By Debbie Fletcher
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“You are the dreamers and innovators who are powering us into the future – that’s exactly what you are – and my administration will be there with you every single step of the way.”
These warm words were uttered by President Donald Trump in an event held to highlight the role of small businesses as the ‘engine of the American dream’. Never one for understatement, the POTUS also declared: “America is on the verge of a golden age for small business.”
While the words here are commendably positive, it prompts us to ask – how are U.S. small businesses currently performing and what, if anything, needs to change if they are to make good on this golden age?
U.S. Small Businesses: The State of Play
First up, we should consider the state of America’s small business sector. It’s perhaps instructive to start with some stats:
- There are about 28 million small businesses in the U.S.
- Those businesses employ almost 57 million people – 48% of the private workforce.
- Small businesses in the US create more net jobs than large businesses.
- Of the total number of companies in the US, 99.7% of them are small businesses.
- In total, 4% of small businesses make more than $1 million – and more than a third make more than $100,000.
Not only that, but it seems that small businesses are feeling confident about the future.
A USA Today and Allstate survey found that 64% of firms with 100 or fewer employees say that their businesses are doing well, while 72% expect things to get better in the coming year too. The entrepreneurial spirit is alive and well among young Americans too – with more than half of all millennials saying that they plan to start a business in the next three years.
With plans to put that confidence into hiring and expanding, it’s certainly fair to say that the nation’s small businesses are primed and ready for this promised ‘golden age’.
Small Business Eco-System Feeds Off Big Businesses
Of course, we shouldn’t look at small businesses in isolation. In many ways, the nation’s network of smaller firms offer an eco-system which feeds into and supports big business.
If a Dow Jones-listed company, for example, gets a multi-billion dollar contract the impact doesn’t end there. Indeed, it ends up with $1 million-plus contracts for specialist companies who can bid for their slice of the pie.
After a bumpy couple of years, the Dow Jones Industrial Average has shown strong growth in 2017 – another good indicator for small- and medium-size businesses who benefit from the trickle effect.
Changes to the Law
So far so good. Small businesses make up a good proportion of the US economy, they’re bringing in good money, they’re feeling confident, the younger generation are showing a strong entrepreneurial spirit, and large businesses are performing well too.
But what needs to happen if we’re to get to the golden age? Here are a few barriers that need to be addressed:
- Banks and financial lenders can do more. More than a quarter of businesses say they can’t get the money they need to grow and succeed.
- Fees could and should come down. The corporation formation fee in Colorado is $50 but $455 in Connecticut. Expensive states should commit to doing more to helping new companies to get off the ground.
- Taxes can be cut. During the election, Trump promised that he would lower corporate taxes from 35 percent to 15 percent but given that small businesses owners pay business taxes based on individual returns, income tax cuts would greatly help many small businesses.
- The system should be simpler. The US tax code is unnecessarily complex. Too much time and effort is wasted trying to make sense of this.
- Apprenticeships and vocational courses should be developed. Small businesses need skilled workers and federal government could, as Dallas News notes, establish a program whereby high school students get a course credit for working in businesses in their hometowns. Those businesses could get a tax credit in return.
With better lending, lower fees and taxes, a simpler system and better training, the current conditions could be capitalized on to deliver the ‘golden age’ promised by the President. There’s a good way to go, but the rewards are worth the effort.