Wednesday, March 30, 2011

Life Expectancy Hits All Time High


The good news is Baby Boomers can expect to live longer and healthier lives. The United States Center for Disease Prevention announced last week that life expectancy at birth rose to 78.2 in 2009, compared with 78.0 years in 2008. For men, the number hit 75.7 years while women can expect to live 80.6 years. The bad news is many Baby Boomers will have to rely on unemployment benefits or part time jobs to supplement dwindling cash flow from retirement funds, inheritance or Social Security benefits. Fortunately, Personal Business Advisors, LLC can offer Baby Boomers a solution to not only enjoy their golden years, but also supplement their retirement cash flow while creating jobs for other unemployed people across our nation.

Baby Boomers will live the longest of any generation before them in history. Just as a perspective, life expectancy when the Social Security Trust Fund was created was 58 for men and 62 for women. The longer lifespan is going to put a strain on the Social Security Trust Fund. Unfortunately for more and more Baby Boomers, living longer means needing income for a longer part of time. For most, that will mean part time jobs or, with the lack of jobs available across the country, collecting unemployment checks.

For entrepreneurial Baby Boomers, the solution to retirement cash flow won’t be as part time jobs or unemployment benefits. It will come by remaining active in life and the local business community by creating business opportunities. Personal Business Advisors, LLC can help connect Baby Boomers with opportunities such as starting a business, buying an existing business or even purchasing a distributorship to lower the unemployment rate in the nation by creating jobs for others.

Baby Boomers can expect to enjoy an active lifestyle in retirement. After working for years for another company, the opportunity now exists for Baby Boomers to unleash their passion in businesses that they now enjoy. Instead of part time jobs, launch a business. Don’t settle for unemployment when you can create jobs for others by buying and expanding a business. There are thousands of entrepreneurial opportunities all over the nation – from pet care facilities and quick serve restaurants to tax preparation firms or even mailbox stores. The opportunities are endless and firms such as Personal Business Advisors, LLC can help Baby Boomers create jobs by using their skills instead of simply working part time jobs or collecting 99 weeks of unemployment insurance.

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Monday, March 7, 2011

Cash-Flow Crisis Is Recession's Legacy for Small Biz

Companies reeling from stalled sales and tightened credit face formidable threats: customers paying more slowly and suppliers seeking to be paid more quickly

Custom cabinet seller M&J Kitchens survived the Great Recession even though its revenue from homeowners and builders dropped by more than half in 2009. Then, last August, with sales tracking 42 percent higher than a year earlier, owner Drew Davies shut the East Greenwich (R.I.) company after 26 years, unable to pay his bills. M&J was a casualty of a cash-flow crisis precipitated by his bank and trading partners who, Davies says, abandoned payment agreements that had been in place for decades.
More than a year into the official recovery, small businesses face what some say has become a permanent legacy of the recession: Their vendors are demanding faster payment even as their customers are taking longer to pay. Companies with the least bargaining power get squeezed the hardest. "The slowdown of currency, of money, the exchange, put us in a very precarious position," says Davies, 50. "We basically had panic from our vendors."
The problem that helped put Davies out of business is growing. The average time private companies took to collect accounts receivable increased to about 27 days in 2010 from about 23 days, the level it had been for the previous four years, according to data from accounting software maker Sageworks, which collects and analyzes financial statements from thousands of private companies. Likewise, average payment times jumped to about 24 days, up from 20 or 21. The largest corporations take even longer to pay. Companies in the S&P 500 paid vendors in 59 days on average in the most recent quarter and collected payments in 46 days, according to data compiled by Bloomberg.

