Smart contracts are one of the most recent developments in blockchain technology and are a great example of the kind of creative innovation that we are seeing coming out of this industry. Smart contracts are revolutionizing the way that professionals interact online. But what is a smart contract and how can I use them too?
Smart contracts, despite what you may think from the name, are not complicated clause filled documents that will give you a headache just from thinking about them. On the contrary, smart contracts are a technology developed specifically to make everyday life easier, and yes, that means your life too.
Smart contracts, in short, take out the middle man when it comes to things like lawyers and banks. A smart contract is a technology that digitally oversees, verifies and maintains compliance in agreements made over the blockchain networks.
How does it work?
Just like any other contract, it starts with two people coming up with an agreement or negotiation. On a basic level, if you want to buy a house but you don’t want to pay a bank or lawyer to oversee the transaction, using blockchain, you can agree on when money should be released from one party to another and when in turn the title of the house should be signed over. When these two things occur, this information will be logged into the blockchain with a digital signature to verify its validity. This log is only available to the parties who are involved. In the case that either side fails to comply with the agreement within the agreed time, the deal is nullified and any actions made are reverted.
In today’s world, many big corporations are starting to use smart contracts in their everyday business too. Banks for example are increasingly experimenting with the idea, and as time goes on and this technology becomes more and more secure and user friendly, we will probably be seeing them turning to smart contracts as a means of interacting with their clients too.
How can I use it?
It all starts by you choosing which blockchain you want to use. This is a critical decision. It is important because it will define the speed, capacity and ease of use of your transactions. One of the most popular networks for blockchain transactions and transaction storage is the Ethereum network. We will be using this as a base for our example of how to use this technology in a practical way.
In our example, we are going to take a straight forward give and take. You work for a company that produces software programs. You are expected to release a new software by the end of the month. So, the company you are working for creates a smart contract and puts your pay into it. This money is locked there until you have completed the software at the end of the month, and once it is confirmed through the contract that you have completed the job, the money is released to you. In the case that you don’t complete the task, the money is refunded back to the company that created the smart contract.
This application can go both ways; even if you are the person releasing the funds to another party. It has many applications and can work with any type of data transfer. What is the point of all this? Isn’t it easier to just go the traditional way and use a bank?
Why should I use it?
The main appeal of smart contracts for people is its decentralized nature. This means that there are no big banks or law firms getting in the way, no red tape or big bureaucracy involved, and this makes the method of transfer not only faster, but more effective and more secure. Your data doesn’t change hands, it doesn’t need signatures and it doesn’t require another person coming in to supervise the proceedings.
Another trait of this technology that makes it a stand out from others is the fact that this contract can’t be changed after it is agreed upon. The digital signature that is required to activate the contract seals it in that form forever. Because of the nature of the source code of the smart contract, any participant attempting to compromise the contract or change it in any way will find a proverbial brick wall in front of them. Likewise, third parties cannot access the information in smart contract without the consent of the parties involved in the agreement itself.
So, to recap, it is instant. Once the contract has been agreed upon, it doesn’t need to go through any offices or receive any stamps. Once the transaction requirements have been completed, the money or data is transferred automatically. No one can change or alter the terms of the agreement once it has been put into place. Most importantly, it is impossible for anyone to gain access to the contract other than the persons involved in the agreement.
Smart contracts aren’t a particularly new idea. Computer scientists have been tossing around the idea since the mid-nineties, but now, this dream of a freer and easier method of interaction has developed into a practical everyday tool. In time, this disruptive technology could come to replace some of the more tiresome aspects of our society; dealing with bankers for your loans, lawyers for property transfers or having to visit hospitals to access your medical records. It is easy to see that there is literally a use for smart contracts within just about any aspect of our society today.
For someone who has no prior knowledge in this sector, it may seem daunting idea. No one gets excited about contracts or making agreements, but this is actually a really amazing technology worth getting excited about. It can make our futures so much simpler; especially in our workplaces. There are great things out there, and it is time to embrace what could be the greatest breakthrough of this century.
