The Top Three New Challenges Facing Small Business

Starting a business is increasingly difficult.

The rate of business starts is hovering near the lowest level in recorded history on a per capita basis. More businesses closed than were opened at the beginning of this decade for the first time in a generation. Why are things so bad right now?

1. It’s the money, stupid! Small businesses are being stifled by overregulation, overtaxation, and lack of access to credit—all of which affect the money businesses have access to. Two-thirds of respondents to a national Job Creators Network poll said that overtaxation threatens the viability of their businesses, while three in five said the same about overregulation. Roughly one-third said lack of access to credit was a killer.
2. Unprecedented labor regulations. Numerous new and proposed labor regulations like minimum wage increases, new overtime pay thresholds, health care, and paid leave requirements threaten to eliminate the single-digit profit margins of small businesses, eliminating the businesses with them. The bad news? If the cost of hiring someone goes up a lot, business owners hire fewer people.
3. Unelected Washington bureaucrats strangling small businesses with red tape. Examples: The National Labor Relations Board’s “joint employer” rule would upend one of the most successful small business models in history: the franchise model. The rule would treat franchisers as joint employers with their franchisees, meaning that they would be liable for the thousands of daily decisions of what are essentially independent small businesses and less willing to take a chance on an untested upstart opening shop. Another is Dodd-Frank, whose financial regulations have disproportionately hurt community banks, which are disappearing at a rate of one per day. And small businesses are also facing one of the highest and most complicated tax burdens in the developed world.