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Jarrett Hull

English 12CP B3

Mrs. Maynard

January 3, 2018

Death of Small Businesses

Nowadays wherever you go entrepreneurship is seen, heard, or experienced. Even as kids

there were lemonade stands and other projects to make a few extra bucks. Problem is its

becoming harder and harder for people to start small businesses. Due to regulations and big

competitors small businesses are having a hard time being successful. Minimum wage is

constantly being increased which is making it harder for employment and other costs. The fact is,

small businesses, although numerous, these businesses are not that successful most won’t get the

chance to grow into a franchise. Or never even get off the ground because of how complicated it

is to get a business started. All the financial steps and precautions that need to be taken and all

the information needed to inquire. Entrepreneurship has become almost a science, something that

takes extensive research and hours of calculating. Nevermind the cost to open a business. With

how the market is going small businesses are going to die and turn into big company’s you

associate with. Unless they deregulate, deinflate, and make it so anyone can open a business

regardless of qualification.

This is the price of a loaf of white bread in 2008 and 2017. 2008 $1.68, 2017

$1.98 (​U.S. Bureau of Labor Statistics​). In 10 years the price for bread went up 30 cents. At one

point it was up a whole dollar. The price for potatoes from 2008 to 2017 managed to double.

2008 32¢, 2017 78¢ (​U.S. Bureau of Labor Statistics​). As for milk the price increase is honestly
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astounding. 2008 $2.65, 2017 $3.12 (​U.S. Bureau of Labor Statistics​). Although these specific

prices are irrelevant to small businesses as a whole, the fact is that this is a perfect representation

of the inflation happening in America. When prices for milk are doubling looking at that

mathematically if you were to look at a different market like cars. A car in 2008 would cost let's

say 26,500 by 2017 it would be 31,200 a 5 thousand dollar difference. Things like this are the

reason small businesses are dieing when inflation happens it affects businesses the most. Any

product or equipment costs more. Workers want more money to pay for the increase of prices.

And you have to have more money on hand in order to pay for things. Big businesses that

already have the clientele and money to be able to handle inflation and consumer price change

but small businesses with one owner who has saved every penny for the last 20 years can not.

In 2000, 61,000 new firms were created in 2010 there were 17,000 (​Weissmann​)​. From

1983 to 2006, the yearly number of new fast food joints, big box stores, and other establishments

that are of bigger chains grew by about 50 percent (​Weissmann​)​. Job creation shifted more

heavily towards big companies as well. While new start up businesses steadily generated around

three million jobs per year, new establishments of previously created chains went to about 6

million and this is in 2006 (​Weissmann​)​. Department statistics are showing that companies less

than a year old contributed 5.2 million jobs in the year 2014 (​Weissmann​)​. Unlike the 6 million

or so they generated in the years before 2007 and the recession (​Harrison)​. Nowhere near the

normal of 7 million to 7.5 million jobs a year seen in the 1990’s (​Harrison)​. The fact is that

small businesses and new sole proprietorships are dieing.

There are countless reasons why someone wouldn’t open a business so the government is

doing it’s best to make it easier. It is generally thought that the permissiveness of the federal
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government began during the presidency of Richard M. Nixon, which led the way for formal

deregulation (​Deregulation)​. During the 1980s the government turned its focus from laws, rules,

and regulations to the creation of market incentives that were thought to motivate business

(​Deregulation)​. The over-regulation of business is thought to thwart innovation by creating

delays and increased red tape (​Deregulation)​. To prevent this the Task Force on Regulatory

Relief was created. The task force reviews all proposed new regulations and review old

regulations which lead to the increased use of cost-benefit analysis, which compares the cost of

all regulations to their benefit (​Deregulation)​. The Paperwork Reduction Act, this Act created

the Office of Information and Regulatory Affairs (OIRA) within OMB and gave it a number of

very specific assignments, which included meeting annual paperwork reduction goals, review of

every agency's information management activities, and improvements in federal information

policy (​A Brief History of Administrative Government)​. The White House is attempting to create

a system in which agencies operate under the scrutiny and control of elected officials.

