I'm trying to get in the habit of pointing to some of the best small business reading from around the Web. I don't promise to post it daily, but I hope to do it regularly. So for today, here are some late links to check out:
Simple is harder than complicated, but businesses like Chipotle and Nintendo are build on doing fewer things than the competition, writes Matt Linderman at Signal vs. Noise.
The big takeaway from Mary Mazzio's powerful new documentary, Ten9Eight, is clear: entrepreneurship skills training for at-risk teens will increase the odds they stay in school. Its title, Ten9Eight, refers to the statistic that U.S. high school students drop out at the rate of about one every nine seconds. The film tells the stories of 14 inner city teens competing in an annual business plan competition run by the Network for Teaching Entrepreneurship. (Be sure to catch my colleague Stacy Perman's profile of the nonprofit from a few years ago.)
Award-winning filmmaker Mazzio, who has written and directed several other documentaries focused on entrepreneurship, including Lemonade Stories and We Are BlackRock, got the idea for Ten9Eight after a conversation with NFTE's founder, Steve Mariotti, at a 2004 screening. After landing funding to make the documentary last year, the former Olympic rower and commercial real estate lawyer set to work chronicling the aspiring entrepreneurs with the goal of convincing their peers to stay in school.
Mazzio says she was most surprised by the velocity at which her subjects' communication skills improved as they made their way through the NFTE contest--and the sheer number of promising kids she met.
"For all the Rodneys and the Annés and the Jamals and the Jessicas that are actually in the film, there are hundreds of thousands of kids that are just like them in low-income communities. Most of America doesn't really realize that," she says.
While acknowledging business curriculum is not allowed in traditional high school settings, she hopes policymakers and educators will consider offering it after watching her documentary. "What this film is, is one tool in the anti-dropout toolkit. It's not a cure-all. It can't solve the crisis."
The film opens this Friday, Nov. 13 in AMC movie theaters in New York, Los Angeles, Washington DC, Boston, Chicago, Atlanta, Miami, and Kansas City. Free screenings are available for teachers and their students this Thursday, Nov. 12. You can watch the trailer now and catch Secretary of Education Arne Duncan's introduction to it below.
One of the biggest challenges for small retailers preparing for the holiday sales rush is anticipating demand and ordering inventory accordingly. Stores that don't order enough of hot items risk losing business if they sell out. Retailers that order too much could be forced to discount heavily to move the product late in the season or after the holidays. This balancing act is particularly tricky for products that can't be restocked on short notice.
As part of our ongoing look at how a handful of retailers are faring this holiday season, I asked the business owners we're following how they prepared their inventory for this holiday season.
Einmaleins, the European lifestyle and home products shop in Olympia, Wash., ran out of certain products late in the season last year. "We probably would have done at least 20% more if we had product in," the store's owner, Mathias Eichler, told me. He wants to avoid that this season -- but that means stretching finances to stock up before sales pick up. The business, just over two years old, is still trying to establish credit lines with suppliers and lenders that would allow it to comfortably expand inventory. Eichler writes:
As a still reasonably new store, I am trying to work with my suppliers to extend terms -- not always successfully.
We've placed some of our orders very bullishly in early April/May (imports from Europe) and [were] expecting a 40% increase over last year. Since then I don't know if I still can manage that, but the product is in, mostly paid for and we're hoping for the best.
I am in talks with a bank (it's late already) to get a line of credit to place my last holiday orders.
In the course of the last year, we've established our lines we carry better and are expecting an increase almost across the board. ... So, since we were cautious last year and sold out of many of our items we're trying not to make the same mistake. Since November started we've seen a bit of an uptick in sales compared to last year, which is great to see. People are already spending money. Small stuff, stocking stuffers etc. [Under] $10 items.
I'm hopeful, but money is very tight right now with many outstanding bills that will have to wait until December to be paid.
David Sasson of Overstock Art has a particular challenge. He carries 1,500 different paintings, and for best sellers he might stock 100 copies. His hand-painted replica artwork needs to be ordered from China six to 10 weeks in advance. That means that if he runs out of a painting between now and the end of December, he probably won't be able to get more until after the holidays. Here's Sasson's take on managing inventory:
We started increasing our order amounts in August. We are expecting this holiday season to be much stronger then last year and therefore, are ordering quite a bit more inventory. Our focus this year has been to fine tune our inventory process which means we are ordering in smaller batches. However, during this time a year there are paintings we do not want to be out of.
When it comes to ordering frames our lead time is similar to a standard retailer. Our lead times are between two days to two weeks depending on the vendor and shipping time. We are using a simple formula to predict demand in which we stock a two months' supply from the slower vendors and two weeks' supply from the closer vendors. During this time, and since we've seen a spike in demand in the last three months, we've been ordering three to four months' supply on some frames. Also, we are having problems with some frame suppliers who do not have enough inventory, so we might run out of our best selling frames.
Inventory is going to be particularly challenging this holiday season, because it's hard for the entire supply chain to predict what the ultimate consumer demand will be. Last year, since the truly scary period of the financial crisis didn't begin until September, a lot of suppliers and retailers had excess inventory by the time people started cutting back their spending. That resulted in deep discounts.
Now we're more than a year into a period of slackened consumer demand. Businesses cut production to adjust. If consumers decide to spend more than businesses anticipated, stores could find themselves selling out earlier than expected. As Sasson points out, this is already beginning to happen with some of his frame suppliers.
