Reuters

(Reuters)

Guess Who Suffers the Most From GE's Headquarters Move?

By Small Business FOXBusiness

Lots of people in Connecticut are pointing fingers. The state will soon be losing significant revenues, not to mention the prestige of being home to one of the world’s largest companies. Who stands to suffer the most?

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Last week GE announced it was moving its long-time headquarters from Fairfield, Connecticut to Boston. The move of nearly 800 employees, when taking incentives into account, will not be a material cost to the company. And according to this report, the company’s CEO says Boston and its surrounding communities are a good fit because the area is home to 55 colleges and universities and that Massachusetts “spends more on research and development than any other region in the world." GE will release its earnings later this week.

Lots of people in Connecticut are pointing fingers. The state will soon be losing significant revenues, not to mention the prestige of being home to one of the world’s largest companies. But the politicians won’t be the ones to suffer the most. They’ll still get their paychecks and who knows – maybe they’ll even be re-elected because anything can happen in politics. 

So who will really suffer?  It will be the small businesses in Fairfield and its surrounding communities.

These will be the real estate brokers, pizza shop owners and mechanics. They will be the firms that provided landscaping, maintenance, cleaning, day care, delivery, transportation and other services to the corporate facilities. They will be the local stores and restaurants where GE employees shop and eat. They will be the charitable and community organizations that received local support from the company as well as participation on their boards from GE employees. Some believe that there are as many as 65,000 others employed by Connecticut businesses who will be affected. These will be the people and businesses that will suffer. And they’re suffering for three reasons.

They’re suffering because they’re stuck in a high tax state.

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And as long as the state’s taxes remain high, other large companies may also follow suit. Big companies have a fiduciary responsibility to their shareholders to operate as profitably as possible and ensure that investors are receiving the highest returns possible. If taxes in another state (or country!) are more attractive and it’s possible to move there – be it physical or through tax-inversion schemes like Tim Horton and Applied Materials have done – profit-minded big company executives will do this. They are being irresponsible if they don’t. Unfortunately, most small businesses don’t have the ability or resources to move operations like big companies can. So they’re left in the wake of departing giants who provide them with so much of their livelihood. In short, high taxes drive away big companies and lower taxes attract them. And big companies benefit small businesses (more on this below).

They’re suffering because they miscalculated.

Trust me - the owners of the maintenance firm, the cleaning service and the shipping business that relied on GE as their main source of revenue over the years have just had a very rough weekend and are going to have a very rough few years trying to replace their lost revenues. And you know what? Their suffering is their own fault. A big company like GE doesn’t care about the long term success of these businesses, nor should they.  And nothing is ever permanent in this life. The lesson here is to never rely on one customer as the main provider of your company’s income. Too many small businesses do this – I see it a lot. The smart business owners I know take great pains to diversify. Things change. Big companies move. Smart business owners are always prepared for when things change.

They’re suffering from the recent trend of demonizing big companies.

For years we’ve watched corporate America fall under attack from the very highest levels of government. The 1% are evil. The rich are bad. The financial community are “fat cats.” Small businesses in Fairfield and its surrounding communities are soon to be suffering because one of the biggest of the big are moving their headquarters. We love to point fingers and place blame but the bottom line is that big companies are made up of people. And those people spend lots of money on services and products provided by smaller firms (like mine).  Even after you leave the corporate park, consider all of contractors, restauranteurs, shopkeepers and other service providers in the area that benefit from the incomes generated by GE.  If you treat these companies poorly, make them feel unwanted, tax them too much then they will ultimately find a place where the business environment is better. To them it’s just a financial blip. But not to the smaller businesses that they leave.

Boston is a big city and of course welcomes the arrival of GE. But the company’s move there won’t have a significant impact on the city’s small businesses. Unfortunately, the Fairfield businesses left behind will certainly be suffering.

What do you think?

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