The Administration’s recommended SBA funding increase has received the endorsement of the National Association of Government Guaranteed Lenders (NAGGL) and the International Franchise Association (IFA), a leading advocate for the franchising industry worldwide.

According to the IFA, SBA-backed lending to franchised businesses represents some 10 percent of the total dollar amount disbursed through the agency’s loan guarantee programs.

The 2013 budget proposal, first released by the White House in February calls for a 3.5 percent increase in allocations to the SBA compared to the previous fiscal year. The Senate Committee on Small Business and Entrepreneurship heard testimony on the proposed SBA budget in late March, at which time the IFA sent a letter of support to Committee Chairwoman Mary Landrieu, a Louisiana Democrat, as well as the ranking Republican member, Senator Olympia Snowe of Maine.

The proposed SBA budget would provide $949 million for the agency in the coming year through regular allocations, plus another $167 million designated as disaster relief to be disbursed under the SBA’s Disaster Loans Program.

The budget request includes $349 million in credit subsidies for the SBA’s two main guaranteed loan programs, the 7(a) and 504 programs. This level of funding would support approximately $16 billion in 7(a) loans and $6 billion in 504 loans.

The SBA’s 7(a) program provides guarantees that encourage lenders to make loans to small entrepreneurs to start or expand a business. The 504 program assists small businesses in building or purchasing commercial real estate or in acquiring business equipment or machinery.

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The FBI is a business index that factors in various statistics on the U.S. economy in an attempt to assess the current environment for the nation’s franchised businesses. The International Franchise Association (IFA) publishes the Index, which is compiled on its behalf by the consulting firm IHS Global Insight. The IFA is the oldest and largest trade group in the world representing the franchising sector.

The FBI, which will be updated monthly, factors in U.S. economic data from government and non-government sources, including:

• employment rates in franchise-intensive industries (U.S. Bureau of Labor Statistics)
• number of self-employed persons (BLS)
• overall unemployment rate (BLS)
• consumer demand in franchise-intensive services (U.S. Bureau of Economic Analysis)
• Small Business Optimism Index (National Federation of Independent Businesses)
• Small Business Credit Conditions Index (NFIB)

The BLS is bureau of the U.S. Department of Labor, while the BEA is affiliated with the Department of Commerce. The NFIB is a private organization that is a leading advocate for American small business.

The various components of the FBI are scored and weighted by a formula to arrive at one comprehensive number meant to express the health of the franchising sector, which makes up a large component of the country’s economy.

Although the FBI is new, the Index was figured retroactively back to January 2000, which was used as the baseline month. The Index was given a value of 100.0 for that month. After January 2000, the FBI rose more-or-less steadily to a level of around 111.0 before the recession caused it to dip down below 105. The FBI has recovered since then and stood at 107.7 in February and March of this year. Although it was stagnant between February and March, the Index had experienced three straight increases in the previous three months and was 1.3 points higher compared to this time last year.

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The Washington, D.C.-based International Franchise Association, which represents some 825,000 U.S. franchise establishments that support nearly 18 million American jobs, released a statement at its annual convention in February weighing in on the President’s budget and tax proposals for the coming year. The IFA is the largest trade organization for franchised businesses in the world.

Instead of reforming the corporate tax structure, something that affects only larger businesses and which the IFA terms a “piecemeal” approach, the Association advocates comprehensive reform of the U.S. tax code in a way that will stimulate job creation by small businesses and more small business opportunities, including increased franchise ownership.

“Tax reform must be done on a comprehensive level that lowers both the corporate and individual tax rates,” said IFA President & CEO Steve Caldeira in a press release.

Caldeira explained that more than 80 percent of franchised businesses are ”pass-through” entities such as S-corporations or LLCs that report business income on their personal income tax return and thus pay taxes on their business income at individual tax rates, rather than at corporate rates.

Nevertheless, 100 percent of franchise business professionals surveyed at the IFA’s 2012 convention in Orlando indicated that they feel more optimistic about their plans for growth this year than they did in 2011. The IFA’s 2012 Franchise Business Economic Outlook, prepared by IHS Global Insight, projects growth in the franchising industry of approximately 2 percent in 2012, both in the number of jobs (168,000) and in the number of franchise outlets (14,000).

