us are hoping for a recession, or a slowdown; however, keep in mind a slowing economy is a natural occurrence in the economic cycle. Once the economy has slowed and completed the cycle, we are in for another period of solid economic growth. It appears to me that the glass is certainly half-full!

One major concern of many analyst is that the credit issues that originated in the housing market will spill over to other types of consumer and commercial credit. The New York Times has a front page article today about how credit flowing to American businesses is “drying up at a pace not seen in decades.”

Small business owners that are going into 2008 with big expansion plans and large borrowing needs will need to make sure their business is positioned to get the credit required. I was meeting with some local bank officials recently and they mentioned three things they look at when meeting with business owners who need to borrow in today’s environment.

1. Cash Flow – The bank wants cash flow, and proof of cash flow. If you are buying a business or investing in capital bankers will need to see evidence that your business has the cash flow necessary to cover the debt. The bank’s comfort with cash flow will be directly reflected in the borrowing terms.
2. Collateral – In today’s environment the bank wants collateral. They need to see other assets that can be used to guarantee the new debt. They will look at receivables, inventory, and equipment. The lenders are thinking about options if the borrower defaults on the loan. Collateral is a great option.
3. Reputation - If you have a positive reputation with your bankers and a strong relationship, then borrowing in today’s environment will be much easier. If you lack a track record with the lender or in the community then borrowing will be difficult.

I have been told that you can be missing one of these three keys and you still be able to borrow. If you are missing two then your chances of finding a lender will be limited!

The U.S. Department of Commerce released their revised third quarter Gross Domestic Product (GDP) numbers this morning. Economic growth was 4.9 percent in the U.S. in the quarter ended in September, this is one percent higher than the original GDP release and right on consensus forecast. The downside is that most analysts are expecting fourth quarter GDP to come in around one percent!

Jobless claims for the week were released by the U.S. Department of Labor. New unemployment claims jumped to over 350,000 last week. The overall trend on jobless claims has been moving up slightly, this is concerning news for economic watchers who believe unemployment needs to stay low to keep consumer spending robust.

Home foreclosures surged in October. New foreclosures were up two percent from September, and a whopping 94 percent from October of last year. The spike in foreclosures is just more pain for an already suffering housing market, most do not expect a turnaround in housing for some time.

The bottom line is that going into next weeks U.S. Federal Reserve meeting, it appears that Fed officials are leaning towards another rate cut to attempt to keep the U.S. economy out of recession!

When starting their business, most entrepreneurs start their business where they live as opposed to trying to find the most “small business friendly” environment for their new venture. If you had a choice, where would you start your business? The Small Business and Entrepreneurship Council has come up with a list which may help you decide.

The SBE recently announced the best and worst states for small business in the U.S. South Dakota came out on top for their low taxes and limited regulatory environment. Washington D.C. (the shocker of all shockers) was the worst! I would have to agree that the further outside the beltway you are, the better the chances for the success of your small business!

One comment in the article from a critic of the SBE got my attention, “And many of the tax rates that the SBE index measures, such as estate taxes, have little impact on small business owners because they only affect the wealthiest taxpayers.” The individual who said this has obviously never worked in family business that is in or approaching the Exit Cycle.

During the last business life cycle, many business owners become preoccupied with estate and succession planning issues. The question of how to get the business to the next generation with minimal tax impact becomes an all consuming problem. Many attorneys and accountants have made a good living by advising small business owners on estate planning issues. This is a big issue for many business owners, and it is no surprise that the SBE considers it pertinent to their measure!

What is the best business advice you have ever gotten? I have always believed the best advice in business comes from those who have been there. Other business owners and executives who have more experience and have fought many battles are usually my most effective sources, rather than consultants, business books, or workshops.

The best advice I have received in my career came from mentor. He always encouraged me to treat people well. Be good to your employees, pay your vendors quickly, and go above and beyond for every customer. If you treat everyone well, the return on your investment will be exponential. Ignore one of those groups, and you will damage your business over the long term.

Just this past weekend I was having a business discussion with a friend who shared a story about a small business in Michigan. They had an employee who had gotten injured on the job, falling from the back of a truck. He had broken his arm, and after he had recovered, he suffered another injury at a local chiropractors office. The owners eventually fired this employee, and then protested when the employee applied for unemployment benefits. The owner’s reasoning was that it would increase their unemployment insurance. The employer spent a great deal of time and energy fighting unemployment benefits for this employee, only to eventually lose. They probably lost more money and credibility fighting this issue than they would have if they had just moved on. Treating people well always goes a long way.

The best advice I give other entrepreneurs is to pursue their passion, if they do success will follow. If you are starting your own business, and the business is something you are passionate about, then your chances for success will be much better. Here is some more great advice from other entrepreneurs!  

The U.S. Federal Reserve released its beige book data today, and the results show a slowing economy. Consumers and businesses alike are operating more cautiously and holding onto cash as they prepare for an economic slowdown (no doubt many of these folks have been reading our advice). The bottom line is that so far this quarter the Fed sees slower growth as housing woes and tight credit continue to squeeze spending!  

Existing home sales fell in October to their lowest level in more than 8 years. Inventories grew to almost 11 months, the highest point since 1999. The bloated supply of homes on the market is forcing prices down, third quarter data showed average home prices were down 5.1 percent. The downturn in housing continues to weigh on the economy, although it appears the market has not yet hit the bottom!

Durable goods orders fell .4 percent in October, which was more than expected.. Except for a spike in July durable goods have been trending down the second half of this year, this correlates with other data which indicates manufacturing has been slowing over the last few months. Some analyst were expecting the weak dollar to help bolster exports and keep manufacturing robust. It appears that stronger exports have not been able to offset the ripple effects of a downturn in housing and the credit crisis.