Batten Down the Hatches, a Slowdown is Coming

David Leonhardt at the NY Times is correct about the sorry state of our economy, further bolstered by today's learned comment:

“Six straight months of job losses are the strongest evidence yet that the economy has slipped into a recession of uncertain depth and duration,” said Peter Morici, an economist at the University of Maryland School of Business.

In Leonhardt's article he rates the chances of a recession at 75%. I would tend to agree.

Leonhardt further addresses the fact that we have deeper problems going forward, the toughest one is that we are not creating enough good new jobs. It's a relative lack of innovation caused by our poor recent performance in education. As I have argued in the past, we need to keep all of the college educated folks we can, including the foreign ones, in order to create enough good jobs here. Let's see if this is something the new President will address, as "No Child Left Behind" has not been the answer.

Educated Professions Make the Most Profitable Businesses

It should come as no surprise that the most profitable small businesses include professional services firms including Accountants, Dentists, and Legal services. So says Maureen Farrell @ Forbes.com in a January 18 article entitled "The Most and Least Profitable Businesses to Start" (look for the article at lower left). Also high on the profitability list, Specialized Health services, Industrial and Graphic designers, and Insurance Brokers. These high performers were drawn from a list of 100,000 private business, most with less than $10 million of revenue per year. The pre-tax profit margins within this group ranged from a high of 25% to a low of 13%.

The worst performing businesses included commodity providers like bakeries, beverage manufacturers, and hotels. Their margins ranged from a low of -7.2% to 0.12%.

Economies of scale do come into play, that is covering overhead becomes easier once revenues clear the $3 million level, and further still over $10 million.

Interestingly, she writes that the profitability characteristics of these business groups tend to hold throughout the globe. Ergo education is the key to higher profitability. It makes for some deep strategic thinking when investing your time and money in a new or existing business, as bankers and CFO's can well attest.