Health Care Costs, the Business Canon, and eBay Exits
BY Ryan McCarthy
A new way to cut health care costs. The Wall Street Journal writes about a novel approach to help small businesses cope with rising health insurance costs, which it says is a "middle ground between traditional insurance coverage and so-called limited benefit plans." It works like this: businesses make deals with local hospitals, which offer comprehensive medical services for a fixed monthly fee. Employees can only see doctors at those hospitals--and coverage is limited--but it's far cheaper than traditional insurance. One plan cost $180 per employee per month, compared to an average payment of $382 per month under a traditional plan. The article notes that the coverage can be a stopgap for some, but isn't enough for patients who suffer from chronic illnesses.
Are things really as bad as they seem? Maybe not. Jonathan Weber, a Montana entrepreneur writing at The Big Money, suggests that his community hasn't been hit by an earth-shattering economic calamity just yet. Which isn't to say that the Montana economy is exactly frothy: "Here in Missoula, a handful of stores have gone out of business, and vacant commercial spaces are staying that way. But the parking lots remain pretty crowded on Big Box row, where only one big chain (Linens 'n Things) has actually closed up shop. You still have to wait in line at the Starbucks (SBUX) drive-through."
Small companies launch PR blitz against banks. A handful of businesses are being very vocal about their dismay over having their credit limits reduced by some of America's largest banks. The WSJ reports that banks that have taken bailout funds have, in some cases, drastically reduced credit for small companies. A few business owners are even publicly blaming the banks for firings: "The template for these counterattacks is Chicago-based Republic Windows & Doors, which informed workers last December that Bank of America's decision to pull financing forced a shutdown of its plant. Angry workers staged a six-day sit in, and then-Illinois Gov. Rod Blagojevich threatened to stop doing business with the bank."
Debunking the business book canon. Exactly how accurate are the business classics that are sitting on your nightstand? In our May issue, we took a look at some of the most indispensable books for entrepreneurs. But, as this article in the Boston Globe points out, there's a growing body of thinkers who question the methodologies used in best-sellers like Good to Great and In Search of Excellence. Can the authors of these books distinguish between universal management principles and just plain dumb luck? The Globe quotes Michael Raynor, a researcher and consultant at Deloitte Consulting: "When we look at the samples of great companies in most studies, by our measure, the companies that they call great by and large aren't," says Raynor. "The conclusions they come to are more a function of the researcher than the company."
Global ad market may be worse than expected. Peter Kafka at MediaMemo is having trouble mustering any emotion about a new report by Zenith Optimedia, which says the global ad market is doing worse than expected this year. The web ad world, Kafka points out, is still a comparative bright spot.
How to give bad news. "There's not a lot of art in communicating positive changes to expectations," writes Fred Wilson. "Everyone loves good news and most people are happy to share it the first chance they get." But bad news is, of course, another story. Wilson recommends continuous communication when news is bad so that your board or investors aren't caught by surprise. And he points out that nobody is going to be shocked by bad news during this economy: "Taking down numbers this year is not likely to get many people fired...But mismanaging the process might."
So, um, what happened to those synergies you told us about? It's been a tough week for eBay. This weekend, Skype's founders let the New York Times know that they were considering buying back the company. And yesterday, StumbleUpon, a content discovery service, announced that it was leaving its corporate parent to return to being an "investor-backed start-up," reports BoomTown. Says newly christened CEO Garrett Camp, "We are grateful to eBay for its guidance. However, we realized there were few long-term synergies between the two businesses."
Confidence still at historic lows. Small business confidence is still in the doldrums. Specifically, it's at 35-year lows, according to the National Federation of Independent Business's small business confidence index. NFIB chief economist William Dunkelberg says its still about consumer spending, which hasn't yet shown signs of recovering.