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By Ryan Morris
The Lesson: As an entrepreneur, finding your calling may be extraordinarily difficult – even terrifying. You may cycle between a few different business ideas before settling on one that works with your personality, interests, and skillsets – but once you’ve overcome those hardships and found a business that works for you, there are dozens of invaluable benefits that come from owning a business and answering only to yourself.
Notable Excerpt: “I didn’t have to get a check from a boss, nobody told me when to come to work or go to work, I can’t get fired from this because of my color, creed, or whatever the case is – I’m responsible for what’s happening here and I will either fail because of the decision I make or succeed because of every decision I make.”
The Guest: Daymond John is an entrepreneurial advisor on the hit television show Shark Tank and the author of “The Power of Broke” – a book on “how empty pockets, a tight budget, and a hunger for success can become your greatest competitive advantage”.
The Host: After spending years of his young life and athletic career struggling with his own emotional wellbeing, a crippling injury left Lewis Howes without an identity and without any work. Instead of wallowing in self-pity, however, Howes recreated himself as a multi-million dollar media producer, motivational speaker, bestselling author, and podcast host. The ex-football player now spends his days chatting with the most inspirational icons of our generation on his School of Greatness podcast.
Podcast: The School of Greatness podcast is available for download on Soundcloud and iTunes. You can also watch footage of the interviews on Howes’s YouTube channel.
Books: Howes is the author of the New York Times bestselling book “The School of Greatness”: an in-depth collection of lessons and wisdom that he has gathered from interviewing hundreds of the world’s greatest role models and thinkers. Howes’s latest book, “The Mask of Masculinity”, is based on his experience with the dangerous stereotypes and expectations that are placed on men in modern society.
Read more from Good News Network
(LISTEN to the inspiring talk below)
Seven in 10 Americans have experienced a wake-up call during the COVID-19 pandemic to shift their purchases away from bigger corporations and, instead, shop small, according to a new poll of US adults. The survey asked 2,000 Americans about how they’ve responded to the novel corona virus’s impact on their local communities and whether they’re supporting small businesses in this difficult time. Seventy-one percent of those surveyed said they’re now shifting their shopping habits to supporting local businesses rather than big corporations or chain stores.
Conducted by OnePoll on behalf of Canva, the survey found that 79% of respondents said the COVID-19 pandemic has changed their perspective on just how important small businesses are to their communities.
LOOK: Hotel Stays Open During Lockdowns to House Homeless Locals; And They’re Repaying the Favor With Odd Jobs
During their months sheltering in place, respondents shared that they’ve supported an average of 10 small businesses.
Forty-three percent of respondents said the top method they’ve been supporting their local businesses is by ordering take-out or delivery. Over half of those surveyed also said they’re tipping their delivery drivers more than they normally would—up to 28% of their bill, in fact.
Another four in 10 respondents said they’ve shown support by visiting their websites and ordering online, while another 38% say they have been donating money. Three in 10 are also writing online reviews and sharing their local businesses’ social media posts to support them during this time.
RELATED: Boss Welcomes Back 14 Employees With Surprise $1,000 Bonuses For Spending on Local Businesses
Despite their individual support, 74% of those polled worried that their favorite local spot may not financially survive the pandemic—and perhaps because of this worry, 77% of respondents said they plan on supporting more local businesses once things return to normal after the coronavirus pandemic.
The places we miss the most
Fifty-eight percent of those surveyed said the top business they can’t wait to visit again after the pandemic was their local coffee shop.
More than half just want to book a reservation at their favorite restaurant—and 31% can’t wait to sit down and have a drink at their local bar.
MORE: Chef Andrés’ Charity is Injecting $50 Million into Restaurants By Paying Them to Feed the Hungry
Other top stops after COVID-19 included paying a visit to the hair salon, nail salon and local clothing store or boutique.
