In Wake of SEC Charges Against Goldman, Paul Krugman Calls for "Lowering the Boom" on Wall Street's "Racket"

In discussing the SEC suit against Goldman Sachs issued on Friday, New York Times columnist and Nobel Prize-winning economist Paul Krugman renews his call for passage of financial reform, and in the process calls Wall Street practices a "racket" in which "a handful of people are lavishly paid to mislead and exploit consumers and investors."

He asks the question, "whether financial reform of the kind now being contemplated would have prevented some or all of the fraud that now seems to have flourished over the past decade." His answer is "yes."

"For one thing, an independent consumer protection bureau could have helped limit predatory lending. Another provision in the proposed Senate bill, requiring that lenders retain 5% of the value of loans they make, would have limited the practice of making bad loans and quickly selling them off to unwary investors."

However, he says, "it's less clear whether proposals for derivatives reform -- which mainly involve requiring that financial instruments like credit default swaps be traded openly and transparently, like ordinary stocks and bonds -- would have prevented the alleged abuses by Goldman (although they probably would have prevented the insurer A.I.G. from running wild and requiring a bailout). "

He concludes that "the main moral you should draw from the charges against Goldman...doesn't involve the fine print of reform; it involves the urgent need to change Wall Street...The fact is that much of the financial industry has become a racket...And if we don't lower the boom on these practices, the racket will just go on."

Amen to that, my friends.

Getting A Quick Look at Your Company's Vital Metrics

If you spend a lot of time out of the office, how do you keep up with what's happening while you're away?

Jennifer Walzer, CEO of New York-based BackUpMyInfo, wrote on December 1 in The New York Times Small Business blog that, in addition to informal feedback from company insiders, you need to have a more formal system of metrics to see what has been happening and the direction the business is going in.

"I need to know how many leads come in each week, how many go to trial and how many clients close. I would like to know all of this on a per-source basis -- how much money is being generated by my sales team, my telemarketers, our partners, client referrals, public relations and media, etc.

"On the other side of the business, I need to know exactly how many support calls my engineers
handle each week. Finally, I want to be able to get a snapshot of our average client in terms of revenue and data storage -- both overall and by source. For us to assess our performance, we need to start to document this on a weekly basis."

Walzer says they are tracking these things in "some way," but it is not as organized as it should be. She says she needs to know where they are growing, and where to focus the company's time, energy and dollars. Maybe it means hiring another sales person or a dedicated partner relationship manager. Maybe it means focusing more on PR.

"I also owe it to my employees to provide structure and accountability for their performances," she writes. "If I want to provide my employees with clearly defined expectations and then hold them accountable, I have to have a way to measure their performance."

It may be as simple as developing an executive dashboard using Excel, she says. Her Entrepreneurs Organization forum teammate Gary Tuerack, from the National Society of Leadership and Success, created one for his organization, she says.

The idea of an executive dashboard is a good one, whether or not you are out of the office for long stretches of time.

Advice for Dealing with Small-Business Stress

Even during good times, small-business owners are typically under stress from a variety of sources. During a recession such as we are currently experiencing, the stress level, of course, rises.

In an article yesterday on The New York Times blog site, "You're the Boss," Jay Goltz, a Chicago-based entrepreneur and owner of five small businesses, offers tips for maintaining equilibrium during stressful periods, and learning from the experience. The article is titled "Six Ways to Deal with Stress."

First, identify the real problem. You may think the problem is that you need more sales or more credit. But looking under the surface, more basic problems can be identified, e.g., poor marketing, poor management, or weak financial management (often pricing or debt-restructuring mistakes). It may take someone with more expertise to ID the problems. Joining a business group, interviewing a new accountant, or reaching out to other business people may make a big difference.

Second, separate your fear from your anxiety. Fear is normal, rational and keeps us from taking reckless actions. You need to manage and overpower fear. Anxiety is unwarranted and irrational worrying. Do your best to recognize anxiety and put it out of mind. Suggestions here include: go to a professional or do exercise.

Third, forgive yourself. Business is not easy, and inevitably you make mistakes. Stop feeling guilty, don't look back, roll with the punches.

Fourth, keep perspective. Life is not fair. Self-pity is kryptonite to the successful entrepreneur. Success in business is as much about tenacity as it is about working hard or being smart.

Fifth, accept responsibility. There's no one but you to point the finger at. After you accept responsibility, re-read the third item above (forgive yourself).

Finally, think positively. If you think negatively, you will fail. "If things are so bad you can't do any of this, throw in the towel...Take the hit. There is no shame in failing...The sooner you can get it over with, the sooner you can move on."

Comment: This is great advice. Unfortunately, like many other things in life, it is much easier said than done. However, if you can follow this advice, you will likely be on your way to success, either in your current venture, or in a future endeavor.

The Trials of Being a Woman Entrepreneur

Being a tech entrepreneur is tough work. For women, it may be even tougher writes Jennifer Walzer, founder and CEO of New York-based Backup My Info!, in an article in yesterday's New York Times titled "Nobody Ever Said It Would be Easy."

