Wednesday, September 28, 2005

Tips to Help You Avoid Economic Disasters

One of my subscribers has been corresponding
with me over the past week on the topic of last
week’s newsletter. In case it did not make it
through your filters, past newsletters are always
listed at
(see The Rats Are Circling).

My subscriber and I had a great conversation
about the financial state of the nation and what
we as small business owners can do to protect
ourselves from any economic backlash brought
on by expensive wars and natural disasters. I
thought the information might be useful to others
so here is some background on the financial
state of our nation and some tips to help you
avoid the negative impacts of that financial state.

I have two big concerns about the economic
status of the United States. The national deficit
and the national debt. In case you did not major
in accounting or economics, here is a quick
explanation. A deficit occurs when you spend
more than you take in. Debt occurs when you
borrow to pay your current obligations (on a
personal level that is like taking a cash advance
on one credit card to pay a second credit card) or
you borrow to invest (think college loans or a mortgage).

At this point in time, the government is operating at
a deficit—more being spent than is being taken in
through taxes and other income. When you hear
politicians talking about balancing the budget, this
is what they are talking about, spending the same
amount that is being taken in.

The national debt is the amount of money the
government owes due to borrowing. We, the
American people, as of today are in debt to the
tune of $7,939,506,438,929.39. This number has
increased by over 9 billion dollars since last week.
If that isn’t enough to scare the socks off you I don’t
know what is!

Think what would happen to you personally if you
ran your personal and business finances that way!
Yikes! Then multiply it by $7.9 trillion and you begin
to see the problem. Add in the costs of a very
expensive war and two very expensive hurricanes and
you may never sleep soundly again.

So, what can a small business owner and citizen of
our great nation do to protect themselves from the
financial chickens that will eventually come home to

1. Pay attention to current events and think about
how it will affect you and your business. Look beyond
the hype and the spin and analyze the facts.

2. Run your business fully aware of the economic
backdrop that exists around it. It is easy to forget that
we are a cog in the wheel of an immense national and
worldwide economic system. When you become aware
of that you can avoid pitfalls and find new opportunities.

3. Plug the leaks in your business. Drive costs down. Find
new sources of income. Run as efficiently as possible.

4. Analyze your business to determine what risks you
need to insure against. A college professor in my small
business program once told us, “The only thing you can’t
insure against is stupidity.” Do you need product liability
insurance? Errors and omissions? Extra insurance for your
home business? Talk to your insurance agent about what
you can do to protect your assets.

5. Manage credit in a business-like way. Get a credit line
before you need one. Keep your debt level as low as
possible. Use debt for investment not to cover current
expenses. Establish good credit relationships with your

6. Take a hard dose of reality. Step back from the
emotional attachments we all have to our businesses and
personal spending habits. Are your decisions rational or
emotional? Do you have a financial plan for your business
and personal finances?

7. Establish and maintain an emergency fund for your
business and your personal life. Always have at least a Plan
A and a Plan B. Are you planning to use a credit card for
emergencies? After Hurricane Katrina, some credit card
companies were refusing to honor the credit cards of people
from Katrina’s impact area. A large, very well known discount
department store refused to take credit cards from people
evacuating from Katrina. (These items were reported to me
by someone working in a shelter in Houston. Big companies
have risk management departments and I’m sure they were
working overtime after the storm to limit losses. Remember,
Katrina took personal property, businesses, and jobs, breaking
the economic backbone of an entire region. No jobs, no money
to pay credit card bills.)

8. Join a small business advocacy group like the National
Association for the Self Employed ( or the
National Federation of Independent Businesses (
If you feel you can’t afford to join, visit their websites for
newsletters and other no-cost information. Organizations like
these have their pulse on the small business economic climate.

9. Vote for candidates who are good for small business. Of
course, to do that you need to know what their backgrounds
are and what their voting records have been. You can find
information like that through the organizations listed above.

10. No one said it was easy. This isn’t our grandparents’
economy. It takes toughness, ever increasing skills, and
savvy street smarts to make it in a complex economic
structure like we operate in. It is definitely not a career
choice for wimps!

Until next time,
Caroline Jordan

Get Knowledge. Get Focus. Get Results.
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