TOP WAYS TO SUPPORT LOCAL BUSINESSES DURING COVID-19…
1. Ordering delivery/take-out – 43%
2. Shop online – 39%
3. Donating money – 38%
4. Buying gift cards – 34%
5. Writing reviews online – 31%
6. Sharing their social media posts – 30%
7. Posting about them on my social media – 26%
TOP BUSINESSES AMERICANS ARE MOST EXCITED TO VISIT AGAIN AFTER COVID-19
1. Coffee shop/cafe – 58%
2. Restaurant – 51%
3. Hair salon – 37%
4. Gym/fitness studio – 36%
5. Local clothing store/boutique – 33%
6. Bar – 31%
7. Nail salon – 23%
“Around the world, we’re seeing millions of small businesses quickly adapt so they can continue operations,” said Canva’s Trends and Data Analytics Lead, Dr. Tim O’Keefe. “We’ve seen a surge in the use of Canva’s free small business templates, with the creation of takeout menus growing by 66% as restaurants pivot to offering delivery-only, new marketing material to promote how distilleries are now producing hand sanitizer, and the adoption of personalized Zoom background designs for personal trainers running virtual classes.”
“It’s incredibly inspiring to see this positive trend towards innovation, determination and camaraderie across the globe.”
Read more from Good News Network
A new report from the Consumer Bankers Association dramatically illustrates just how much small businesses were impacted by COVID-19 during the latter part of the first quarter of the year. The report found that delinquency and utilization were stressed. This was likely due to short term business closures, especially in the Northeast, although other sections of the country were impacted early in the pandemic. Some key findings:
By Rohit Arora Senior Contributor
Small Business Strategy
I write about small business lending and growth.
— Delinquencies increased across credit types, including commercial card, line of credit, open ended/revolving, and term. The quarter marked the highest delinquency point since the start of the survey in Q1 2018.
— Both credit limits and balances declined to the lowest point since the start of the survey, with balances declining at a greater pace than limits. This led to an overall decline in credit utilization.
— Charge-offs increased for accounts extending open credit. but dipped for collateralized loans. Overall, however, charge-offs declined.
— Delinquency and credit utilization increased, which was likely was due to short term business closures impacting many industries, especially the Northeast region.
— As the coronavirus continues to spread across the country, I suspect that these numbers may climb even higher – especially in Q2 and Q3. (To view the full report, click here.)
Fortunately, the government got involved to try to help small businesses. By most accounts, the Paycheck Protection Program (PPP), Congress’s central policy for keeping workers in their jobs amid widespread firm closures due to COVID-19, has been a success. Implemented by the Treasury Department and Small Business Administration (SBA), the latest reported data shows that the scale of PPP is historic.
Since the launch of the program in April through to July 6, nearly 5,500 lenders made 4.9 million loans with an average of $106,000, totaling $521 billion in funding for small businesses that might have otherwise failed. According to the SBA, these loans went to companies and helped preserve over 51 million jobs nationwide. That is about 84% of the nation’s small business payroll.
This data proves that despite the chaotic initial implementation, the PPP did what it designed to do: it very quickly provided liquidity relief to a vast number of small businesses.
What made the lending program so attractive was the forgivable nature of the loans. If small business owners comply with the terms of the PPP, the loans essentially became grants of money that do not have to be paid back. If this holds true, there was little risk involved, but quite an important reward for small business owners. Companies need only to demonstrate that they used the money for the intended purposes as specified in the PPP guidelines.
A PPP loan will be fully forgiven if the borrower can prove that he or she used 60% or more of the funds for payroll costs, mortgages or rent, and utilities. If the small business owner did not comply with these requirements, and the loans therefore are not forgivable, and the money must be paid back at an interest rate of 1%. It is still a deal worth taking. Loans issued prior to June 5 have a maturity of 2 years, while loans issued after June 5 have a maturity of 5 years. Loan payments will be deferred for six months. No collateral or personal guarantees are required.
Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. The PPP loan forgiveness form and instructions include measures to reduce compliance burdens and simplify the process, including:
• Options for borrowers to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles
• Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the 24-week period after receiving their PPP loan
• Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness
• Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30
• Addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined.
Lender approval of a loan made to small business or non-profit organization does not reflect a determination by SBA that the borrower is entitled to loan forgiveness. All PPP loans are subject to SBA review and all loans over $2 million are automatically reviewed. The fact that a borrower received PPP funding does not guarantee that the loan will be forgiven.