In starting up and running her company, Walzer has often been treated as if she were "a non-technical female with a nice smile, sent to butter [clients] up in the hopes of scoring a second meeting with a 'real' engineer,'" she writes. "I've had technical questions fired at me like bullets, with the expectation that I'd crack under pressure, but I always try to answer the questions calmly, coolly and knowledgeably, often to the surprise of those around the table.

"I'm biased toward tech. I think this industry is great and full of opportunities, so if you know of a woman heading to college with an interest in math, science and problem-solving, tell her to give tech a try.

"But let's face it, no matter your gender or what you are trying to do, you're going to face someone who writes you off without giving you a chance, thinks your idea is foolish, or doesn't have time to hear what you have to say. If you think you are strong enough to get up every day and try again and again to make it work, you just might be an entrepreneur."

Very sound advice for both men and women.

Belt-Tightening and Selectivity are the Watchwords for Venture Investors Today

A year after the collapse of Lehman Brothers, venture capital investors continue to emphasize belt-tightening and investing only in companies that have the very best chances to succeed, says an article on the Venture Capital Dispatch in yesterday's Wall Street Journal.

The article is based on a panel discussion on "Keeping Portfolio Companies Alive and Thriving," at the Dow Jones Private Equity Analyst Conference in New York last week.

"If you're not getting escape velocity, that company should be sold or closed," said Kate Mitchell, a managing director with Scale Venture Partners. While there's still a willingness to invest in portfolio companies that are doing well, Mitchell said "there's a lot more dialogue about whether it's too early or too late" to try to accelerate a company's growth.

"The best CEOs are very cognizant of how hard it is to get new funds and [are] adjusting their spending accordingly," said David Lane, a general partner with ONSET Ventures.

Not all the talk on the panel was negative. All panelists saw opportunities for companies to succeed during the recession, but the concept is the need to be very selective.

It's anyone's guess as to how long this attitude will last among venture investors.

Is Entrepreneurship Right for You?

Pointing out that starting a business is in some ways like becoming a parent, an article in today's Wall Street Journal poses five questions that an individual should ask before starting a business.

The article, "How to Decide If Entrepreneurship is Right for You," by Colleen Debaise, points to the following five questions:

Am I passionate about my product or service? Because your enthusiasm for you product or service typically makes the difference in making the sale and building the business, "it's unwise to start down the path of entrepreneurship unless you've got a zeal that will get you through the rough patches and keep you interested long after the initial enthusiasm has faded."

What is my tolerance for risk? "Nothing about starting a business is for the faint of heart," the article states."...There's no guarantee of success or even a steady paycheck. If you're risk-averse, entrepreneurship probably isn't the right path for you."

Am I good at making decisions? "No one else is going to make them for you when you own your own business...Decision-making only gets more complicated as time goes on, once you have employees or clients depending on you...The choices you make can lead to success or downfall, so you must feel confident in your ability to make the right call."

Am I willing to take on numerous responsibilities? "Solo entrepreneurs in particular must be versatile and play a number of roles...If juggling many roles doesn't suit you, entrepreneurship probably won't either."

Will I be able to avoid burnout? "Working seven days a week, losing touch with friends, abandoning old hobbies and interests, and not making time for loved ones can quickly lead to burnout in the midst of starting up--and ultimately to business failure." The article gives a specific example of total burnout. With this particular entrepreneur working on his second startup, he has embarked on a better work/life balance, including not working on Sundays, making time for hobbies, and building close ties with other business owners through a faith-based support network.

"Take some time to mull over these questions, do some soul-searching, and then if you think you have what it takes, go for it," the article advises.

Good advice!

This article was adapted from a forthcoming book, "The Wall Street Journal Complete Small Business Guidebook," (Three Rivers Press, scheduled for publication December 29, 2009).

SBA Lending Has Risen This Year, But When Stimulus Money Runs Out, Where Will Additional Funding Come From?

An article in yesterday's New York Times cited a good news/bad news situation with regard to monies available for SBA lending to small businesses. The article, "SBA Lending is Rising, but What Happens When the Stimulus Runs Out?", says that lending backed by the SBA has rebounded back from last winter's low point. But it adds that, unfortunately, the spigot may run dry again when stimulus money runs out. And, it adds that it is unclear whether Congress will be able to find a way to keep the money flowing.

"We're almost back to '08 levels," said Karen Mills, SBA Administrator. "Almost a thousand banks that did not make a loan from that frozen point in October have come back to the program and are making SBA loans. And more than half of those banks hadn't made a loan since 2007."

Since the stimulus law went into effect, Mills said, the SBA has approved $7.7 billion in loans, and "leveraged $9.5 billion into the hands of small businesses."

Officials in Washington are trying to find a way to keep the stimulus going, the article says. It is unlikely to be funded by an additional appropriation, it says. But an aide to a senator on the Appropriations Committee said committee members are looking at legislation that would permit the unused money from the Troubled Asset Relief Program (TARP) allocated to secondary market loans to be used to extend the stimulus provisions.

This would be a positive development for small-business growth.