To Small-Businesses, It's Economic Data Overload
Every Sunday morning this summer, I played softball with my men's over-40 team. We were horrible. And from this I learned a few things.
I learned that it's possible to pull a hamstring catching a pop-up. I learned that men my age should always wear a shirt when playing (or in some cases, a bra). I learned that it's possible to strike out, even in slow-pitch softball. I learned never to slide into second base, never to assume that our third baseman (who wears glasses, black socks, and street shoes) could catch a ball thrown to him, and never to argue a call when your opponent is a lawyer.
And I played with a lot of lawyers. And doctors. And plenty of business owners, too. Smart guys. Overweight, balding, and just a wee bit uber-competitive. But very smart. Or so I thought. As the summer wore on, I started to realize a secret about these so-called educated and experienced men I played with: Not enough of them wore deodorant. Oh, and when it comes to the economy? Clueless!
"So, how's business?" I often heard. "You guys picking up?" was another common question. "Think things will turn around soon?" was another.
You'd think with all the data at our disposal during this "information age" that these guys would have a better handle on what's in store for their businesses. But the problem is that we, as business owners, are inundated with so many facts, figures, statistics, and analysis about the economy we don't know what to believe. There's too much of it—and most of it is irrelevant to our businesses.
who's the consumer conference board?
Take the Consumer Confidence Index. On last Tuesday of every month, this statistic is announced, and it always gets headlines. Is it up? Is it down? Who cares? It's irrelevant to my day-to-day decision-making. The index is calculated by the Consumer Confidence Board. Who? The numbers come from a survey of 5,000 consumers. You know—the people sitting at home during the day watching Dr. Phil. I've never gotten any of these calls. And if I did, one of my teenage sons would've grabbed the phone from me and made farting noises at the telemarketer.
Then there's the stock market. Sure, the tubby guy next to me playing second base gets upset when the market drops. But it's not affecting how he's running his hardware store. He's not going to lay people off or stop carrying a product line just because the Dow lost 100 points. And if he is, he's got much deeper problems other than the fact that he can't bend down far enough to pick up the ground ball that just went through his legs.
Small-business owners don't really care about the unemployment rate, either. Whether the rate's at 9% or 29%, it's not changing the fact that the owner of that dental-lab supply business still looks like an idiot wearing batting gloves during a slow-pitch softball game. I'm sure he feels bad for people who have lost their jobs. Then again, the unemployed carpenter waiting on deck is sniggering at him every time he steps out of the batter's box to adjust those stupid gloves between pitches. More unemployed workers may provide us with more potential people to hire, but the number of jobless claims reported each week has no impact at all on the way we're running our businesses.
Then there's statistics like the gross domestic product and the trade deficit. Who cares? GDP is down, we're told. Like we didn't figure that out already? The trade deficit is up. Like that's impacting the grey-haired architect who's huffing and puffing toward second base even though his fly ball was called foul by about a 100 feet 30 seconds earlier. As soon as the paramedics give him oxygen, he'll be back in the office on Monday hustling for business—trade deficit or no trade deficit. It doesn't matter to him.
interest rates and commodities costs matter
These macroeconomic statistics reported by the media are irrelevant to the small-business owner. Meaningless. At best they give us a sense of the psychological mood of our customers.
At worst they serve to needlessly scare the hell out of people who otherwise would be buying our products.
That doesn't mean all economic statistics the media report are without value. Some are actually useful to a business owner—such as interest and inflation. It goes without saying that many of the guys in my league suffer from abdominal inflation brought on by too high an interest in the lox and bagels served after our softball games. But I'm not talking about that. I'm talking about how a change in interest rates can cause higher or lower debt-service costs and make financing easier or harder to attain. And an uptick in the Consumer Price Index or Producer Price Index can quickly translate into higher production and operating costs. These are figures smart business owners keep a wary eye on.
The price of commodities affects us directly, too. Copper and steel are part of just about everything that's produced. Their loss in value over the past year has been a big reason why inflation has been kept under wraps. But rising economic activity will put pressure on how much these materials cost, and these costs will affect our profits. The price of oil has the same impact, and not just on small businesses. An extra 10 bucks a barrel could cause my softball team's dues to skyrocket, what with the added expenditures on Icy Hot and Ben Gay.
In addition to the above data, smart business owners I know also keep their own statistics. These are numbers directly related to their businesses. For example, I'm told that the quiet guy in left field does something in the "import/export trade" and needs to pay close attention to the dollar's exchange rate with the Iranian rial. Whatever—he's one of the few good hitters we have. And our pitcher, who pitches only because his two knee surgeries make it the only position he can play, keeps a very close eye on shipping indexes because his company relies heavily on transporters to get its products to customers. That makes sense, too.
Well, the season's over. We went 3-15. We beat a group from Our Mother of Mercy Retirement home, and two middle-school girls' teams. But hey…a win's a win. The reason why is irrelevant. Almost as irrelevant as some of the economic data that's constantly thrown in our faces.