The edicts often took the form of executive orders being executed by presidents since

1971, many of which focused on providing the White House some opportunity to review federal

regulations during their development (​A Brief History of Administrative Government)​. In 1971,

through a memorandum from OMB, President Richard M. Nixon introduced the idea of a White

House regulatory review process (​A Brief History of Administrative Government)​. This requires

agencies to submit summaries of proposed regulations as well as alternative options for ones

currently in effect. The deregulation might be the cause for the prime years for starting a

business between the ages of 25 and 55 extending (​Harrison)​.

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New research by ​Moody’s Analytics​ shows that the country’s rate of new business

creation, which peaked about decade ago, plunged more than 30 percent during the economic

collapse and has been slow to bounce back following the recession (​Harrison)​. While the rate of

business formation has slowed, the pace of business closures, which had held steady over the

previous decade, started to ascend in 2005 and spiked in 2008, according to data compiled by the

Brookings Institute (​Harrison)​. Businesses that have been in business for more than five years

now accounting for more than two-thirds of companies (​Harrison)​. Meanwhile, the proportion of

companies of every age from one to five years old has shrunk over the past 35 years (​Harrison)​.

Businesses that have been open for 5 or more years tend to survive because they are

already used to the aspects that come with running a business like paperwork. Numerous recent

studies on aging reveal an unpleasant truth: The analytical abilities of new entrepreneurships

can’t keep up with the complexity (​Wells)​. Agarwal, a professor of finance at the McDonough

School of Business at Georgetown University. Mr. Agarwal’s 2009 study “The Age of Reason”

found that the peak financial decision-making age is 53, based on how people at different age

groups made a handful of financial choices (​Wells)​. Yet the prime age for opening a business is

between 25 and 55 and expanding. Almost as if the system is being fixed into a trap made for

small business owners to lose, either too inexperienced to understand what to do, or too old to be

able to understand trends and keep up with society.

Although the small business administration’s website says that small businesses are doing

well regardless. With 28.8 million small businesses which is 99.7% of all businesses in 2013

(​2013 Small Business Profiles for the States and Territories​). With over 56 million employed in

small businesses which was 49% of the 115 million people employed (​2013 Small Business
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Profiles for the States and Territories)​. 1.1 million of those jobs created just in 2013 (​2013 Small

Business Profiles for the States and Territories)​ which is not bad considering the country’s had

been in a recession. Small businesses also controlled 97.7% of U.S. exports (​2013 Small

Business Profiles for the States and Territories)​. This same site also points out facts like that

multiple economic indicators, including real gross domestic product (GDP), consistently signaled

a strengthening US economy (​2013 Small Business Profiles for the States and Territories)​.

Although in 2015 the United States grew at an annual rate of 1.9% (​2013 Small Business Profiles

for the States and Territories)​. Which is down from the 2014 growth of 4.1% and the 2013 level

of 3.2% (​2013 Small Business Profiles for the States and Territories)​. Although at the end of

2013 unemployment was at 5.6% at the end of 2015 it was only 5% (​2013 Small Business

Profiles for the States and Territories)​. The fact is employment is only small businesses that

includes any other companies and workforces. A current statistic showed unemployment at 4.2%

(​2013 Small Business Profiles for the States and Territories)​. Which all of this does help prove

the fact small business are doing good but it also pointed out in 2014 there were 220,000 small

business start ups 205,000 exited (​2013 Small Business Profiles for the States and Territories)​.

That means in 2014 there were only 15,000 more small businesses than the year prior.

Those statistics were from 2013 and the surrounding year’s as for 2017. In 2017 there

were 29.6 million small businesses of 99.9% of all businesses in America (​2017 Small Business

Profiles for the States and Territories)​ meaning that percent went up by 0.03%. Along with 59.7

million small business employees which is 47.8% of all employees (​2017 Small Business

Profiles for the States and Territories) ​that percent went down people are actually working at

small businesses less. Small businesses created 1.4 million new jobs in 2017 (​2017 Small
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Business Profiles for the States and Territories)​ which is 300,000 more than 2013. As for the

export percent has stayed the same at 97.7% (​2017 Small Business Profiles for the States and

Territories)​. Going into 2014 the growth rate was expected to be 4.1%, instead the growth rate in

2014 ended at 2.2% (​2017 Small Business Profiles for the States and Territories)​. The United

States’s in 2015 had a growth rate of 2.5% up from 2014’s ending percentage (​2017 Small

Business Profiles for the States and Territories)​. Going into 2016 it was expected to be 2.5%,

instead 2016 ended with a growth rate of 2.1% and in 2017 it’s expected to be 2.4 (​2017 Small

Business Profiles for the States and Territories)​ which is still way less than the initial

expectation of 2014.

