The Multiplier Effect: What it Means for You in 2020

multiplier effect

In 2020, as you consider where and how to spend your hard-earned paychecks, there’s one economic force we at Veitengruber Law would ask you to consider: The Multiplier Effect.

Why exactly is it that money must be spent locally to benefit the community? In short, it boils down to the multiplier effect, which states that each dollar spent has an impact that is greater than the original sum.

For example, if you were to visit a New Jersey locally-owned hardware store to purchase a new door for your home rather than choosing to order from a big-box chain, the money you spent will allow that store owner to earn profits and pay a local employee, who will likewise spend money in the community, hopefully at another local shop, thus multiplying the positive impact of the original amount spent.

In this way, each dollar spent locally has the potential to send positive economic reverberations throughout the region, and will continue to do so as long as the majority of cash earned continues to circulate locally.

When we think about cities and towns in NJ that have gone from thriving and vibrant to economic wastelands, it is evident that these communities lack local investment. Without local businesses and investors reinvesting their wealth, the very infrastructure supporting the community fractures and collapses.

In order to avoid such conditions, businesses and investors alike must commit to the local communities that support them. By the same token, consumers can maximize the impact of every dollar spent by finding local businesses to support.

What will the multiplier effect mean for you as a New Jersey resident in 2020? Should you cancel your Prime account and forego the convenience you gain as a modern citizen of a global economy? Of course not. There are, however, ways you can spend locally without having to restructure your life.

First, if you’re in the fortunate position to have the capital to purchase an investment property in the new year, consider looking nearer to home rather than just shopping for the best bang for your buck. Not only will doing so encourage additional investments – people can’t invest money they don’t have, after all – but it will also improve the New Jersey landscape by ensuring property development continues to happen right here where we live.

Furthermore, every dollar spent in New Jersey is not only just earned and re-spent, but it is also taxed! Consider that cash spent locally can be taxed repeatedly – nearly indefinitely – until someone in that cycle breaks the chain by spending the money elsewhere. Tax dollars are absolutely essential to the establishment and maintenance of vital community services: schools, libraries, parks, and public transportation are just a few of the most beloved public services, none of which will survive without a steady stream of local spending.

What if you’re a first-time home buyer rather than a big-shot investor? Are the dollars you spend really going to have a significant impact, or does massive impact only accompany huge property investments? The answer couldn’t be clearer.

In the calendar year 2019, if we only consider NJ buyers who purchased new homes, they will have splashed out more than two billion dollars. When the National Association of Home Builders crunched the numbers, they calculated that the multiplier effect of such an astronomical sum would account for the creation of nearly four million local jobs, over $180 million toward wages and income of those workers, and $225 million in revenue for local tax funds.

Furthermore, this two billion will still be positively impacting the community after 12 months! Clearly, if we want our incomes to sustain, nurture, and grow the very towns in which we live, we have to commit to spending, investing, and hiring locally whenever possible.

If this article has sparked you to action, and 2020 will be your first year focusing on keeping your money circulating here at home in NJ, we couldn’t be more delighted. Here are easy-to-use resources to get you started:



Better Networking Strategies for the Modern Small Business Owner

Every small business owner recognizes the importance of networking. You can’t be an entrepreneur today and not hear or read the buzzword “networking” at least several times a day.

However, this doesn’t mean that every small business owner is equally adept at reaching out and working the circuit. If you need help or ideas when it comes to your personal networking plan, you’re not alone. Networking can be one of the more challenging aspects of owning a business because it involves stepping out of your comfort zone.

Difficulty level aside, reaching out to other entrepreneurs is a crucial part of how successful your small business can be. It’s a great way to generate leads which can increase your customer base, and it can also help you to learn and grow as a person and business owner.

Give the following networking tips a try – you might be better at networking than you thought!

Focus on forming relationships

Instead of going into the networking process with the mindset of striking a deal at every turn, commit to the concept of forming friendships with other like-minded entrepreneurs.

The traditional approach to networking through formal meetings and conferences can still be effective ways to hook up with other business owners, but you should also constantly be thinking about making authentic contacts as you move through your workday. You never know who may end up being your next great connection.

Knock the pitch out of the park

No matter where you do most of your networking, you have to make an incredible first impression. With only seconds to impress upon someone why they should want to continue connecting with you in the future, have an elevator pitch prepared and ready to go at a moment’s notice. Naturally, work on honing your go to introduction so that it sounds less like a pitch and more like a good reason to get to know you better.

Be honest about your intentions

Even as you work to change your mindset towards building relationships that last, leading with honesty is always the best policy. If you’re looking to expand your company‘s reach into a new geographic area, a good tactic can be reaching out to friends of a friend. Reveal your motives as you give your elevator pitch and then quickly transition into committing to the “slow burn” of long-term relationship-building.

Use social media

Small Business Trends Magazine reports that, as of November 2016, 97% of adults who use the Internet either utilize or visit a social networking site regularly. The most popular social networking sites include: Twitter, Instagram, Pinterest, LinkedIn and Facebook.

Cyber-networking has actually proven to be quite successful and prosperous for many modern small business owners. Connect online with local entrepreneurs in your industry as well as those who may complement your business. Often, online connections can prove to be as fortuitous in business as they are in romantic comedies.

Leave an impression (and your contact info)

As you work to grow your networking circle, remember to always have plenty of business cards on hand. Even if you make a lasting impression, it will mean little if your new connections don’t know how to contact you. Many business owners today still favor traditional business cards, while others have transitioned to the digital business card. It’s a good idea to be familiar with how to create, share and exchange the more modern e-business card while still carrying paper business cards, so that you are prepared for the preferences of anybody you meet.


