Wayne R. Lorgus, B2B CFO®
Providing B2B CFO® services in Philadelphia, PA and surrounding areas

Reuters today reported “at a time when its future is being threatened by falling sales and a loss of market share, Nokia’s patents have emerged as the struggling company’s most valuable and stable assets… The reasons for the more aggressive stance are not hard to find. Sales of Nokia’s new Lumia phones have not compensated for diving sales of legacy products as the group loses out to smartphone offerings from the likes of Apple Inc, and analysts have said its cash reserves of 4.9 billion euros are likely to dwindle. Both Standard & Poor’s and Fitch Ratings have recently cut their credit ratings on Nokia to “junk” status.”

While the focus of the story is on Nokia’s attempts to extract royalties from companies they allege are infringing on their patents, what I found fascinating was how quickly Nokia’s fortunes have reversed. When Nokia launched its Nokia 1100 handset in 2003, with over 200 million units shipped, it was the best-selling mobile phone of all time and the world’s top-selling consumer electronics product. In May 2007, Nokia released its first touch screen phone, the Nokia 7710, which was also a huge success. In November 2007, Nokia announced and released the Nokia N82, its first mobile phone with Xenon flash. In 2008, Nokia released the Nokia E71 to directly compete with the BlackBerry-type devices by offering a full “qwerty” keyboard and cheaper prices.

But Nokia’s early success in mobile telephones quickly faded. In May 2008, Nokia no longer wanted to be seen as the telephone company and announced at their annual stockholder meeting that they wanted to shift the company to the Internet business. In November 2008, Nokia announced it was ceasing mobile phone distribution in Japan. By 2012, Reuters reported, “Desperate for cash to tide it over until sales ramp up of new products, Nokia is stepping up its quest for royalties from rivals using its designs as the basis of their technology.”

The recent bankruptcy of Eastman Kodak underscores the point. Every company founded on innovation has to keep up with what its customers want. While it took much longer for Kodak’s core business of film to evaporate, faster cycles of innovation can imperil any company, even one like Nokia, the world’s second-largest vendor of mobile phones, with its 130,000 employees across 120 countries, sales in more than 150 countries and annual revenues of €38 billion.

B2B CFO® partners work with the owners and entrepreneurs to take their companies to a higher level of success with our proven six-step process, the GamePlan™.

A story on Bloomberg today illustrates the problems when a divided Congress tries to set policy. The U.S. Postal Service, mandated by Congress to both deliver mail to every address in the United States and its territories and (since 1971) to be a self-funding public entity is now facing annual losses of $18.2 billion by 2015. The Service has developed a five-year plan to restore itself to profitability by ending Saturday mail, delivery, close underutilized facilities, reduce employment, restructure its health plan, raise postal rates and enter new lines of business.

As Bloomberg notes, “Each element of the plan has an opponent. Postal worker unions are fighting the closings and job cuts. Direct-mail advertisers and magazine publishers demand Saturday delivery and low rates. Rural constituents — for whom the post office is their strongest link to the rest of the world — and their representatives in Congress protest post office closings.”

The predictable result is that Congress will block the reforms necessary to cut costs to match revenue. The Senate passed a bill 62-37 last month that would block the Postal Service from ending Saturday mail delivery for at least two years. The service has estimated $2.7 billion a year would be saved by that cut. The Postal Service also drafted its own medical plan to bring health care costs, which consume 20 cents of every revenue dollar, under control. The Senate measure didn’t grant a new health plan and would make it more difficult for the service to close facilities soon enough to staunch its financial crisis. The bill’s passage capped more than five months of debate about how to prevent closings of as many as 3,700 post offices the Postal Service has deemed inefficient or redundant.

Like many other policy debates, when Congress makes choices to protect one group or another, it shuts off options and makes the ultimate adjustments that much more painful.

The biggest problem with government regulation and laws in the economic sphere is that they freeze existing conditions and stifle innovation. Yet, if the experiences of the last 4 years of government “stimulus” spending have shown anything, it is that government employees are not good at picking winners and losers in technology or creating jobs. It is only through rewarding those who are willing to take the risks of creating new enterprises, new goods or services, by spotting opportunities and risking their own money who will create the jobs and growth that lead to prosperity.

B2B CFO® partners work with owners and entrepreneurs to take their companies to a higher level of success with our proven six-step process, the GamePlan™.