Currently, jobs can have so many benefits vacations days, raises, promotions, free trips,

healthcare, and so much more. Problem is, when people are expecting all these benefits small

business owners don’t have the ability able keep up. They try to make enough money to

constantly be giving out raises or paying for healthcare for employees but most of the time that

has become impossible. Because of such reasons more experienced employees are going to

manage these more financially sound companies. In the statistics shown before the amount of

small business in America went from 99.6% to 99.9%. That’s 29.6 million small businesses. As

the amount went up somehow employment went down. It was at 56 million out of 115 million

workers in 2013. In 2016 it was 57 million out of 121 million that means out of 6 million new

workers only 1 million went to small businesses even though the percent of small businesses

went up from 99.6% to 99.9% that is almost 100% small businesses and five times more people

went to work for bigger companies. The fact that there are more small businesses yet less people

working at them proves small businesses are dieing. People are realizing that chains and
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franchises have more money, meaning they offer better pay, more benefits, and more

opportunities. Small businesses especially new ones can’t keep up with these things they just

don’t have the ability.

Small business owner’s talked about some of the biggest problems they are facing like

minimum wage going up (​Charles, Jeff)​. In some places they pay up to $15 an hour to do

something as simple as cashier or dishwasher. Small businesses can’t keep up, first time

restaurant or shop owners won’t pay $15 for a cook, dishwasher, cashier, and anyone else who

makes minimum wage. For five hours of work that’s $225 per person and that’s plus the food

being fed, waitresses, drinks everything that costs money. Most businesses are literally making a

few dollars off each meal or item sold. In addition building costs, taxes, advertisement, and even

an accountant if needed, most businesses want make enough revenue when they first open to

break even but most won’t. On top of that if it’s a new company and not very popular who

knows how many customers will go there or even consider going there. If they do survive a

couple months those workers are going to want to get raises, if it gets busier they might need to

hire more people fact is even if they are a instant hit, they most likely can not make profit.

Multiple sites have stated in today’s culture a business is either an instant hit something new,

everybody enjoys, and will survive, or it’s not new or good enough it might get business but it

either will not grow or will not make it.

Nevermind surviving the first few months getting a business that passes all the

regulations and codes is a challenge all by itself, along with paying all the taxes and fees

associated with the business. Some won’t even survive the creation process. For taxes paying

them isn’t necessarily the problem. Nearly 60 percent said administrative burdens were the
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biggest challenge to their business posed by federal taxes (​10 Regulations That Give Business

Owner’s the Worst Headaches​). That means that the government has a tight financial grip on

them and most people who start a business can’t fully finance them and if they can finance their

business they struggle financially throughout the business’s life. Not just income taxes; payroll

taxes are a hassle as well. Most businesses with more than five employees use an external payroll

company (​10 Regulations That Give Business Owner’s the Worst Headaches​) That means

business owners pay someone to help them pay someone. It’s a double loss, if the employees are

getting paid it should not matter how it’s done, in reality payroll should not be so complicated

someone else needs to be paid to do it.

“Employers need to devote significant time and energy to maintain compliance with the

law,” said Julie Stich, director of research at the International Foundation of Employee Benefit

Plans (​10 Regulations That Give Business Owner’s the Worst Headaches)​. “The extensive

amounts of data that employers are required to collect can take hours and even require complex

IT infrastructures. The process has meant a cost increase for many, especially smaller

organizations.” (​10 Regulations That Give Business Owner’s the Worst Headaches​). An

employer has no need this much information about their workers. Not only is it a big break in

privacy, but that puts more work on someone already running a business and puts them in an

awkward position towards their employees. It makes it so they hold their employees lives in their

hands. They know employees medical history and if medical insurance is included in the job then

they quit they lose. The company’s paycheck puts food on their table, clothes on their backs, and

pays medical bills. Due to how much they make you commit to a job and it’s too much for small

business owners. “For example, businesses with 50 or more employees must file 1095-C forms
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with the Internal Revenue Services for every worker, showing that they have health insurance

coverage meeting the ACA’s minimum essential coverage requirements” (​10 Regulations That

Give Business Owner’s the Worst Headaches​). That’s 50 lives in one person hands which is a lot

of pressure especially if the market is down and someone has to make cut backs. That’s also a lot

of paperwork more if the owner provides health insurance. On top of that it’s almost guaranteed

unless someone is a previous business owner, that they never filled out any of those forms before

nevermind even heard of any of them before.