Because the PPP was run by federal government agencies, the paperwork involved is more extensive that for other types of loans. It can be intimidating. To help smooth the process, the American Institute of CPAs (AICPA) and CPA.com have released a free online platform, PPPForgivenessTool.com, powered by Biz2Credit, to help small business owners submit their forms.
The online tool, using advanced Biz2X technology, incorporates a PPP forgiveness calculator created by the AICPA in May and is available to any business approved for a PPP loan, regardless of the lender or bank they worked with to receive funding. Borrowers or their CPA advisors can log onto the platform to fill out the forgiveness application and the tool produces all government-mandated forms automatically.
PPP applicants will be able to electronically sign the 3508 or 3508 EZ forms, and all the required source documents will also be included in a downloadable file that can be provided to their lenders. The platform will likely save hours of manual work for any applicant going through the process.
“For the past three months, we have been very actively engaged in providing resources and tools to support the 44,000 CPA firms in the critical role they’ve played for the five million businesses that applied for PPP loans,” said Erik Asgeirsson, president and CEO of CPA.com. “We are now incorporating our PPP calculation and process recommendations into a dynamic PPP Forgiveness Tool to help drive a simple and effective forgiveness process. Our broader goal with this tool is to also to help drive a common approach to this process with the payroll and lender communities.”
PPP lending has been extended through August 8 in an effort to dole out the remaining $130 billion allocated to the program. Additionally, in Congress, future stimulus packages are being discussed. As the virus continues to threaten human lives and the economy, further federal assistance may indeed be necessary, especially as the southern and western parts of the country are now being hit hard by the pandemic.
Read more from Forbes
Judges including Russell Wilson, Sheryl Sandberg, Alex Rodriguez, Mellody Hobson, Ciara and Reid Hoffman (pictured from left to right) will help sort through nominations and select the super-achievers on their way to huge success. Forbes launches our next big franchise to spotlight and accelerate self-funded, self-driven overachievers, providing a platform for under-represented communities.
By Randall LaneForbes Staff
I am chief content officer and editor of Forbes, and post on business, philanthropy--and food!
From pandemic curves to unemployment spikes to protest march estimates, the spring and summer of 2020 has introduced us to all sorts of mind-bending statistics. The one that surprised me most, though, came last month via America’s most successful Black entrepreneur, Robert F. Smith of Vista Equity Partners: More than 90% of Black-owned businesses, he explained, are sole proprietorships. In many ways, these business owners are the most entrepreneurial entrepreneurs: completely self-funded, self-driven and self-reliant. Tired of waiting for others to help deliver prosperity, they have to take it and make it themselves.
For Forbes, which has helped define what success looks like in America for over a century, this cohort and others like it offer us an opportunity to expand the continuum of who we cover, laud and learn from. Today, we’re introducing our next big franchise, the Next 1000, a platform that will scour the country to find those entrepreneurs working harder and thinking smarter as they blaze new trails to success.
Different than our “counting” lists, such as Billionaires or Self-Made Women, which numerically chronicle those at the very top, or achievement lists like the Midas List or 30 Under 30, which reward immediate past results, the Next 1000 will seek and highlight doers on their way, overcoming any and all obstacles to get there. These types of journeys tend to prove the most inspiring and, in finding them, we hope to elevate a new class of super-achievers.
We’ve tried to democratize the process of making this list. Any entrepreneur in America can apply, or be nominated, as long as you’ve been in business at least a year (whether full-time, part-time or side hustle), and have less than $10 million in revenue and have raised no more than Series A funding (with extra points for the do-it-yourself heroes extolled by Robert F. Smith). We’re looking for people with compelling personal stories and business models, as well those having an impact on their community, industry and the world. The application process will run through October.
This criteria will produce a list that looks like America, providing a platform for under-represented communities. Besides the racial, ethnic and gender diversity that will naturally occur by focusing on bootstrappers, we’ve designed the Next 1000 for geographic representation, carving up the country into eight zones, each with their own nomination pools, since amazing nascent entrepreneurs exist in every state, not just the coasts.