“While poised for modest 2 percent growth in 2012, franchise businesses could grow significantly faster if the President and Congress offered solutions for long term certainty on tax reform that do not raise taxes on small business,” said the IFA’s Caldeira.

A survey of franchisors and franchisees conducted in October 2011 by the IFA indicated that they overwhelmingly believe that franchise growth would be stifled under the President’s budget and tax proposals. In the survey, 88 percent of franchisors and 73 percent of franchisees indicated that higher tax rates on households earning more than $250,000 per year will negatively impact their businesses.

The survey also showed a desire by franchise business owners to simplify the tax code by trading credits and deductions for a lower tax rate, but not if the effective tax rate for pass-through entities would increase.

In January, the IFA sent a letter to President Obama and members of the 112^th Congress urging them to take up comprehensive tax reform.

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Still, these modest increases in recent years come after much larger drops in the small business market that occurred earlier in the wake of the economic recession. Sales of small businesses fell by 28 percent in 2009.

Small improvements in the overall economy and in small business lending are thought to be the main reasons that more businesses for sale are finding buyers lately. But another factor could be that sellers are offering more realistic prices in order to keep buyers interested in their small business opportunities.

The median selling price of a small business did rise in 2011, but only by the same modest 3.3 percent figure that sales rose. That percentage represents only a $5,000 increase, from $150,000 in 2010 to $155,000 in 2011. Median selling prices had been around $180,000 just a few years ago.

Median asking prices are still up near that range, at about $175,000 in the last quarter of 2011, but sellers on average have been willing to settle for less in the end. Also, many sellers are helping buyers to finance the purchase of their businesses, and to a greater extent than usual. BizBuySell quotes a business broker who says that sellers are sometimes carrying 50 to 70 percent of the purchase price, much higher than the level of seller financing that would prevail in a healthier economy, which is about 20 to30 percent.

The median annual revenue for small businesses sold last year was markedly higher than the year before, but at about $360,000 for the last quarter of 2011, the median revenue figure has not yet even recovered to late 2008 levels. Both the sales price and median revenue figures vary widely by geographic location, of course.

According to the BizBuySell statistics, retail businesses – both restaurants and other retail establishments – made up about half of the small business sale transactions in the last part of 2011. Of the other half, the majority, or a total of 38% of all business sales, were of companies that provide services.

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A California assemblyman introduced legislation in February that he says is intended to help franchisees, but that others say could have the effect of driving franchisors away from the state.

The proposed legislation, known as the Level Playing Field for Small Businesses Act or Assembly Bill 2305, was introduced in February by San Rafael Democratic Assemblyman Jared Huffman and is co-sponsored by Assemblyman Tom Ammiano of San Francisco. Bill 2305 was meant to replace the franchising law that has been in place in California for 32 years.

The International Franchise Association (IFA) and the California Chamber of Commerce have voiced their opposition to the bill, saying that it would take away some of the power that franchisors have to control their brands and to protect the majority of franchisees from negative consequences caused by the minority who don’t maintain the required standards of quality.

Massachusetts and Vermont are both set to consider similar franchising legislation this year. Three years ago, Rhode Island passed a new franchising law that dictated some of the terms under which a franchisor could terminate a franchising contract. Laws governing some aspects of franchising agreements currently exist in 17 other states, the District of Columbia, Puerto Rico and the Virgin Islands.

As with many other areas of legislation, the regulatory environment for franchising in California is followed closely because of the state’s size and influence. According to the IFA, California has 83,000 franchised business locations that in total generate $94 billion in economic output and employ 925,000 workers. Franchised businesses are an economic sector that is doing relatively well in a state that has been one of the hardest hit by the recession and still has an unemployment rate of 11 percent, the third-highest in the nation.

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Whether starting up a new company, buying a franchise or exploring home-based business opportunities, people by the hundreds of thousands have struck out on their own in the last few years. At one point in 2009, USA Today reported that nearly 10 percent of job seekers who found employment did so by starting their own businesses and employing themselves. In 2010, a study by the Kauffman Foundation found that startup businesses were being created at a rate higher than at any time in the previous 15 years. According to the Foundation, that amounted to 565,000 businesses created in 2010, a number that’s in line with business-creation numbers reported by the Office of Advocacy of the Small Business Administration.