Delinquent Dollars

Even as companies push for more time to pay their bills, more are falling behind the terms agreed on, data from credit bureau Experian show. In December, 14.3 percent of dollars owed were delinquent, vs. 12.5 percent at the start of 2010. The average time late payers took increased as well, to 6.5 days in December from 5.8 at the start of 2010.
In Davies' case, he had to float his own commercial customers—builders, architects, and home remodelers—who had slowed their payments, typically from 30 days to 60 or 90. At the same time, his own suppliers changed agreements that had been in place for decades by cutting credit lines or requiring deposits, which Davies says could tie up between $60,000 and $120,000 per month.
The late payments rippled through the supply chain. At Wood-Mode, one of the cabinet lines Davies sold, customers that normally pay in 30 days are taking closer to 60, and fewer are taking advantage of discounts for paying in 10 days, says credit manager Nick Yoder. In general, he says, the 1,100-employee Kreamer (Pa.) company has not changed terms and tries to be flexible with its 1,200 dealers, though in some cases Wood-Mode has begun asking for larger deposits or payment on delivery when buyers appear risky. "We have to reassess each individual's credit as different orders are placed with us, and we're reviewing how much we're going to give them as far as a credit line," Yoder says.
Changes in vendors' payment terms can have seismic effects on small businesses, particularly when bank credit is tight. Though Davies says he was current on his bank loans—an $800,000 commercial mortgage on his showroom and a $200,000 credit line—his lender called them in last March, saying he had violated a loan covenant that required a certain ratio of assets to liabilities. M&J Kitchens, which once employed 12 people and grossed $3 million to $4 million a year, went into receivership at the end of August. The business was one of 85,000 commercial bankruptcies in 2010, a figure up 30 percent from 2008, according to bankruptcy data provider AACER.

"New Normal"

Longer terms are part of the "new normal," says Joe Reini, founder of the 28-employee engineering services company Mason-Grey. "It seems to me that 'net 30' is gone," he says, referring to the practice of paying invoices in 30 days. "Customers are now asking for 45, 60, some are even asking for 90 or 120 days." About half the Atlanta company's customers, which include large industrial companies in pharmaceutical, energy, and metals production, have sought longer payment terms, Reini says.
Since 2009, he has been speeding up his cash flow by selling some of his invoices on The Receivables Exchange, an online marketplace where investors pay cash to buy unpaid invoices at a discount. Nic Perkin, co-founder of the New Orleans-based exchange, says larger companies stretching out their payments is a prime reason small businesses choose to sell their receivables. "The large corporations are in a position to drive terms. One of the terms they can drive is the payment cycle of their supply chain," he says.
The longer payment periods clog the pipes of commerce. Mike Mitternight, president of Factory Service Agency in Metarie, La., says about one-third of his revenue "is tied up in longer-than-normal terms." The nine-employee commercial air-conditioning contractor, with sales of $1.5 million to $2.5 million, installs and maintains AC systems in such places as churches, schools, and retailers. "The big chains are holding on to their money longer," he says.
The shift, which he says affects at least 40 percent of his accounts, means he can only buy from certain manufacturers "who will allow a little extra float." Mitternight avoids other suppliers that demand payment in 30 days when he knows his customers won't pay that quickly. Accounts receivable ballooning on his balance sheet makes Factory Service Agency look weaker on paper to potential lenders and insurers who provide the bonding needed for government contracts. "It's hard to expand and grow your business," he says.
Davies, of M&J Kitchens, says his vendors unintentionally helped cause the thing they were trying to prevent: By tightening their credit terms to reduce the risk of him not paying, they pushed him into receivership. "Without the cash flow we were used to and without the terms we were used to, we didn't have great negotiating power with the bank," he says. "We were getting squeezed from both sides."

By John Tozzi

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How the middle class became the underclass

The average American's income has not changed much, while the richest 5% of Americans have seen their earnings surge.
 
NEW YORK (CNNMoney) -- Are you better off than your parents?

Probably not if you're in the middle class.

I
ncomes for 90% of Americans have been stuck in neutral, and it's not just because of the Great Recession. Middle-class incomes have been stagnant for at least a generation, while the wealthiest tier has surged ahead at lighting speed.

In 1988, the income of an average American taxpayer was $33,400, adjusted for inflation. Fast forward 20 years, and not much had changed: The average income was still just $33,000 in 2008, according to IRS data.

