Lauren Simonetti: David Sussman, the CEO of Valcor Worldwide – a small business consultant, joining us now. Great to see you again, David.
David Sussman: Hi Lauren. Thanks for having me back.
Lauren Simonetti: Yeah, it’s a little concerning the things that are going on. You hear good news that jobs report and then you get bad news. We’ll start off by talking about how small businesses are feeling out there. The latest report, not terrible, but the terrible part of the report is that looking forward, these small businesses aren’t that optimistic, are they?
David Sussman: Yeah, not so much. Small business is rated by the NFIB, the National Federation of Independent Businesses. They have something called the Small Business Optimistic Index and it’s been fairly low for a while. It went up about 1% for November and what we’re seeing is that there still is some significant concern for small business owners regarding the future.
Lauren Simonetti: Yeah, the level 92.5 and the outlook six-months out, pretty concerning. What are small businesses concerned about? Taxes? Healthcare? What is it? All of them?
David Sussman: Yeah, the number one issue is regulations. There’s just a tremendous amount of oversight now by Washington, the Fed, the different agencies in Washington that are overseeing, such as the EPA small businesses. Regulations is by far, the number one concern. Taxes, as well; poor sales is third and right behind that, obviously being an issue right now because of Obamacare, we see that the cost and availability of insurance for small business employers and what’s that gonna look like for the next year.
Lauren Simonetti: Those are so many big issues and we could spend an hour tackling each one. You speak of regulation, I think big business, big banks; I think of the (inaudible), arguably, not a good thing. In terms of small businesses, regulation obviously a problem, not understanding regulations or not knowing, how to prepare for whatever it is to come definitely a hurdle. As is, you know next week, we have the last Fed meeting of the year, as is this potential taper or that pull back of stimulus and then that eventual hike in interest rates. How does that affect everybody?
David Sussman: Well, it’s going to affect the consumer, which is going to affect small business. The fact of the matter is that if they are going to start tapering, that will eventually lead to higher interest rates. And we are a consumer based economy. 70% of the economy is based upon consumer spending and if costs you more to service your debt, you’re unlikely to purchase more – and that includes, mortgages for homes, commercial real estate, goods and products, services that you would fill your homes with, such as appliances, cars, whatever it may be. And if it’s more expensive, then people are going to spend less.
Lauren Simonetti: Yes, less discretionary spending because you are spending more to pay down your debt. Get it. You know, we’ve kind of seen the tightening of rates, a little bit this year, particularly, mortgage rates. How has that affected the housing industry?
David Sussman: Well, we are starting to see that the last three months are plateauing a little bit. I think there is two reasons for that, Lauren. Two reasons – #1 being that the interest rates have come up, ever so slightly, but #2, from what we’ve been reading about 50% of residential real estate, have been investors. So these are persons who are looking to buy portfolios of properties and homes and rent them out; and they’re now pulling back. If you’re losing 50% of the market and obviously you’re going to have a little bit of a slowdown and we’re starting to see that plateau. Certain areas around the United States, you’ve still got some pockets, where there are bubbles. Your bigger cities – New York, San Francisco, Los Angeles – for example, but it is starting to level out a little bit.
Lauren Simonetti: David, what do you want to hear from the White House right now? What would be the best Christmas gift that you could get under the tree?
David Sussman: Certainty. Yeah, what we’re hearing from our clients Lauren, is we have no clue what is going on with insurance, with what is expected of us. Every day the laws are changing; the rules are being changed. And so as a business owner, let’s say I’ve got 39 employees, 40, 45 employees, how much is it going to cost me next year to pay for the insurance for my employees. Am I going to be able to afford the insurance? I have no clue!
Lauren Simonetti: And are consumers still going to buy my products because of all of these things facing the regular, typical consumer?
David Sussman: Yeah, and again, going back to the NFIB survey, poor sales were the third highest concern, behind regulations and taxes. Wall Street has done fairly well, because the quantitative easing have been filtering money into the economy but the consumer is the one that spends. The consumer is the one that keeps the small businesses alive.
Lauren Simonetti: Yeah and it’s interesting that you say this because I thought Black Friday passed, but Walmart is saying today that they’re doing a new Black Friday, it starts this Friday, for more deals – goes to show you. I don’t know about Walmart’s inventory in particular, but I guarantee you that there are many retailers out there, big and small, who have so much inventory that they are just sitting on, because people aren’t buying anything, despite the fact that everything is 40, 50% off. I was reading some of your notes, David, and you said that the federal budget, we have a potential deal on our hands, you said that even though that’s a good thing, consumers wouldn’t spend a lot, even though we have a deal? And it is affecting Wall Street today. You would imagine that stocks would be up.
David Sussman: Yeah, I mean, the first thing that I did this morning was I took a look at the index, I was expecting some form of a reaction from the market. And I think people, especially Wall Street, have had kind of a meh, response. I mean, really? What they’re doing and it’s what they have been doing for years and years now, is kicking the can, down the road. You know, let’s not deal with the impending debt. Let’s not deal with the concerns regarding the unfunded liabilities of Medicare and social security. Let’s just kick the can down the road and let’s get passed the election. And this is all the politicians seem to care about – getting passed the next election. And whether it’s 2-14, 2016 it’ll be again 2018; and meanwhile, you’re 16 trillion in debt and you’ve got about 70 trillion in unfunded liabilities, nobody is talking about this! And so it’s purely political. And I blame both sides on this. And so the business owner, and again, my focus is dealing with small business owners, which I believe, are the backbone of the economy, they look at this and they look at Washington and they go, “Are these guys kidding?” Nobody is answering the number one question and that is the financial viability and reliability of the United States of America. What is going to happen to this economy if we keep going down this road?
Lauren Simonetti: David Sussman – we dealt with a lot of big issues in this short interview. Great job tackling that with us. I think we can break it down with small businesses want confidence and certainty for Christmas. Thank you so much Davis Sussman, the CEO of Valcor Worldwide.