Healthcare costs, federal regulations, taxes top the list
As I look at the state of small business, I do so from the perspective of both being a small business and serving small businesses. Our client base consists primarily of small businesses. According to the SBA’s definition for the trucking industry, that is businesses with less than $27.5 million in annual revenue. As a small shop ourselves with a handful of employees, we face similar issues as our customers.
The good news for those of us who serve small businesses is that the creation of small businesses has been on the rise since 2010. As one would expect with a moderately growing economy, the Bureau of Labor Statistics reports that establishments less than one year old have gone from 560,588 in 2010 to 679,072 in 2015.
Probably every other month, there is an article about the top issues that face small-business owners. Most of those articles list a version of the same issues. The National Federation of Independent Business (NFIB) does an annual survey of "Problems and Priorities." In 2016, that survey returned 75 issues ranked by 2,831 small-business owners. Top among the challenges was the cost of healthcare. Second was federal regulations and third was federal income tax on business.
Cost of Health Insurance
The fact that the cost of health insurance is the top issue is probably not a surprise to most. According to the Agency for Healthcare Research and Quality, health insurance costs have risen 56 percent in the past decade, outpacing inflation and wages. Very few of our trucking company customers offer health insurance plans. The numbers show that is the case across most industries. Just 29 percent of firms offer health insurance plans to their employees, down from 42 percent in 2004.
It impacts hiring decisions of small-business owners. Employers who provide insurance certainly have a larger pool of employees to recruit from, but it makes the decision to hire the next employee a bigger hurdle to jump. Uncertainty is the largest concern around healthcare for small-business employers. The new administration has not changed that. It is hard for a business owner to expand payroll when they don’t know if significant insurance costs will be part of that or not.
In the near term, offering health insurance to employees will continue to be a business decision for employers as they try to recruit and retain the best talent to move their business forward. In the long term, I believe you will continue to see small-business owners vote for their representatives based on this issue.
Customer Experience or Consumer Expectations
Companies like Amazon have moved customers’ expectations of ordering and fulfillment in the retail space. Over the past few years, my industry of finance is evolving significantly around the customer experience. What many call fintech companies or online lenders such as On Deck, Kabbage, Funding Circle, Lending Club and many others are streamlining the application and funding process for both consumers and small businesses. While many of those online lenders are reporting significant losses, they are impacting traditional bank and even alternative lenders like factors. Small-business owners who need cash quickly to stay afloat or take advantage of an opportunity are not waiting around a few days for traditional lenders to approve and fund them. These small-business owners are willing to use these arrangements at much higher rates than the alternative. Speed and ease of the process is a top priority for our company and most of our competitors.
For other industries where the small-business owner is competing against large competitors, many would say their advantage is that personal touch and service. While that is certainly true, both the retail and commercial consumer have moved over to expect “both/and” — personal touch and ease of process. Does the consumer really need to touch and feel the product? With online reviews and ratings of one to five stars, consumers trust the masses and purchase based on the experience of others.
I believe this is the area where we will continue to see the most movement among the winners and losers in small business. Those who can blend technology and social experience for their customers will win out over those who cannot.
Hiring
Unemployment is a double-edged sword. It is great for our economy that almost all the available workforce is employed, being taxed and spending that income to fuel sales in most sectors. As an employer, it makes it tougher to find people when our unemployment hovers at just over 3 percent. Simple economics of supply and demand have pushed the cost of labor up.
Add into the equation that baby boomers are retiring and millennials are now the largest generation in the workforce. What attracts and retains the younger employee has changed the way employers deal with employees. How does an owner keep employees who are expecting autonomy, flexibility and self-expression? For many millennials, money is not the motivator; life/work balance is. They want opportunities to make a difference immediately. For many small businesses with the founder active in the day-to- day operations, that is a tough task as there just are not many layers to move up.
Not all is lost. What attracts and retains millennial employees probably attracts and retains your customers. Millennials want to be part of an organization where there is a positive customer experience and the company, through its employees, is making a difference in the customer’s life. Much of that experience revolves around technology. According to a PricewaterhouseCoopers survey, 78 percent of millennials surveyed said access to technology they like to use was a consideration in evaluating a job opportunity. Millennial employees represent the best-educated (the most schooling and the highest SAT scores) generation in history. My advice is to let them help you evolve your business into one that brings you customers you want.
Eric Myers is president of Diversified Transportation Finance in Park City. Diversified Transportation Finance is part of Diversified Lenders Inc., a 30-year-old finance company that provides working capital and equipment finance to small and mid-sized companies.