Celebrating Small Businesses—The R&D Of The U.S. Economy
Small Business Week acknowledges the essential role of entrepreneurial ventures in the development of our economy every day. The small business sector is the “R&D” of the U.S. economy. Name a large successful firm that didn’t start off as a small innovative enterprise, there aren’t any. Walmart, Amazon, Microsoft, McDonald’s etc.—their stories are inspirational and there are a million such stories of a different scale and flavor that populate Main Street across the country and employ about half our workforce. Entrepreneurs are free to try out their ideas. The market picks the winners, the losers go on to try other ideas. Profit is the supporter of success, providing capital to grow the business and attracting new competitors. It is a great dynamic. And the risk taking doesn’t end with great success, look at who dominates our space program for example—entrepreneurs in private firms.
Surviving in this competitive environment is not easy. Small businesses are lean and mean, they don’t have legal departments, human resource department etc. As the regulatory environment expands and changes, small businesses have to spend more of their scarce resources on “compliance.” The most valuable resource a small business has is the time and energy and vision of the owner. Diverting those assets to deal with regulations and tax compliance is a headwind to growth for the firm. For the past 48 years, NFIB has surveyed its 300,000 members to gather data on their well-being and concerns. When asked to identify their most important business problem (from a list of 10), taxes and regulatory costs are historically the top vote-getters with few exceptions. Today, finding qualified workers wins the top spot.
Now small business owners have a new Administration to deal with, with promises to increase taxes and regulations. And the virus is still driving a lot of fear for those not vaccinated and a lot of regulations. Foot traffic is critical to the business of most small firms and it is still restricted by regulations, capacity restrictions, and fear of the virus. Opening the economy is probably the largest stimulus that could be efficiently delivered, letting markets work again. There is much uncertainty about the course of policy, not helpful to decision-making. The government has provided a major stimulus, checks in the mail, and loans and grants to small firms. Consumer spending is likely to be strong, helping to increase employment at under-utilized Main Street firms, a welcome change from the empty streets of last year. Whatever the course of economic policy, small businesses will remain the core of the economy, an important job provider, and the source of the star performing firms in the next decade.