The Social Security Administration announced on Wednesday that the 55 million Americans who receive Social Security benefits and the 8 million who receive SSI Disability benefits will see a 3.6% increase in their benefit checks in January 2012. This is the first cost-of-living adjustment for Social Security recipients since 2009. The average benefit check will increase by $43.

While this might be good news for the recipients, the bad news is that inflation, quiescent for the past two years, has reawakened. In 2011, the increase in the Consumer Price Index for Urban Wage Earners went up 3.6%. The Federal Reserve Board of Governors is divided on whether to ease monetary policy further to stimulate the economy or hold off further easing in the face of rising inflation expectations. The Wall Street Journal reports that Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, said the central bank has been inconsistent. Inflation picked up this year while unemployment has come down, he noted in a speech in Minneapolis. That calls for less Fed money-pumping, not more.

Recent easing moves by the Fed, he said, are “thus inconsistent with the evolution of the economy in 2011.” The inconsistency, he added, suggests the Fed has become more tolerant of inflation, weakens its credibility and “could give rise to a damaging increase in inflationary expectations.”

The other bad news from the announcement of higher Social Security benefits is that the Social Security wage base will increase in 2012 to $110,100 from $106,800 in 2011. The Social Security Administration estimates that 10 million of the 161 million Americans who pay Social Security taxes will be affected by this increase. For employers of these workers, this will mean an additional $204.60 in tax per year.

For business owners concerned about the possibility of rising inflation, the following steps should be considered:

1. Meet with key suppliers to lock in prices for 2012.
2. Begin to set expectations for price increases with key customers.
3. Consider setting a 3% target for salary increases for nonunion employees in 2012.

The picture is becoming clearer: business activity in Philadelphia is looking up. First we had the Federal Reserve in Philadelphia publish its December 2010 Regional Economic News which showed that unemployment in Philadelphia is below the national average, and that job growth in Philadelphia, while not robust, has been up 1.2% over the past year. Then, in January, in The Beige Book, the Fed reported that business activity in the Philadelphia region continued to improve: “Manufacturers, on balance, reported increases in shipments and new orders in December. Retailers achieved moderate year-over-year increases in sales during the holiday shopping period. Motor vehicle dealers also posted year-to-year sales increases as 2010 came to a close.”

That was followed by corroboration in the January Business Outlook Survey which reported, “All of the broad indicators remained positive this month and there was an apparent pickup in new orders and employment. Increases in input prices continue to be widespread this month, and more firms reported increases in prices for their manufactured goods. The survey’s broad indicators of future activity suggest that firms expect a continued expansion in activity over the next six months.” In the survey, 35% of firms reported plans to increase capital expenditures over the next 6 months.

The Greater Philadelphia Chamber of Commerce, in their 2011 Economic Survey reported in January that more than twice as many firms in their survey were reporting positive activity in the region and for their company than were reporting declines.

Just last week, in its State Leading Indexes, the Fed reported “Pennsylvania’s leading index for December suggests expansion in the state’s economy through the second quarter of 2011.”

For incisive observers of local business activity, this comes as no surprise. Eric Keiles, Chief Marketing Officer at Square2 Marketing, a Philadelphia advertising agency who provides advertising and marketing solutions for small and medium size business in Pennsylvania, last August predicted that “for the next 12-18 months, business should be good for smaller businesses that survived the recession. These businesses are going to do well, because their weaker competitors are gone.” Eric’s part-time CFO recently echoed this observation, reporting that all of the companies with which he works are doing better in 2010 going into 2011 than a year ago.

For those businesses that want to take advantage of the opportunity this recovery presents, this is a great time to talk to a B2B CFO® partner. Apart-time CFO can offer smaller businesses the advice and insight they need to grow profitably and improve their cash flow, at a cost they can afford.

The Labor Department reported on August 18 that businesses with fewer than 50 employees accounted fo 61.8% of all jobs eliminated in the fourth quarter of 2009. At the same time, smaller companies created 54.1% of all new jobs in the fourth quarter. Small companies employ roughly 29% of all workers in the U.S.

