The Most Serious Issue Facing Small Businesses

When it comes to getting their company ideas off the ground, new small business entrepreneurs encounter a slew of obstacles. Marketing, obtaining goods, personnel, and developing procedures are just a few of the problems that new business owners may face. However, there is a whole other set of issues that are often unwelcomed, such as the unwelcomed "partnership" with government, both federal and state and municipal. Although they were certainly aware of the tax rules, the multiplicity of laws, compliance charges, licences, and other expenditures related with their new business and location most likely startled them. Cutting a curb to provide customers access to your parking lot may be a major hassle. Unfamiliar acronyms such as OSHA, EPA, FDA, and others suddenly demand your attention and adherence to their regulations.

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Since 1973, the National Federation of Independent Business (NFIB) has asked a random sample of its 300,000 member businesses to choose their top business challenge from a list of 10 options. Taxes earned more votes than any other issue 62 percent of the time across 195 calendar quarters (48 years). Inflation (another sort of tax) was in second place 16 percent of the time, and it soared to the top rank 16 percent of the time. Weak sales came in third place with 11% of the vote. In the early 1980s, credit won a few victories (2%) and restrictions in the 1970s (2 percent ). While rules were seldom at the top of the list, they were often at the bottom.

However, when you stand back and consider the larger picture, the number one issue for small companies is GOVERNMENT at all levels. Obviously, the government is responsible for taxes, regulatory compliance fees, licences, and permits. Inflation, on the other hand, does. Unless the economy can find additional money, prices of certain products may increase while prices of others fall. One reason is debt: when people borrow more and spend more, prices increase. This is what the government did when it issued checks to a large number of people. However, unless there is a genuine increase in supply (output), a cycle of increasing prices, or inflation, results.

Credit availability and cost (interest rates) were top issues in just six quarters, mostly in the early 1980s when the Fed was combating inflation from the 1970s. That is also government. In the last several years, labour quality has received the most votes in 7% of the quarters. In 21 of the 195 calendar quarters, poor sales garnered the most votes, especially during the 2008 recession. Government policies were undoubtedly present at the time, but we'll give them a pass on that. As a result, "government" has received the most votes as the top concern affecting small companies in almost 80% of quarterly polls since 1973.

The peaks for each of the "issues" may be viewed by moving from the left to the right on the "spaghetti" in Chart 2. The first is for "inflation," which held the top spot for a long time until "credit" (Volcker) overtook it. As inflation (a tax) declines, taxes take precedence, with regulations continually coming in second. With the onset of the crisis in 2008, "weak sales" appear, followed by "regulations" that outnumber "taxes" until "labour quality" takes first position in a developing economy, only to be replaced by "inflation" in 2021-22.

"Taxes" is the large, sad winner during the full period 1973-2022. (landing in the top spot 62 percent of the quarters from 1973 to 2022). Regulatory compliance, on the other hand, came in second, with the government advising business owners how to spend their money in order to achieve political goals. Much of this stems from the acts of the several government agencies charged with overseeing our operations (OSHA, EPA, DOL, HHS, and so on), all of which are run by unelected people. Several of these agencies' budgets are bigger than many nations' GDP. The effectiveness and efficiency of these agencies are determined by the persons chosen by our elected authorities to lead them. Small company owners certainly bear the brunt of the government's growing participation in their operations. Small company owners face increased expenses and time obligations as a result of government meddling, both of which are in short supply in the small business sector.