It’s a big task. Luckily, we have an incredible team helping us sort through the nominations. The Next 1000 judging panel includes billionaire tech pioneers like LinkedIn cofounder Reid Hoffman and Facebook COO Sheryl Sandberg; investment ceiling-breakers like Ariel Investments co-CEO Mellody Hobson and Cowboy Ventures founder Aileen Lee; sports superstars turned entrepreneurial heavyweights like Alex Rodriguez and Russell Wilson; world-class mentors like National Geographic Society Chairman Jean Case and Morgan Stanley Vice Chairman Carla Harris; and self-starters like restaurateur Ayesha Curry, comedian Lilly Singh and Grammy Award-winning singer Ciara, who all understand how to translate influence into business — middlemen not required. Overseeing it all, we have one of own superstars, Maneet Ahuja, our senior editor for Small Business.
The past few months have underscored the hurdles faced by so many in America. With the Next 1000, we look forward to celebrating and accelerating those who haven’t let anything stop them from creating their own American Dream.
Read more from Forbes
Of all the things business leaders have learned during the COVID-19 pandemic, the most important aspect of leadership is communication. Through open and honest communication with staff, managers and leadership, your business will fare far better than if you fail to communicate effectively with your team.
By Jeff Bevis Contributor
During a major crisis, your staff will be worried, anxious, concerned and scared. Will they have a job? Will they have to work from home? Will they get sick? These are all concerns that people have and your job as a leader is to communicate exactly how you will support them and exactly what your business is doing to achieve that. They will also benefit from your honest assessment of the future of the business and how you are addressing its survivability. Clarify every step your business is undertaking, and provide information every day if necessary.
Left without direct leadership communication, staff could misunderstand what is going on, leading to further stress and anxiety. If they feel unsupported and adrift, your employees will be less likely to support you, and that can be a potential business disaster.
As a business leader, it’s up to you to set the tone for the communications with your staff and management. Calm, firm and consistent communications will show your commitment to both your staff and your leadership. Here are three leadership keys to help support your team during a crisis.
Establish regular communication networks
During a crisis, communication is everything. It’s easy for misinformation to spread without direct communication channels with all employees. In a larger business, try working with smaller groups or by department. Encourage employees to ask questions and express their concerns, needs, uncertainties and family or work pressures. Maybe they are unfamiliar with new work procedures, such as working from home, or worried about learning new processes. Express your flexibility and willingness to adapt, it will be appreciated.
Lean on company leadership
You can’t do it all, so have a clear conversation with your leadership that encourages them to step up and rise to the challenges facing the organization during a crisis. Use your leadership team as an extension of you, and let them know you expect them to take on a role as a main means of communicating the company’s crisis plans and status with employees. The team approach assures every employee feels part of the organization’s future.
Show employees you care
Most employees want to feel valued by their bosses. It’s often more important to an employee than wages. So, during a crisis it’s even more crucial to let employees know you care about their well-being. Let them know your business wants them to feel safe and secure, and that their health is the number one concern.
Your employees want the business succeed too, so share with them your recovery plan and the steps you are taking to recover and thrive, not just survive. Being informed will help your employees feel they are part of the success.
Read more from Forbes
As unemployment benefits are set to decrease, the Treasury dangles a second round of no-strings-attached payments to most Americans.
Digital Content Director
Last updated on July 28 at 10 a.m. EST.
It took a couple months and a few tweaks in the delivery system, but by June, most eligible Americans had received a one-time stimulus check from the Treasury Department of up to $1,200 to spend or save as they wished. What the current presidential administration didn't count on — despite weeks of warnings from public-health experts — was that a summer surge of coronavirus cases across the country would lead to renewed shutdowns in the lifestyle and hospitality sectors and overwhelming need for another round of relief.
So as $600-per-week in additional unemployment benefits expire on July 31 and the Paycheck Protection Program continues to come under scrutiny for failing to serve its stated purpose (i.e. bridging true small businesses through this time), Congress has set about finalizing a new $1 trillion sequel to its initial $2 trillion CARES Act. The details are being fine-tuned as we speak, but Treasury Secretary Steven Mnuchin — while insisting any extension of unemployment benefits will emphasize rewards for returning to work over payments that rival or exceed an average worker's wages — has pledged that another wave of no-strings-attached, one-time stimulus checks will make their way into millions of checking accounts. But when?
