Thursday, 4 August 2011

09:31 – I read an interesting article the other day on CNN or FoxNews about small business owners pawning their Rolexes to meet payroll, and a second article about lending being extremely tight even for those with top-notch credit ratings. Interest rates are very low, which means nothing if no bank will lend you money.

Fortunately, I don’t want to borrow money. In fact, the last thing I want is to borrow money. That may seem odd for someone who’s just starting a small business, but in my experience the two biggest causes of small business failures are borrowing money and hiring employees. When Barbara and I talked about this new business, I told her that I intended to fund it out-of-pocket and that I would not hire our first employee until Barbara and I were run ragged and also had some assurance that the hectic pace was not merely a seasonal bump in sales. And, even then, I’d almost certainly contract work out or, as a last resort, hire a temp/part-time employee.

The problem with borrowing money or hiring employees is that you give up control by doing so. As long as we avoid either, we don’t have to worry about making a loan payment or meeting payroll, which is the way I want it. Now, if only the US government would be equally careful with our money.


Inventory of the chemistry kits is getting perilously low, so Barbara is taking the day off from work tomorrow to help me build more. We have enough components to build another dozen or so kits, and all but one of the components needed to build 50 or so more beyond that first dozen. The problem is, that one component is back-ordered for about the next three weeks. So we’re going to build all of the kits, but missing that one component. That way, we can just drop in that one component when it finally arrives and have kits ready to ship.

I’m also preparing purchase orders that I can drop on a moment’s notice if kit sales pick up quickly as the new school year approaches. Making up all the chemical solutions for any arbitrary number of kits is a couple days’ work, whether I make up enough for 50 kits or 500. The really time-consuming steps are filling and labeling the containers, assembling and packaging the chemical blocks, making up the small-parts bags, and assembling the kits themselves. For 50 kits, that’s maybe three days’ work for Barbara and me working together.


The media, including most of the financial media, is putting as favorable a spin as possible on today’s Spanish bond auction, although of course the yields remain disastrously high. That WSJ article does mention one significant factor that’s being generally ignored in news reports: a large and increasing percentage of Spanish bond sales are being made to Spaniards. The latest figures the WSJ quotes are for the end of last year. I suspect the percentage of Spanish bonds being bought by non-Spaniards is much lower now. And what few of the reports mention is that Spain has to sell another €38 billion in bonds–more than ten times as much as they sold today–between now and the end of the year. Good luck selling €38 billion worth of bonds into the Spanish economy, which is already nearly saturated.