With President Trump set to deliver the State of the Union address on Tuesday evening, one important group of Americans will most certainly get a few mentions: small business owners. While entrepreneurs and the small businesses that they run all across this nation are always given a nod, what is the current state of small business?
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According to the SBA, there are more than 30 million small businesses currently in the United States, and around 6 million of those have employees and the rest are solo entrepreneurs. Small businesses are owned by a diverse group of individuals, from immigrants to multi-generational families, men and women and 8 million minorities. They account for close to half of the country’s jobs.
While small businesses often get headline acknowledgement as the “backbone of the American economy,” which they are, they are often treated in a much different manner. Proposed legislation on everything from taxes to employee rules is often justified by politicians using giant businesses like Amazon or Apple or Walmart as examples. And when enacted, these laws often ends up affecting the millions of small business owners, usually disproportionately and negatively.
While small business owners risk their own capital to create a business and often jobs, they are plagued with demands for higher minimum wages. This is causing small businesses like restaurants to close in some locations and to reduce employee hours in others.
While an entrepreneur is subject to these non-free-market rules and restrictions as an employer, it is important to note that nobody is guaranteeing their wages, while they take on all the risks.
Politicians have also proposed a slew of rules that impact even the smallest entrepreneurs. A recently proposed House bill HB 1515 in Washington State is seeking to penalize solopreneurs and independent contractors, providing fines for entrepreneurs like hairdressers that go out on their own instead of becoming someone else’s employee.
Entrepreneurs who braid hair and provide other cosmetology services are just some of the ones facing onerous licensing requirements in states all around the country, including New Jersey, whose hair-braiding licensing law took effect January 1. Many of the small business owners affected are women and minorities.
It is extremely difficult to be an entrepreneur and even harder to be a successful one. More rules and regulations create additional challenges to growing a business and create hurdles for hiring more employees -- or even your first one.
If just 5 percent of all small business owners with no employees were able to hire their first, it would create more than 1 million new jobs. However, as the forgotten majority of businesses, small business owners rarely get the types of incentives that would make it easier for them to increase their positive impact on the economy.
While President Trump has worked hard to provide tax relief and cut regulations for business, many small business owners are still worse off than big corporations. Service businesses, for instance, did not get the same percentage corporate tax break that larger businesses benefited from.
Elsewhere on the policy front, small businesses have had mixed results. Some have felt heat from the U.S.-China trade war. Others have had better access to capital, with a pause during the recent government shutdown, which created a backlog of non-processed SBA loans.
This has led to varied readings on confidence, as Vistage’s small business optimism index has been declining for several quarters, while the NFIB’s index slipped in December just slightly after reaching record highs.
So today, the state of small business and entrepreneurship is strong, but undoubtedly could be stronger. Even so, small business owners will continue to keep their heads down plugging away at their work, because that’s what entrepreneurs do.
Carol Roth is the creator of the Future File legacy planning system, a “recovering” investment banker and New York Times bestselling author of The Entrepreneur Equation.