This proliferation of small businesses opens up opportunities for those who can provide the goods and services that businesses need to operate. And while the needs of businesses can vary greatly according to the industry they’re in, they do have some basic things in common. All companies keep financial records and pay taxes, and any business with employees must calculate payroll and disburse paychecks on a regular basis. These routine nuts-and-bolts administrative functions are the kinds of things that business owners can and do outsource in order to free up their time to focus on more strategic aspects of their operations.

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For the past 16 years, the SBE Council’s “Small Business Survival Index” has ranked the states according to their favorability toward small business and entrepreneurship. At the top of the list for 2011 were South Dakota and Nevada. The 50^th-ranked state was New York, and Washington, D.C. was once again at the very bottom of the list in 51^st place.

Each year, the index compares public policy in the 50 states and the District of Columbia on various factors important to business competitiveness such as taxes, regulatory costs, government spending and debt, property rights, health care policies, energy costs and more. The SBE Council expanded the index for 2011 to take into account 44 major government-imposed or government-related costs that affect small businesses and entrepreneurs. Each state was assigned an overall rating and ranking based on a combination of the 44 different measures.

“Elected officials have a clear choice,” writes Raymond J. Keating, SBE Council chief economist and author of the studies used to assemble the index. “They can expand government, tax too much, and over regulate, and thereby restrain entrepreneurship, small businesses and the economy. Or, they can provide a climate of low taxes, reasonable regulation, and limited government spending, which is critical for economic, income, and employment growth.

“State and local lawmakers need to be pro-active in advancing pro-growth policies,” Keating continued.  “Unfortunately, as illustrated by the ‘Small Business Survival Index,’ too many elected officials just don’t get it, and impose costly policies that chase away entrepreneurs, businesses, capital and jobs. But policy leadership is being provided in the states that rank best on the index. That’s … good news for entrepreneurs, small businesses and investors.”

While the SBE Council’s Survival Index provides one of the most comprehensive studies of public policy in each state as it relates to business and entrepreneurship, there’s not necessarily a direct correlation between a state’s position in the index and actual rates of small business ownership. One professor of entrepreneurship studied the SBE Council’s 2010 rankings and found only a weak correlation between a state’s SBE score and its number of small businesses per capita (defined as establishments with fewer than 500 employees). The state with that highest number of small businesses per capita, Wisconsin, ranked 31^st on the index that year (it moved up to #24 in 2011). The professor found no correlation at all between a state’s ranking and its number of small business startups or closures for the year.

The top ten states in the 2011 index were, in order, South Dakota, Nevada, Texas, Wyoming, South Carolina, Alabama, Ohio Florida, Colorado and Virginia. Making up the bottom ten were Massachusetts, Minnesota, Connecticut, Maine, California, Rhode Island, Vermont, New Jersey, New York and the District of Columbia.

The SBE Council is expected to release its 2012 Survival Index toward the end of the year.

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Why is franchising such a popular business concept? Simply put, it offers advantages for everyone involved – franchisors, franchisees, employees and consumers.

Successful businesses offer franchises for sale as a way of expanding their brand outside the city or region where they started. Franchisors can tap into the knowledge of local markets that franchisees already possess, while teaching them how to make the most of that knowledge. Franchisors choose franchisees carefully, looking for entrepreneurs who will preserve and protect the company’s good reputation while advancing the brand even further. Franchisors want team players who will follow their proven systems while being alert for ways to improve them. The best franchisee ideas can then be adopted into the system for the benefit of all.

For franchisees, the benefits are many:

• a greater statistical chance of success – over both the short and long terms – than starting a business from scratch and “going it alone”
• a shorter time frame from starting the business on paper to actually opening and bringing in revenues
• thorough training in a successful business system
• franchisor assistance in locating a site for the business, if necessary
• support and advice from fellow franchisees
• franchisee conferences
• the goodwill of a recognized and respected brand
• an established  and successful business model to follow
• advertising and marketing support and guidance
• internet exposure through a prominent national website that helps potential customers locate their local franchise

It’s true that for some would-be business owners who prefer complete independence and the chance to succeed or fail without a safety net, buying a franchise might not be the way to go. But for those who have an entrepreneurial spirit and a desire for camaraderie, partnership and the chance to be part of a winning team, franchising can be the perfect solution.

