Problem For Small Businesses

Problems for Small Businesses

Abstract

Small businesses face economic uncertainty, overwhelming legislative regulations, and employee retention problems. Small Business represents more than 99 % of all employers and employ's more than one half of the private sector. It also generates one half of the United States private G.D.P. ( PR Newswire, Oct 29, 2004 pNA).

In light of the significance of small business to the economy, it should be a grave concern when a third of small business owners rate the overall health of the United States economy as their biggest worry, rating higher than terrorism, the war on Iraq or healthcare costs. ( PR Newswire, July 12, 2004 pNA). Normally, during periods of economic sluggishness, it is small business that paves the way for a rebound. However, this trend has not appeared during the recent down turn in the economy which began in 2001. A major reason for small business failure to bolster the economy is a result of their inability to raise capital due to the decimation of the Small Business Administration's loans program ( Harpers Magazine, July 2004, V309 il 850 p79(2)). It appears that the very fuel that normally would stoke the economic furnace has been diluted through cost cutting measure as a result of a floundering economy. Such challenges will test the creativity and viability of small business.

Unfortunately, that creativity can be overwhelmed with the legislative regulations imposed by the local, state and federal agencies. According to Kenneth Howe of the San Francisco Chronicle, "The small business person must thread through a maze of more than two dozen regulatory procedures at the local, state and federal levels before opening

a business... And this task applies to the least regulated businesses" (1997. p1). Furthermore, John Kane of the Business Journal believes that " legislators have no idea what kind of burden they're imposing by passing conflicting labor laws, overly stringent and costly environmental regulations, punitive worker compensation laws and frivolous signage requirements," (1996, p 29). Furthermore, Sandra Fuller (2004) stated that she has to hire consultants for payroll, taxes, and asset protection because she is just too busy working on her patients to have time to even look at these things (interview).

The greatest challenges for any business are hiring the right people for the job and keeping them and that is why employees and their contributions are the most important assets to any business. Especially for small businesses where they have to face several disadvantages compared to big companies when finding qualified employees. Disadvantages such as wage level, benefit package and training make the competition for top performers an imposing challenge. The Contract Journal states: "Small construction businesses often have trouble recruiting skilled staff as they cannot match the wage levels offered by bigger contractors (Contract Journal, 7/14/2004).

Problems Facing Small Businesses

Small businesses face many issues from the time of inception. The three most common problems that all businesses face are economic uncertainty, overwhelming legislative regulations, and employee retention problems.

Small business does for the economy what gasoline does for your vehicle- it makes it run. Small business represents more that 99% of all employers. Small business also employs more that one half of the private sector in addition to generating over one half of the United States' gross domestic product. With small business representing such a significant portion of the economy it should be cause for concern that a survey revealed that the overall health of the U.S. economy was deemed to be small business owners' biggest worry. This rated higher than the threat of terrorism, the cost of health care, or taxes. Small business owners can take some comfort in the fact that the positive signs of an economic recovery on the horizon will impact them more quickly than their larger corporate brethren. Small business sells the bulk of its wares to the resilient United Sates consumer, and therefore was not as affected by the economic downturn in the first place. These smaller entities typically sell approximately 75% of their goods and services on the domestic front, compared to less than 60% domestic sales generated by big business. The U.S. economy weathered the financial storm better than many of her trading partners who dramatically reduced orders placing tremendous strain on large corporations.

The role that small business plays as the impetus for economic recovery will continue as economists predict a steady yet unspectacular rebound. The entrepreneurial

spirit will lead the way for the creation of new jobs as many join the ranks of self-employment as a result of being casualties of corporate America downsizing. While small businesses review the past economic plight with an understandable degree of anxiety, they look to the future with cautious optimism. The National Federation of Independent Business measured 10 indicators ranging from capital spending and employment plans to sales expectations and inventory levels. The results of "The Index on Small Business Optimism" surged to its highest reading in the past 20 years. Thirty eight per cent of the respondents indicated that they were planning to increase capital outlays. As the U.S. economy tries to nudge itself from reverse to neutral, then into drive, it will be small business' enthusiasm for the financial forecasts that will provide the fuel in the economic tank of the country.

Unfortunately, the "small business' enthusiasm" can be overwhelmed with the legislative regulations imposed by the local, state and federal agencies. According to Kenneth Howe of the San Francisco Chronicle, "The small business person must thread through a maze of more than two dozen regulatory procedures at the local, state and federal levels before opening a business... And this task applies to the least regulated businesses" (1997. p1). Just ask any small business owner how cumbersome filing the proper paperwork was for starting up their business. Furthermore, John Kane of the Business Journal believes that "legislators have no idea what kind of burden they're imposing by passing conflicting labor laws, overly stringent and costly environmental regulations, punitive worker compensation laws and frivolous signage requirements" (1996, p 29). All of these tasks create an enormous amount of administrative

work for the entrepreneur, and many business owners have to hire others to help them. For example, Sandra Fuller (2004)