Notwithstanding its name, small business is big business in the United States. We have approximately 28 million small businesses in this country, approximately 21.4 million of those being one-person entities and another approximately six million with at least one employee.
To put that in perspective one way, if every business that currently had employees grew to be able to hire just one more person, we would cut the number of unemployed persons by more than half.
To put it in perspective another way, there are only approximately 18,300 “big” businesses in this country - a tiny fraction of the number of small businesses.
But despite the volume of small business owners, their collective impact on our economy and the constant rhetoric from politicians, small businesses continue to lack a voice in Washington, D.C. The group, at its core, is inherently fragmented and has no singular pool of capital and thus no coordination of lobbying efforts dominated by larger companies and industry groups.
As a result, when Washington enacts legislation, small business is often not only a non-consideration, but also a victim of the insanity.
[sharequote align="center"]When Washington passes laws small business is often a non-consideration & a victim of the insanity[/sharequote]
The ironically named Affordable Care Act is only the latest issue to impact small business. Solopreneurs who have been covered are being forced to change plans with less than enjoyable consequences.
One freelancer I heard from in Illinois said, “…my new policy will be significantly worse in meeting my needs…”, explaining that both her monthly costs and deductible will be higher. She also had to buy pediatric dental coverage, although she is in her 60's and does not have children.
At its core, Obamacare is against everything that the American Dream stands for. It builds in a penalty for growth.
If you take risks and do really well and create too many jobs - 50 full-time ones - then you are penalized and are forced to have your expenses increased. Companies over that threshold are taking note and retarding growth, moving employees to part-time status, which creates more headaches for the employees and the employer’s operations.
One of the biggest issues that small business faces - and impacts their ability to grow and help drive forward our economy - is that they spend far too much time on administrative tasks that don’t produce any revenue.
Fred Barkman Jr., owner of Spectra Laboratories, poses for a photo at his business in Tacoma, Wash. Barkman. Many small business owners spend hours filing paperwork instead of doing work that turns a profit. (AP Photo/Ted S. Warren)
In previous surveys I have conducted through CarolRoth.com and Business Unplugged, small businesses owners estimated that on average they spend more than 40 percent of their time on non-revenue producing administration. Every cumbersome law, like Obamacare, adds more and more non-revenue producing work to the small business owner’s load, creating real costs and time and opportunity costs.
But Obamacare isn’t the only concern for small business.
The continued fight to raise the minimum wage is another example of how small business is an afterthought. While many people profess concern about the plight of workers - those workers, mind you, who have of their own free will agreed to trade their skill level and time for a certain wage - rarely have I heard concern for the small business owners. These are men and women who risk their own capital, as well as their time and effort to make a living and hopefully have the opportunity to grow and create jobs too.
As I discuss in The Entrepreneur Equation, the reality for these nearly 28 million small business owners is that the majority of their businesses earn less than $100,000 in revenue a year, aren’t profitable over their lifetimes and constantly struggle. Many business owners work more hours for the same or less pay than they did when they had a job. They’re exhausted, taking risks and working hard, so who is guaranteeing they get their living wage, or even make a profit? Many lose money for the first few years while the businesses is getting settled. The majority fail within in five years.
So are we going to guarantee their income? We shouldn’t, just as we shouldn’t for anyone. Appropriate compensation is what a free market sorts out.
In the early 1980s, when my mother was alive, she created one of the first gift basket companies in the nation with a friend. They hired another mom in the neighborhood to help them. They worked 50 weeks a year, averaged more than 50 hours a week.
When all was said and done, my mom and her partner netted the equivalent of a whopping $4 per hour a piece per year. Had they had to pay the neighbor a higher minimum wage, they would have earned even less, if anything at all.
So should an employee earn more than those risking their capital in the business? Or should new entrepreneurs not be able to hire as they grow because of an increasing nationally mandated minimum? It’s preposterous, but the little guys and gals are never truly considered.
If we want to encourage innovation, growth, jobs and overall prosperity in our economy, we have to take the needs of small business owners seriously. The economic future of our country depends on it.
Feature Photo Credit: AP
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