We've all heard the saying "It takes money to make money" meaning that in order to sucessfully grow your business you have to be willing to invest in it. Our federal government has recently taken this theory to heart with the passing of a massive government spending plan aka the Stimulus Plan in some circles and the Porkulus Plan and the Generational Theft Act in others.
The government's "it takes money to make money approach" is based on an economic theory of the spending "multiplier effect". That is for every dollar the US government spends in a certain sector the economy will grow by a multiple of that amount. Here are the spending areas that one economist states will give the government the most bang for the buck:
Extend Unemployment Insurance Benefits 1.64
Temporarily Increase Food Stamps 1.73
Issue General Aid to State Governments 1.36
Increase Infrastructure Spending 1.59
As you can see for every $1 the government spends to incease food stamps the economy will grow by $1.73. So if the government spends $100 million dollars to increase the amount of food stamps, the economy will grow by $173 million.
This should lead those of us who are protesting the amount of government spending to reconsider. I mean why spend only a trillion or so dollars? If it is so easy to spend our way to prosperity, let's just spend a gazillion dollars, which when the multiplier efffect is taken into account, willl take the term "economic superpower" to a whole new level.
While, I'm not an economic expert, I am guessing that this mulitplier effect can also be applied to small businesses as well. For instance you may have found that for every dollar you invest in direct mail marketing you can grow your real estate or mortgage business by 1.49. Or perhaps you know that for every dollar you invest in internet marketing your business grows by 1.32. New office furniture or carpeting for the office may increase your revenue by 1.2.
As you can see, what every small business owner needs to do is come up with their own stimulus plan, spend a few million on their businesses, and take full advantage of this spending muliplier effect. Don't be afraid to spend even if it seems frivolous. So if you've always wanted say, a frisbee golf course, go for it! If all goes as planned ( and why wouldn't it?) , we should all be able to retire early to some foreign country where the cost of living is cheap. (Probably since they haven't yet figured out how to spend their way to a prosperous economy).
Now I know what you are thinking: I don't have a few million dollars lying around, and unlike the US government I can't just print my own money, so how can I get this stimulus plan to work for me?
Well I listened to the president's address to Congress earlier this week, and he stated that in order to get this economy moving the banks need to start lending money again. In fact he went as far as to say that "if we do not restart lending in this country, our recovery will be choked off before it even begins". He also stated that our economy is based on credit, which is true, and if you overlook the fact that our credit based economy collapsed because of the fact that banks lent money to people to couldn't afford to pay it back, I don't see any reason why the banks would be unwilling to lend you a few million dollars in order to create a stimulus plan of your own.
However, in the event the loan officer at the bank turns down your application for a small business loan just remember "Yes We Can!". And if all else fails, we will always have Hope and Change You Can Believe In.
cartoon courtesy of www.townhall.com.
Written by Michelle Chamberlain
For mortgage and business financing information visit:
