A recent article in the Los Angeles Times (“Small business sidelined in slow recovery from recession”) discussed how small businesses are not leading the way out of the recession as they have in the past. Writer Don Lee points out that “in every recession over the last three decades, it has been America's small businesses ... that stepped forward, began hiring and pulled the country out of the mire.” But this time it’s different. Why? As Lee indicates, there are many reasons, most of them enough in their own right to hold business owners back from hiring, and taken together creating an almost insurmountable obstacle.
I read this article, and on a micro level, boots in the street, this is very true. Small businesses have little enough resources to start with, frequently relying on the home and business building equity to tide them over. Their war chest is frequently thin at best. One rough patch and they are out of business. Miss a payroll just once and the doors close. Fail to pay anyone, including lenders, vendors, bankers or the guy in the corner, and you close within 24 -48 hours. That is why small businesses cant afford to promote hiring in light of the imminent threats of rules, regulations, taxes and the like. They are not signing a suicide pack with anyone.
One of the major reasons small businesses are not hiring is there is no reason to. As one business owner told Lee, “If I got more people coming through the front door, then I'd need more people to take care of them.” Economists talk about cycles, and right now we are in the midst of a dangerous one - people are out of work, so they have cut spending; people do not buy as much when they cut spending, so businesses don’t sell as much; businesses are not selling as much, so they are forced to cut expenses, including staff; people lose their jobs and have to cut spending... Now throw into the mix increases in taxes and regulations and you have the veritable “perfect storm” of conditions for extended slow recovery or worse.
Ah, yes, regulations and taxes. These have become more of an issue with this administration as the President and Congress look for ways to fund Obamacare and pass cap-and-trade legislation, among other things. One small business owner explained to Lee that she can get through a slow economy, but “what I can't get through is a runaway government." In addition, the Bush administration tax cuts will run out soon and there is no move in Washington to extend them.
First of all, I hate it when I am right. At least in this type of situation. For some time I have been talking about how government interference, in the form of higher taxes and increased regulations, is making it much more difficult for existing businesses to expand and new businesses to begin. Starting a business should not force the entrepreneur to sign a suicide pact with the government. At this time, business owners vote with their wallets. They don't hire new employees since they do not know the short or long term ramifications of that hire, particularly the legal, regulatory, or tax impacts resulting from the de novo employment terms. No new hires means the extension of the current jobless situation and thus the continued slow recovery.
And the worst part is Obama and his cronies. They have covertly declared war on small businesses. They talk a good game but when you review the minutia of regulations, taxes, health care, minimum wages etc etc etc, you have that perfect storm that makes ANY business owner, new or established, deathly afraid of hiring.
Does this mean it’s time to throw in the towel and give up on business ownership? Of course not, but it does mean that current and potential business owners need to make certain they have all the information they can get before making any decisions. Find a mentor to help you plan your moves and discuss your options. Talk to a lending expert before committing to any decisions on credit. Do your homework and due diligence first, then make your decisions based on the best information you have. And never give up on the dream of having your own business. Remember that all cycles eventually return to the top.
Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.
I read this article, and on a micro level, boots in the street, this is very true. Small businesses have little enough resources to start with, frequently relying on the home and business building equity to tide them over. Their war chest is frequently thin at best. One rough patch and they are out of business. Miss a payroll just once and the doors close. Fail to pay anyone, including lenders, vendors, bankers or the guy in the corner, and you close within 24 -48 hours. That is why small businesses cant afford to promote hiring in light of the imminent threats of rules, regulations, taxes and the like. They are not signing a suicide pack with anyone.
One of the major reasons small businesses are not hiring is there is no reason to. As one business owner told Lee, “If I got more people coming through the front door, then I'd need more people to take care of them.” Economists talk about cycles, and right now we are in the midst of a dangerous one - people are out of work, so they have cut spending; people do not buy as much when they cut spending, so businesses don’t sell as much; businesses are not selling as much, so they are forced to cut expenses, including staff; people lose their jobs and have to cut spending... Now throw into the mix increases in taxes and regulations and you have the veritable “perfect storm” of conditions for extended slow recovery or worse.
Ah, yes, regulations and taxes. These have become more of an issue with this administration as the President and Congress look for ways to fund Obamacare and pass cap-and-trade legislation, among other things. One small business owner explained to Lee that she can get through a slow economy, but “what I can't get through is a runaway government." In addition, the Bush administration tax cuts will run out soon and there is no move in Washington to extend them.
First of all, I hate it when I am right. At least in this type of situation. For some time I have been talking about how government interference, in the form of higher taxes and increased regulations, is making it much more difficult for existing businesses to expand and new businesses to begin. Starting a business should not force the entrepreneur to sign a suicide pact with the government. At this time, business owners vote with their wallets. They don't hire new employees since they do not know the short or long term ramifications of that hire, particularly the legal, regulatory, or tax impacts resulting from the de novo employment terms. No new hires means the extension of the current jobless situation and thus the continued slow recovery.
And the worst part is Obama and his cronies. They have covertly declared war on small businesses. They talk a good game but when you review the minutia of regulations, taxes, health care, minimum wages etc etc etc, you have that perfect storm that makes ANY business owner, new or established, deathly afraid of hiring.
Does this mean it’s time to throw in the towel and give up on business ownership? Of course not, but it does mean that current and potential business owners need to make certain they have all the information they can get before making any decisions. Find a mentor to help you plan your moves and discuss your options. Talk to a lending expert before committing to any decisions on credit. Do your homework and due diligence first, then make your decisions based on the best information you have. And never give up on the dream of having your own business. Remember that all cycles eventually return to the top.
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