Franchise operators have a chance to become stars not only in their franchise system, but also in their communities as they provide valuable services and create jobs. Franchised businesses employ more than 9 million people in the U.S. and more than 1 million in Canada. Employees of a franchise have the assurance that they are working for small business that is likely to be stable and successful because it is following a proven system.

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Choosing entrepreneurship over nine-to-five employment is a natural for many vets, especially when poor economic conditions continue to make finding a job difficult. And statistically, unemployment for veterans as a group is even higher than the national average, despite federal government programs that give employers added incentives to hire them.

The nation’s franchising companies have stepped in to give veterans a hand in starting businesses through a program called the Veterans Transition Franchise Initiative, or VetFran. Through the program, franchisors help veterans acquire franchises more easily by voluntarily offering various forms of financial assistance such as reduced initial franchise fees, waivers of training costs and free product inventories.

Going into business by buying a franchise is a great fit for former members of the armed forces, because performing well in the military often means learning to work within and follow a proven process or system. That’s exactly what franchising is all about – buying into a successful system and having the discipline to follow an established formula for success.

The VetFran program was initiated by the International Franchise Association (IFA), the world’s oldest and largest organization representing franchising companies worldwide. The IFA initially launched VetFran about 20 years ago, in the aftermath of the first Gulf War. VetFran was revived after the September 11 attacks and the ensuing increases in military service and in overseas deployment of U.S. troops.

More than 400 companies are currently participating in VetFran, which has helped more than 1,500 veterans to start a franchise with the assistance of discounts extended by franchisors that now total in the hundreds of thousands of dollars.

The goal of owning a franchise may be even more attainable in the future for America’s veterans thanks to IFA-supported legislation currently pending in Congress. The bill, called the Help Veterans Own Franchises Act, has bipartisan support and would give incentives to franchisors to offer discounts to veterans by providing a tax credit based on a percentage of the discounts granted. Veterans themselves would also be able to take a credit against part of the franchise fees that they pay.

Padgett Business Services, the small biz pros, is a proud participant in the VetFran program. Padgett offers accounting franchises for sale and has franchise opportunities all across the country for veterans who want to become civilian entrepreneurs. Padgett has served small businesses since 1966 with professional bookkeeping, tax and payroll services, and is a trusted and respected name in the small business community.

Call Padgett Business Services today at 1-866-729-8725 to learn more about how we can help you reach your goal of business ownership.

Perhaps the most difficult part of going into business for yourself is making the jump from technical expert to the role of entrepreneur/business manager. Having thorough knowledge of a particular field, such as accounting, is obviously a solid foundation for starting a business in that field. But technical expertise alone is not enough to ensure small business success.

Business author and consultant Michael E. Gerber uses the term “entrepreneurial myth,” or E-myth, to describe the mistaken belief that technical or subject-matter knowledge by itself necessarily translates into a successful business operation. Gerber thinks the E-myth is responsible for many misguided and ultimately unsuccessful entrepreneurial efforts.

The fact is that performing a certain kind of work as an employee, no matter how long and how well you’ve done that type of work, only partially prepares you for the task of running an organization that sells the same kind of services in the marketplace.

Buying an existing independent accounting business for sale may supply name recognition and a list of clients, but it won’t buy business mentoring, entrepreneurship advising or managerial training. And even the former corporate accountant who does well initially with an accounting business opportunity as a sole proprietor may be frustrated in his or her attempts to grow the business later on.

One of the more secure ways to enter any field of business is through buying a franchise. The success rate of new franchised businesses is much higher than that of non-franchised ones, precisely because the franchising model addresses the E-myth problem. Whatever a particular franchisee lacks in the knowledge needed to run and grow a company, the franchising organization can supply. A franchisor knows the market for their products and services and the methods to successfully deliver them to customers in a profitable way. And by definition, a successful franchisor knows how to plan for growth and how to scale up a business when the time comes to expand.

Padgett Business Services’ accounting franchises for sale are an excellent value because Padgett has more than 35 years of experience helping people to become savvy business owners while doing something they love. Our ability to make the most of our franchisees’ accounting experience and their entrepreneurial drive through our proven model for success is why Padgett is one of the top franchisors in the United States today. Call Padgett Business Services, the small biz pros, at 1-866-729-8725 to learn more about how we can help you realize your vision of successful and rewarding business ownership.