On top of all this paperwork there are taxes. Nearly 60 percent of small business owner’s

said administrative burdens were the biggest challenge to their business posed by federal taxes.

It’s not just income taxes; payroll taxes are a hassle as well. That’s why most businesses with

more than five employees use an external payroll company, NSBA found. One-third of small

businesses report they spend over 80 hours per year on federal taxes, and nearly half pay at least

$5,000 a year to accountants or other tax practitioners (​10 Regulations That Give Business

Owner’s the Worst Headaches). ​On top of that there are new overtime regulations. These

proposed rules nearly double the salary threshold where overtime pay is required. Only people

who make more than $55,440 aren’t eligible under these circumstances (​10 Regulations That

Give Business Owner’s the Worst Headaches​). Businesses contend they’ll be forced to cut

workers’ hours and hire more part-time workers in order to cope with the cost increases imposed

by the regulation (​10 Regulations That Give Business Owner’s the Worst Headaches​).

For some businesses, money is not the problem the question is whether or not they are

joint employers. The National Labor Relations Board broadened its definition of who constitutes

a “joint employer”. On a 3-2 vote, the NLRB ruled businesses without direct control over
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workers employed by their franchisees, subcontractors or temporary staffing agencies can be

considered to be joint employers if they have indirect control or potential control over these

workers’ terms and conditions of employment.” (​10 Regulations That Give Business Owner’s the

Worst Headaches​). If applied widely, the ruling will make it easier for labor unions to organize

fast-food restaurants (​10 Regulations That Give Business Owner’s the Worst Headaches​). It also

could upset the traditional franchising model, because franchisors would feel the need to exercise

more control over franchisees in order to protect themselves from liability for any employment

law violations by franchisees (​10 Regulations That Give Business Owner’s the Worst

Headaches​). That would make owning a franchise a less desirable option for small business

owners. At the same time this makes it harder for franchises to expand and in turn could help the

number of small businesses.

Not all regulations come from the federal government though. In the state of Kentucky in

order to run a hairdressers a need of 1,800 hours of coursework, a six-month internship, and get a

cosmetology license in order to operate a legitimate business (​10 Regulations That Give Business

Owner’s the Worst Headaches​). If looked at periodically 1,800 hours of coursework would

probably take 60 weeks of 30 hours a week more if you have a job. Plus another 26 weeks for the

half year internship. Now add the four years of college. That means in order to even be able to

start a cosmetology business in Kentucky it takes 300 weeks of prep and that’s not even

including actually figuring out a legitimate business plan and preparing the store. More than

one-quarter of U.S. workers are in jobs where licenses are required, according to the White

House (​10 Regulations That Give Business Owner’s the Worst Headaches​). This limits economic

opportunity as well as competition for entrenched businesses (​10 Regulations That Give Business
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Owner’s the Worst Headaches)​. It’s not even just regulations on the business being affected that

hurts them. EPA rules requiring power plants to reduce their carbon emissions by burning less

coal and using more renewable energy, such as wind and solar power, could increase the cost of

electricity for businesses as well as consumers, contend business groups such as the chamber and

the National Federation of Independent Business (​10 Regulations That Give Business Owner’s

the Worst Headaches)​.

Whether or not financial problems, regulations, lack of experience, or missing

information is keeping a small business from succeeding. It costs to much now a days and with

prices constantly going up making it harder and harder to afford. Even with deregulations there

are so many restrictions on opening a business it’s become a commonly unreachable dream. On

top of that even if they manage to open a business often the paperwork and lack of proper

paperwork can put them right back out of business. The fact is small businesses are dying there

are ways of fixing it and making the economic structure stronger but as of now small businesses

are going to die.