FREE SPEECH ZONE | What small business REALLY wants

Recently on TV there was a rerun of a popular movie produced in 2000: What Women Want, starring Mel Gibson and Helen Hunt. Very briefly, Gibson has “shocking” experience (literally) and is able to get into the “heads” of women and read their thoughts.  Not a great movie, but high grossing and of interest to me because it involved an advertising agency – my core profession for over 40 years.

It also coincided with the continuing claims by many members of Congress about what needs to be done to assist small business, who will be the drivers of our economy to get us out of this funk.  Frankly their comments are inane, fictional, silly and inept.  Why? Because virtually none of them really know the dynamics of small business challenges, and consequently do not or can not get “into the heads” of true small business people.  Frankly, their statements are politically based, and have little to do with reality or an intelligent analytical basis of small business needs.

The current Senate (where most of the nonsense resides) is made up of about 60% lawyers.  Only 9% (9 Senators) list their former occupation as “businessmen” and of those 9, several are suspect, and several others had experiences in businesses that would not be described as “small”.  Of the suspect ones, Jim DeMint (R. SC) is listed as a “businessman” before becoming Senator – but his own biography says nothing about that experience. James Inhofe (R. OK) is also described as a former “businessman” – but he was president of Quaker Life Insurance which went into receivership and was liquidated in 1986.  Using the credentials of these men, along with the few others who may have expertise, I conclude, is of less than little value; and indeed, in some respects antithetical to helping small businesses grow.

My credentials as a legitimate small businessman are these. After serving in the USAF for 3 years active duty, I was honorably discharged in 1957. A friend of mine owned an ad agency, and having gone to flight school, he advised me that his largest account sold communications equipment to the Air Force. He asked me to join him. A few years later I became a partner in my own agency, and owned several more over the decades. From that day on I have been entrepreneurial, my own boss, and a quintessential small businessman.  Additionally, I have owned small businesses in the aforementioned advertising, real estate, health care – and at 77 still own and operate my own successful businesses today. That gives me well over half a century of expertise to share with you, and the right to point out that most of the proposals today are irrelevant, or worse; and the right proposals are being ignored.

The most egregious of their useless proposals revolve around the tax debate – whether to include the top 2% in reversing the Bush tax cuts.  The sanctimonious claim is “this would hurt small business” – and this suggestion is incredibly wrong and even detrimental.  It is wrong for many reasons, mostly because it is fiction. It would not affect the huge majority of small businesses to begin with.  In a very cogent recent study, Scott Shane,  A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University, plotted the average of all industries and businesses classified as “small business”; with the average revenues at a little over $1.5 million annually, and the average income (on which taxes are paid) is about $100,500. This is far from the $250K target for increasing taxes on the wealthy (or small businesses). Shane is the author of nine books, including Fool’s Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By. Moreover, almost all such businesses are classified as Sub-S corporations, and as such they pay no taxes at all (profits are prorated and passed through to the shareholders, of which there could be several or more, further diminishing the likelihood of $250K taxation).

Aside from the fictional account of such taxes harming “small business”, the whole subject of taxes to me (as a small businessman) was entirely moot.  I never based my growth plans, or operational strategy on taxes. Never, ever did the issue of taxes inhibit me from attempting to grow profit and succeed. Nor do most small businesspeople let taxes drive their goal for success. Should I actually get lucky… make considerable profit…and see a higher tax rate, the worst case scenario is I pay a bit more. No big deal (are you listening, Senators?)

I stated that not raising taxes on the wealthy is antithetical to small business success. How so? Well, Capitalism is a demand-driven economic system. Putting more money in the hands of fewer people is a negative; what is needed is putting more money in the hands of MORE people – folks who are demand-driven consumers.  The whole discussion of trickle down vs. raising all boats is too trite to repeat here; but to me, it has been positively decided. Small businesses depend on strong consumer demand. In that regard, extension of unemployment benefits fits that mold too; it is not only a humane issue, it is also economic in that it adds demand from the bottom up.

Two other bugaboos that Senators are claiming, but are largely fictional are regulatory issues and the mystery they keep purporting of “uncertainty”.  I have never “feared” regulation. Some is essential…some easily complied with…and some bogus. But regulation, to a small businessman, is a moving target. Always changing, annoying, but to me it has never inhibited me, or dissuaded me from carrying on and growing. To me, it is a gnat that you keep dealing with.  And with the disastrous lack of regulation on such things as the egg recall, the Gulf oil spill, the mine tragedy, and the Wall St. debacle, it has to be remembered that as a small businessman, I am a consumer too, and I see the value of keeping our environment clean, food safe, and financial system legitimate.

Uncertainty – to a small businessman – is absolutely not related to the economic issues of this recession (despite claims that it is inhibiting small business growth). To small businesspeople, uncertainty is a way of life in any economy.  It means putting your own money at risk…meeting payrolls…possible loss of a significant account…or unforeseen circumstances that may strike you. The Senators should not be giving lectures to small business folks on uncertainty – because probably none of them have faced any of those challenges.  Their next paycheck is assured.

The largest element of “uncertainty” is now being promoted by Congress itself:  the threat that they wish to repeal the Health Care Reform Bill. That would be a disaster in the making for small businesses. Health care has been a massive ongoing problem for small businesses, and the reform bill corrected many of the issues of costs, coverage and certainty. With the present health care bill, I can now better plan employee benefits, without the outrageous annual raises we experienced in health care insurance costs these past several years, along with the fact that I have had employees who could not even get insurance. That it should be revisited periodically, tweaked and improved is a positive idea – but repeal would be an anathema for small business. Do not do it!

Well, if those are things small businessmen do not agree with, what are some positive thoughts on things we would like to see?  Right now, the biggest negative is lack of liquidity. Despite all the talk, promises, and programs to stimulate bank lending, none are working, and without the fuel (funds) to power expansion, small businesses are stuck in neutral.  Take it from me, good credit, strong growth history, long term relationships, etc are not stimulating banks to lend – and it is devastating to businesses which ARE growing and hiring. 

Further, the SBA has been less than helpful, it is mostly useless. Long ago, after many tries, I gave up on navigating the bureaucracy of the SBA – and this despite the fact that several banks told me my business was a “poster child” for SBA loans; because I was a veteran owned successful growing small business, and the SBA had “special” programs for folks like me. The programs turned out to be far less special than promised (Are you listening, Senators?).

One last thing the government must do to assist small business is invest infrastructure and education.  In the short run, small businesses must have solid transportation, good roads, and easy access to markets domestic and foreign.  On the education front, small businesses especially depend on an educated, skilled workforce, because with fewer employees, better trained and more strongly motivated employees are crucial.

The bottom line is this. As a long term, successful, and experienced small businessman, I resent being told what is good for me by a bunch of politicians who know not of what they speak…have never had to make a payroll…are basing proposals on political positions rather than factual suggestions that might have merit for small businesses….and, in fact, are proposing policies that might actually be harmful to such businesses. Now you have heard from a small businessman with some very specific suggestions to give true assistance to the people who will create the jobs in this recessive period. Are you listening, Senators?