While the reasons are complex, most economists point to reduced access to credit and the imminence of tax increases and higher costs from the Patient Protection and Affordable Care Act (better known as ObamaCare) and the expiration of the tax cuts of 2001 and 2003. Estimates of the effect of the increase in the top marginal income tax rates from the latter anticipate higher taxes on 54% of Subchapter S smaller companies, 33% of sole proprietorships, and half of all smaller business income.

It’s not hard to foresee that higher taxes and a hostile attitude toward private businesses are unlikely to encourage businesses at the margin to invest and hire more workers.

So what can an entrpreneur do? A B2B CFO® can help you analyze the sensitivity of your business to increases in costs and develop a contingency plan to protect your bottom line. Maintaining your financial position will preserve your access to credit when the economy again begins to improve.

B2B CFO NAMED IN PRESTIGIOUS INC. 5000 LIST
184% Growth Earns B2B CFO Spot in the 2010 List of Fastest Growing Companies in America

Phoenix, Ariz. August 24, 2010 — B2B CFO, nation’s largest provider of CFO services to small businesses, has been named to the prestigious Inc. 5000 list of fastest growing companies in America.

Now in its 29th year, Inc. Magazine’s annual ranking judges US-based and privately held companies by their revenue growth. This year’s list was ranked on the percentage in revenue increase from 2006-2009. B2B CFO’s growth earned 84th place in its industry.

“There are approximately 27 million small businesses in the U.S. today,” said Jerry L. Mills, founder and chief executive officer of B2B CFO, “It is a huge honor to be among the fastest growing and the most successful businesses in the country. Our firm has experienced tremendous growth over the past few years and we are on track to continue expanding. I am especially grateful to all of the firm’s dedicated Partners who continue to advocate our services around the nation.”

In a personalized letter congratulating B2B CFO on this accomplishment, Jane Berenston, editor-in-chief of Inc. Magazine’s wrote “Congratulations: your company, B2B CFO, has made the 2010 list of the fastest growing private companies in America. This achievement puts you in rarefied company, especially if you consider that over 27 million businesses are registered in the USA. The elite group you’ve now joined has, over the years, included companies such as Microsoft, Timberland, Visa, Intuit, Jamba Juice, Oracle, and Zappos.com. I look forward to congratulating you in person in Washington, D.C.”

B2B CFO’s growth is reflected in numerous awards this year. The company was also recently named in ACE Corporate Growth Awards, which recognized the most successful and fastest growing companies in Arizona.
In August 2010, B2B CFO has grown to 170 Partners across 39 states, representing 5,000 years of cumulative experience. Each Partner is a seasoned financial executive who serves as CFO to growing businesses on as-needed basis. Approximately 80% of the Partners have a background that includes senior executive positions at the Big Four, and all of the Partners have held high level executive finance positions in various industries in corporate America. Together, B2B CFO Partners work with more than 500 businesses in the nation with combined annual sales of more than $3 Billion.

Jerry L. Mills and many of the B2B CFO Partners regularly dedicate time to educate business owners on financial matters. Mills is a frequent speaker and contributor and has been featured on many national media networks including FOX Business, Fortune Small Business, Smart Money and many others. Mills is also the author of The Danger Zone – Lost in the Growth Transition, and Avoiding The Danger Zone – Business Illusions, both business non-fiction books that help entrepreneurs understand and build a strong financial strategy.

“We look forward to participating in the Inc. 500|5000 conference in Washington, DC this fall,” added Mills. “Along with my colleagues, I look forward to the October 2nd awards ceremony and to meeting the entrepreneurs that created the other 5000 fastest growing companies in America.”

About Inc. Magazine

Founded in 1979 and acquired in 2005 by Mansueto Ventures LLC, Inc. is the only major business magazine dedicated exclusively to owners and managers of growing private companies that delivers real solutions for todays innovative company builders. Inc. provides hands-on tools and market-tested strategies for managing people, finances, sales, marketing, and technology.

Inc. Magazine’s 29th annual Inc. 5000 ranking of the fastest-growing private companies in the country is available online at www.inc.com/inc5000/list

ABOUT B2B CFO
Headquartered in Phoenix, Ariz., the firm was founded in 1987 by Jerry L. Mills. B2B CFO is the nation’s largest CFO firm serving entrepreneurial, growth and mid-market companies with revenue under $75 million. The firm’s partners have an average of 25 years of experience and each individual partner is a senior level executive with a broad range of expertise. Please visit online at www.b2bcfo.com