Meanwhile, the richest 1% of Americans -- those making $380,000 or more -- have seen their incomes grow 33% over the last 20 years, leaving average Americans in the dust.

Experts point to some of the usual suspects -- like technology and globalization -- to explain the widening gap between the haves and have-nots.

But there's more to the story.

A real drag on the middle class
One major pull on the working man was the decline of unions and other labor protections, said Bill Rodgers, a former chief economist for the Labor Department, now a professor at Rutgers University.

Because of deals struck through collective bargaining, union workers have traditionally earned 15% to 20% more than their non-union counterparts, Rodgers said.

But union membership has declined rapidly over the past 30 years. In 1983, union workers made up about 20% of the workforce. In 2010, they represented less than 12%.

"The erosion of collective bargaining is a key factor to explain why low-wage workers and middle income workers have seen their wages not stay up with inflation," Rodgers said.

Without collective bargaining pushing up wages, especially for blue-collar work -- average incomes have stagnated.

I
nternational competition is another factor. While globalization has lifted millions out of poverty in developing nations, it hasn't exactly been a win for middle class workers in the U.S.

Factory workers have seen many of their jobs shipped to other countries where labor is cheaper, putting more downward pressure on American wages.

"As we became more connected to China, that poses the question of whether our wages are being set in Beijing," Rodgers said.

Finding it harder to compete with cheaper manufacturing costs abroad, the U.S. has emerged as primarily a services-producing economy. That trend has created a cultural shift in the job skills American employers are looking for.

Whereas 50 years earlier, there were plenty of blue collar opportunities for workers who had only high school diploma, now employers seek "soft skills" that are typically honed in college, Rodgers said
.

A boon for the rich
While average folks were losing ground in the economy, the wealthiest were capitalizing on some of those same factors, and driving an even bigger wedge between themselves and the rest of America.

For example, though globalization has been a drag on labor, it's been a major win for corporations who've used new global channels to reduce costs and boost profits. In addition, new markets around the world have created even greater demand for their products.

"With a global economy, people who have extraordinary skills... whether they be in financial services, technology, entertainment or media, have a bigger place to play and be rewarded from," said Alan Johnson, a Wall Street compensation consultant.

As a result, the disparity between the wages for college educated workers versus high school grads has widened significantly since the 1980s.

In 1980, workers with a high school diploma earned about 71% of what college-educated workers made. In 2010, that number fell to 55%.

Another driver of the rich: The stock market.

The S&P 500 has gained more than 1,300% since 1970. While that's helped the American economy grow, the benefits have been disproportionately reaped by the wealthy.

And public policy of the past few decades has only encouraged t
he trend.

The 1980s was a period of anti-regulation, presided over by President Reagan, who loosened rules governing banks and thrifts.

A major game changer came during the Clinton era, when barriers between commercial and investment banks, enacted during the post-Depression era, were removed.

In 2000, the Commodity Futures Modernization Act also weakened the government's oversight of complex securities, allowing financial innovations to take off, creating unprecedented amounts of wealth both for the overall economy, and for those directly involved in the financial sector.

Tax cuts enacted during the Bush administration and extended under Obama were also a major windfall for the nation's richest.

And as then-Federal Reserve chairman Alan Greenspan brought interest rates down to new lows during the decade, the housing market experienced explosive growth.

"We were all drinking the Kool-aid, Greenspan was tending bar, Bernanke and the academic establishment were supplying the liquor," Deutsche Bank managing director Ajay Kapur wrote in a research report in 2009.

But the story didn't end well. Eventually, it all came crashing down, resulting in the worst economic slump since the Great Depression.

With the unemployment rate still excessively high and the real estate market showing few signs of rebounding, the American middle class is still reeling from the effects of the Great Recession.

Meanwhile, as corporate profits come roaring back and the stock market charges ahead, the wealthiest people continue to eclipse their middle-class counterparts.

"I think it's a terrible dilemma, because what we're obviously heading toward is some kind of class warfare
," Johnson said. 

By Annalyn Censky 


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