So an open question to retailers: How is your store managing inventory differently this year compared to last year? Let us know in comments below or on Twitter.
Most banks kept credit standards for commercial loans to small businesses (under $50 million in sales) the same over the last three months, while a handful further tightened credit, according to the latest quarterly survey of senior loan officers from the Fed. (PDF here.)
The last report in August seemed to show the credit crunch decelerating. Stabilizing might be a better word -- credit conditions are not really easing but they're not tightening at the rate they had been. Some details from the Fed below:
In the October survey, domestic banks indicated that they continued to tighten standards and terms over the past three months on all major types of loans to businesses and households. However, the net percentages of banks that tightened standards and terms for most loan categories continued to decline from the peaks reached late last year. ... A small net fraction of branches and agencies of foreign banks eased standards on [Commercial & Industrial] loans, whereas a significant net fraction continued to tighten standards on [Commercial Real Estate] loans. Demand for most major categories of loans at domestic banks reportedly continued to weaken, on balance, over the past three months. This weakening was somewhat less widespread than in the July survey for C&I loans, CRE loans, and nontraditional mortgages; approximately the same for consumer loans; and significantly more widespread for home equity lines of credit. ... Demand for C&I and CRE loans at foreign banks continued to weaken, on balance, but the weakening was somewhat less widespread than that in the July survey.
Advanta Corp., once one of the largest credit card lenders to small businesses, filed to reorganize under Chapter 11 bankruptcy protection Sunday night. The Spring House (Pa.) company's main operation that issued credit cards, Advanta Bank Corp, is not part of the filing. But Advanta said that unit doesn't have the capital required by regulators and may be taken over by the FDIC.
Advanta listed assets of $363 million and debts of $331 million, and said that over time it would not be able to meet its obligations.
Banking entities in distress are handled by their regulators, not in the bankruptcy courts, which is why Advanta Bank Corp. isn't part of the filing. Advanta said the bank subsidiary, which cut off all new lending in May, is currently collecting $2.7 billion in credit card receivables from 360,000 account holders. (Advanta's statement is here.) Advanta also said that the parent company deliberately allowed the Advanta Bank Corp. to fall below regulatory capital requirements to preserve the funds for the parent company's creditors. That means Advanta Bank Corp. -- which is the entity that 360,000 small business borrowers still owe money to -- is likely to be taken over by the FDIC or sold off to another bank shortly. Borrowers trying to renegotiate their payments with Advanta could be negotiating with a different bank in the near future.
Advanta became notorious among small business borrowers for offering credit cards at attractive low interest rates and then raising APRs steeply, often to over 30%. The company stopped all new credit card lending in May and entered into a settlement with the FDIC over the interest rate hikes, which the regulator said constituted unfair and deceptive practices. (Advanta didn't admit or deny liability in the settlement.) When settlement checks began arriving in September, the average settlement of $131 seemed laughable to many business owners who were still paying sky-high interest on thousands of dollars of charges they made under the initial low rates. At least one group filed a lawsuit seeking class action status. (An Advanta spokesman declined to comment about any pending litigation.)
Advanta isn't just in trouble with borrowers. Shareholders have seen Advanta stock drop from a high of over $30 in 2007 to pennies today. Jeff Blumenthal of the Philadelphia Business Journal has a good run down of the suits against Advanta, including a class action by common stockholders. From his story:
The complaint says Advanta concealed that its assets contained tens of millions of dollars worth of impaired credit-card receivables for which the company had not accrued losses; it had been extremely aggressive in granting credit to customers without verifying the customers’ ability to pay, to such a degree that by last summer, Advanta customers’ default rate would be almost six times worse than industry average; Advanta’s manipulation of its cash rewards program angered customers and caused it to lose good, creditworthy customers; Advanta’s credit receivables were unduly risky because of the company’s practice of issuing credit cards to small business owners without, in many instances, verifying income; and Advanta failed to properly account for its continuing delinquent customers and the credit trends in its portfolio, resulting ultimately in large charges to reflect impairments.
It's unclear whether Advanta will have anything left for plaintiffs to collect if these lawsuits go forward. The company filed for Chapter 11 reorganization, but if the FDIC takes over the banking subsidiary than most of Advanta's operations are gone. Chapter 11 may be a way of doing an "orderly liquidation" rather than a true reorganization.
One interesting note: If the FDIC takes over the bank subsidiary and has a claim against the Advanta parent company for failing to maintain minimum capital requirements, that claim gets priority over other unsecured creditors, according to Robert Lawless, bankruptcy law professor at University of Illinois and blogger at Credit Slips.
[Update: An earlier version of this post said that Advanta Bank Corp. fell below FDIC capital requirements. The capital requirements are actually set by banking regulators in Utah where Advanta Bank Corp. is chartered. It's also worth noting that as of June 30 about 2% of U.S. banks were considered undercapitalized, according to the FDIC. Regulators push banks into FDIC receivership based on different triggers, and in this case it's up to Utah authorities to determine if and when they will do so with Advanta Bank Corp.]
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After several months of twists and turns in an effort to avoid bankruptcy, on Sunday CIT Group put an end to its ongoing saga and indeed filed for a prepackaged...
What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. The writers and editors from the Small Business team, Amy Barrett, Amy S. Choi, Nick Leiber, Stacy Perman, Jeremy Quittner, John Tozzi, and Kimberly Weisul, discuss the news, trends, and ideas that matter to small business owners.
The big takeaway from Mary Mazzio's powerful new documentary, 