Image: “Cheers” by Jakob Montrasio – licensed under CC by 2.0

Can I Discharge Business Loans in a Bankruptcy?

store closing

Knowing that a large percentage of your personal debts can be discharged or forgiven by filing for bankruptcy, many business owners  wonder if the same would be true for loans they took out to start a small business.

Unfortunately, nearly all loans taken out by any small business will have been guaranteed by the owner(s) of the business. Lenders do not typically grant loans to new small businesses without the personal guarantee of the company’s owner(s). Therefore, even if you do file for bankruptcy for the loans you took in order to get your business off the ground, you will still be held personally responsible for the repayment of the debt(s). Because of this, filing for small business bankruptcy in order to recoup your initial business loans will not be very effective.

Another faulty belief held by many new business owners is that an incorporated business will mean protection for the owner(s) if the business fails. The reason why this belief is faulty is because, as previously mentioned, most small business owners are required to guarantee any loans they take out for their start-up. Anyone who has personally guaranteed the loan(s) s/he took in order to specifically start their business will not find any protection in incorporation.

Filing for bankruptcy for a failing business usually does not offer a whole lot of help to the business itself. Bankruptcy discharges aren’t even granted for businesses that are closing their doors. Therefore, if your business just isn’t going to make it, don’t waste your time filing bankruptcy paperwork for the business itself. YOU are the person/entity who will need protection, so you should consider filing a personal bankruptcy and attempting to discharge debts related to your business. These kind of debts can typically be discharged in an individual bankruptcy matter.

On the other hand, if you think that your business is going to survive and (at some point in the future) thrive, but you are just having some temporary trouble keeping it afloat, a business bankruptcy may help protect it from going under. It should be noted here, though, that most small business that file for bankruptcy do not make it through to the other side with their doors still open.

Filing for bankruptcy for your small business can give you time to reorganize your business finances and debts. As a business owner who would be able to stay in business with a reconfigured budget and restructured debts, there are two bankruptcy options. Both Chapter 11 and Chapter 13 bankruptcies allow businesses to stay open by organizing a more realistic financial plan for the business owner(s).

Both Chapter 11 and 13 bankruptcies offer you the ability to maintain ownership of any business properties. In order to do so, you’ll be required to sell any unnecessary assets for profit, to help you pay down your existing debts. Additionally, your secured business debts will be modified to make the payments more realistic for your budget.

Where possible, it is advised to file for Chapter 13 bankruptcy if you are the sole owner of your business and if you meet the debt limitations required under Chapter 13 bankruptcy law. It is a less expensive and usually much faster option to file Chapter 13 instead of Chapter 11. However, if you do not meet the eligibility requirements for Chapter 13, you can file under Chapter 11. No debt or income requirements/limits exist regarding filing for Chapter 11 bankruptcy, but as mentioned, it can be expensive and time consuming.

You can learn detailed information about your particular bankruptcy needs by working with a NJ bankruptcy lawyer near you. Each case is unique, and your attorney will review all specifications relating to your business and debts in order to best advise you about your options.

Image credit: Bradley Gordon

Legal Representation for the Small Business Owner

Every business owner, whether large or small, should have the safety net of a well-qualified attorney standing by in case they are needed.  However, many smaller business owners tend to get so embroiled in getting their business off the ground that they put off finding legal representation until it is actually needed. Looking for a trustworthy and appropriate attorney when you’re in crisis mode is not ideal, and will cause you to rush the process, likely landing you a sub-par lawyer who overcharges.  Take the time now to  retain the services of an appropriate attorney or firm, so that you can easily and confidently turn to them in your time of need.

As you may have already realized, the task of finding a reliable, successful, and cost-effective attorney can be daunting.  There are so many attorneys who want your business! How in the world should you even begin to narrow down the prospects, especially when your other business duties are taking up so much of your time?

Use your networking skills to ask around for names of attorneys who possess the most important qualities you are looking for when it comes to representing your business in any future matters that may arise.  For example, you may need help with planning the growth of your business, the writing, review, and revision of letters and contracts, and representation in court on the off-chance that you or your company ends up getting sued. Take down a number of recommended names from your most trusted peers who also run small businesses.  This will ensure that all of the attorneys on your list are familiar with problems that are common to small business owners.

In order to narrow the list of recommendations down to a reasonable number of candidates, have your assistant (if possible) do some investigation into each attorney’s experience, education, and wins versus losses in the courtroom.  Also consider having your assistant call each firm and ask about retainer fees and if a lower rate can be negotiated if a long-term relationship develops. You’ll want to inquire about any differences in fees for court representation versus office time, and what additional fees/costs will be your responsibility.

With a manageable list of appropriate local attorneys, take the time to interview the top three or four personally.  While anyone can look good on paper, it is important to feel a connection with someone who you may be dealing with regularly for many years, especially regarding something so important – your livelihood. Ensuring a good working relationship from the start establishes well-defined parameters, expectations, and how routine matters will be handled.

If you find yourself in an unexpected legal bind without an attorney, you’ll obviously need to find one – fast.  Although it’s best to have someone retained ahead of time, sometimes you can be caught unaware and unprepared for a crisis. If this occurs, act fast but responsibly by looking for attorneys who specialize in the area you’re having a problem with at the moment.  Worry less about connecting with them on a personal level and more about whether or not they can get the job done in the short-term.  You can always look for long-term representation after your emergency matter has been settled if this particular attorney doesn’t mesh well with your business or your personality.

*Photo credit: DonkeyHotey