Related: Where's My Stimulus Check?
As of now, Mnuchin foresees the cash finding its way to folks' wallets very soon. As reported by AP, Mnuchin announced this past weekend, “We’ll get the majority of them out in August and those will help people." That is, of course, predicated on the latest CARES package passing smoothly and expeditiously prior to the Senate's upcoming August recess.
But given the precarious state of the economy and the inevitability of more modest unemployment payments, it behooves everyone to ensure their up-to-date tax filings are on record with the IRS. You can do so via this online tool, and we will keep you posted as more information is made available.
Update: After this article went to press, Senator Majority Leader Mitch McConnell (R-Kentucky) shared the outline of his party's proposed $1 trillion HEALS Act. A key piece of it is Senate Finance Committee Chairman Chuck Grassley's (R-Iowa) American Workers, Employees, and Families Assistance Act, confirming a second round of checks and direct deposits — up to $1,200 for individuals and $2,400 households, with an additional $500 per eligible dependent — to American households. We will continue to update this story as specifics on delivery of payments becomes available.
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If you're looking for financing, you'll find that data matters-- a lot. Here's what to watch for.
BY LEVI KING, CO-FOUNDER AND EXECUTIVE CHAIRMAN OF THE BOARD, NAV @KINGLEVI
Over the 20 years I've been in business, I've noticed only a fraction of business owners pay attention to their business credit profile, but it's a critical factor to keep watch over.
Although the credit bureaus take their mandate to provide accurate and timely business credit information seriously, mistakes happen. Your business credit profile, unlike your personal score, is publicly available. It doesn't require the same level of data individualization to report or access your credit history, and it's possible for similar business names and business addresses to get confused with each other.
For example, a business I purchased years ago had a credit history that was confused with another business that had a similar name and address. The other business' credit profile was in the toilet, and the confusion negatively impacted my business. This experience reinforced the need to regularly monitor my business credit to catch any possible mistake early to make sure the information being reported about my business was accurate and up to date. This is our responsibility as business owners.
That said, regularly-- at least monthly-- reviewing these three data points is a good idea.
Your Personal Credit
For most small business owners, your personal credit will likely be part of every business creditworthiness decision, so building and maintaining a good personal score is important. Some financial experts might suggest closing your personal credit accounts is a good practice, but I believe it's not good advice for a small business owner who needs to demonstrate a good personal credit history.
Many lenders use your personal score to determine if they'll even consider your business loan application. Most traditional lenders, like banks and credit unions for example, want to see a score over 700, although they sometimes go as low as 680. The SBA's minimum threshold is 660. There are lenders that will approve a loan if your score is lower than that, but you should expect a higher interest rate and more restrictive terms if approved. Because of this, you should be working to improve your score.
Your Accounts Receivable (AR) and Accounts Payable (AP)
Many business owners aren't very good at managing their AR and AP, meaning they don't have very good control of their cash flow. You're always going to be chasing past-due AR, so it's important to stay on top of it by looking at it every single day or as much as possible. If your past-due AR is running around 10 to 15 percent, you have a break-even business. Beyond that, you are losing money.
As for your AP, suppliers that offer you payment terms are the most underutilized form of credit the average small business has to manage his or her cash flow. And, if your suppliers report your good credit history to the appropriate business credit bureaus, it's one of the most powerful ways to build business credit.
Most of the time, all it takes is to ask for payment terms. If you already have them, you should ask for better terms. Your suppliers will likely accommodate you if you've been a good customer.
Your Balance Sheet
In addition to making sure all your assets and liabilities are listed correctly, it's also a best practice to ensure you're not using your personal credit for business purposes that aren't included on your balance sheet. This makes it difficult to tell if your business is really profitable or not--for both you and someone evaluating your loan application.
Having accurate and complete information will make it easier to make data-driven decisions about your business' creditworthiness. And, it will help you build a more profitable and thriving business.
Read more from INC.
Want to make sure your business can endure the current economic climate? Remember how businesses endured the last one.
ENTREPRENEUR LEADERSHIP NETWORK WRITER
Author and Franchise Coach
The economic impact of 2020 will be felt for a very long time. Businesses have closed en masse, gutting certain industries and leaving millions of Americans without jobs. More than 40 million people — over a quarter of the work force — have filed unemployment claims since March.
As we face these scary prospects and the long, unknown financial road ahead of us, many people reflect on the most recent major economic downturn, the Great Recession of more than a decade ago. Although the Recession officially spanned December 2007 to June 2009, it took several more years for employment and the economy to stabilize to previous levels. It marked the largest economic crisis of our lifetime.
Many people are familiar with the quote, “Those who cannot learn from history are doomed to repeat it." Regardless of what the future holds, it is important for us to look at the business successes and failures from the most recent financial crisis and learn from that challenging time. Here are five lessons we learned from the Recession that are still true in 2020:
1. Diversify your customer base.
One of the most common recommendations from financial planners to people managing the stock market is to have a diversified portfolio of investments. That is, to have a mix of investments in different areas and yields, which limits the potential for financial distress that comes from a single failed asset or risk. That is also true for businesses and their customer bases.
If a company has only one or two segments of customers, regardless of how successful it may be at the time, that can be a risky venture. It is best to have diversified income streams and establish multiple industries and types of customers that can be serviced. That way, the business will continue to exist if any of them go away.
2. Strengthen your operating systems.
One of the key factors for businesses that survived the recession is that they had a strong operating system. This is not just from the franchisor, but having franchisees who implement the system in an effective way. These are the people who understand how the numbers work and how to run the business in an efficient way.
This is why franchisees with strong operating systems survive downturns while weaker franchisees or mom-and-pop businesses often do not. It is not just about having the system in place, but people with a good knowledge of the system who can effectively implement it.
3. Cash is king.
It is fine to use debt to get into a business and it can be a common practice. However, it is important to preserve cash and reduce debt as soon as possible. Too much leverage in an economic downturn is a problem.
The people who were successful during the recession were those who were not overly leveraged. When a business owner makes money, one of the things they will want to do is to reduce their debt load as quickly and effectively as possible.
4. Always be prepared.
We don’t know many things about the future, but we can predict it will be different than the present. Those who went through the recession ten years ago and may be struggling now should find solace in knowing the situation will eventually improve. Meanwhile, some people who felt business couldn’t be better in 2006 may have been upended just a few years later. The key is never to get complacent and fail to think about the future.
Business owners should be prepared for what is coming next, even if they don’t know what that will be. To a certain extent, they need to be worried about it so they do not become comfortable where they are. Like a good chess player, they should anticipate a move a step or two ahead of time. It is important to have a contingency plan and be flexible in how to respond.
A great example of how to anticipate and react to change can be seen in the book Who Moved My Cheese by Spencer Johnson. The story follows the journey of four characters in search of their favorite food in a twisted maze. It is a metaphor about the ongoing search for what we want in life and the many changes we will face along the way. The main message is that change is inevitable and that we must learn to accept it, adapt to it and embrace it.
5. Seize the opportunity.
During difficult times, whether it was a decade ago or in the present day, I have seen people panic and think the sky is falling. This is often the mindset of the weaker players, and they ultimately don’t survive.
Contrast that to others who look at the situation as one of opportunity. This becomes a time of less competition and a greater chance to consolidate ownership in a marketplace. There are new advantages, such as cheaper real estate and more available employees that were not possible just six months ago. You will see larger, stronger franchisees buyout out the weaker ones and positioning themselves for greater success in the future.
Warren Buffett said, “Someone is sitting in the shade today because someone planted a tree a long time ago.” This is the time where people start planting trees. There are currently some available opportunities and over time those trees grow. They may not immediately enjoy the fruits of their labor, but at a certain point in the future, they will be sitting in the shade.
There are many valuable lessons we learned ten years ago. It is important to remember these examples as we move forward in the current situation.
Read more from Entrepreneur
Another 15,742 businesses listed on Yelp closed forever in just the past month
American states have been reopening their economies in the wake of the coronavirus pandemic, but tens of thousands of businesses are still closed — many of them for good.
As of July 10, 132,580 businesses listed on the Yelp YELP, +2.39% review site remain closed due to the coronavirus pandemic, according to its latest Economic Average report. The good news is, that’s a slight decrease from 140,000 closures last month, as phased reopenings in some places have allowed many businesses to operate again, even if in a limited capacity.
But while temporary closures have dropped, the number of businesses that have permanently shuttered is rising. Of all the business closures since March 1, 55% (or 72,842 businesses) will never reopen again, which is up from the 41% that Yelp reported in its Local Economic Impact Report just last month.
In other words, another 15,742 businesses listed on Yelp permanently closed between June 15 and July 10.
“Overall, permanent closures have steadily increased since the peak of the pandemic with minor spikes in March, followed by May and June,” the report reads.
Restaurants and retailers remain especially hard-hit. Restaurants listed on Yelp have suffered 26,160 total closures as of July 10, and 60% (15,770) have permanently closed — which is up 23% from June 15. And it’s been last call for more than four in 10 bars and nightlife spots (44%) listed on Yelp, that will also never reopen.
Some 26,119 shopping and retail businesses are also still closed, of which roughly half (or 12,454) are permanent — which is up 29% from what Yelp reported last month.
Beauty (4,897 permanent closures) and fitness (1,930 permanent closures) centers are also among the sectors struggling the most. It’s difficult for these establishments to incorporate the social distancing measures required to reopen in many places.
“When you look at those two top categories [retail and restaurants], we’re potentially never going to see some of these businesses again,” Justin Norman, Yelp’s vice president of data science, recently told the Wall Street Journal.
In May, the CEO of the OpenTable restaurant booking service warned that one in four eateries won’t be able to reopen following the coronavirus pandemic. Indeed, total reservations and walk-ins on OpenTable were down 95% on May 14 from that date the year before, and they were down 100% throughout the month of April compared to the same time last year. And the National Restaurant Association estimates that the total shortfall in restaurant and food service sales from March through May likely surprised $120 billion.
Read more:1 in 4 restaurants won’t reopen after the coronavirus pandemic, OpenTable CEO warns
Black-owned businesses have been more devastated by the pandemic than any other demographic group, according to the National Bureau of Economic Research. The number of Black small business owners plummeted from 1.1 million in February to 640,000 in April, or a 41% drop.
Watch:41% of Black small businesses have closed since the pandemic
But there’s one silver lining: Yelp reports that support for Black-owned businesses has skyrocketed on its site amid renewed activism for racial equality. In the months since George Floyd was killed while in Minneapolis police custody, there were more than 2.5 million Yelp searches for Black-owned businesses, compared to 35,000 during the same window last year — a 7,043% increase. Searches for Black-owned restaurants are up 2,508%. And Black-owned bookstores have seen a 1,437% year-over-year spike in interest, possibly driven by people looking to better educate themselves on anti-Black racism, police brutality and other social justice issues.
Some other bright spots in the Yelp report include professional services such as lawyers and accountants, which have seen fewer closures (840 and 294, respectively.) Health services, education businesses and online services like web design are also closing at slower rates.
It remains to be seen what economic recovery will look like, and which businesses will reopen and be able to remain open, as coronavirus cases continue to spike in southern and western states.
Related: MarketWatch’s coronavirus recovery tracker — these 6 data points should tell us when the economy is returning to normal
Los Angeles recorded the largest total number of closures with 11,342 business establishments shuttering on Yelp, but Las Vegas has had the highest number of closures relative to the number of businesses in the city at 861. These numbers have dipped slightly since last month, as more places have reopened, but they’re subject to shift as coronavirus cases continue to climb back up to April levels across the country. California is moving to shut down indoor operations at restaurants, bars, gyms and museums once again, for example. And New York, New Jersey and Connecticut, which managed to flatten their coronavirus curves, are now demanding that visitors from nearly two-thirds of the U.S. will now have to self-quarantine when entering their states.
The U.S. coronavirus death toll surpassed 1,000 for the first time in weeks on Tuesday, when there were more than 65,000 new cases recorded across the country — raising the number of confirmed cases to more than 3.8 million.
Read more of MarketWatch’s coronavirus coverage, including economic recovery, here.
This article was originally published on June 25, and has been updated with the latest Yelp data.
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