Why are SMIDs Important to Economic Recovery?
SMIDs (small-mid size businesses) employ at least half of the workforce in this country. Corporate jobs are not the only jobs around yet our government is focused on dealing more for large corporation benefit because of the big dollars they represent. Small business represents half or more of the voter base indirectly but do have a greater impact on local government through state and local taxes. Anyone can own a small business including teenagers on the internet and retired people running a small business of any type, which I’m sure we will see even more.
SMIDs offer the best way for Americans to fight against socialism. There is no doubt whatsoever that this country has voted in a very socialist congress and president. We don’t need socialism since we already have social programs in place to help those who really need help, despite the few that abuse that system. In any case, the point is that true freedom is the ability to decide how to live your life. The ultimate form of that freedom is not in owning a house but in owning the ability to not be in debt for that house, to have financial freedom, the ability to enjoy life. Good business owners have that. They can decide how much to earn, how much to spend, how much to invest, and most importantly for their lifestyle, when to do these things.
SMIDs help control taxes in an environment in which our representatives would have everyone making a good living pay even more into their coffers of ill-will. We really have the butting of heads between ill-will and goodwill. Goodwill is the ongoing viability of a business or venture and ill-will is the opposite. The government’s ill-will would take as much as possible from SMID business owners and damage their ability to prosper and grow. In opposition, the effective business owner has the ability to operate with some tax rules that allow write-offs; discounts for employees to some degree; and control of forces effecting net income by writing off expenses, assets, and fees. All this activity creates cash flow for suppliers and advisors of the business owner as well. A lot of people feel they enjoy writing off their home mortgage interest and they should also realize business ownership is a multiple of that. The knowledge a business owner gains in dealing with smart business concepts is key to our economy.
SMID owners become very aware of our taxation problems and can educate family and friends. Through the process of learning about their tax liability and the resulting shock and awe of the ridiculousness of it, owners become acutely aware of the need for better legislative representation! They learn what it takes to successfully profit in the environment of business ownership and generally become advocates of smarter government along with smart business. This advocacy can have a direct impact on employees when business owners take the time, and they should, to educate them on how the process works, limitations on benefits imposed upon the owner by tax law and regulations, and how to work better as a team to enhance the business so it benefits employer and employee alike. This knowledge of the average owner and employee should have an impact on future elections of government representatives. The evidence of this is the current effort of the federal government to employ more people and compete for those votes which will favor big government and corporations over small and mid-size business. This is a fight, not just for the right to make a good earning, but also for true freedom.
Our freedom depends on the abilities of SMID owners and their partners. If the U.S. Government continues to be in direct competition with business in this country and move forward with the effort to remove the ability of employers to provide enticing benefits to employees, the social impact will move us closer to economic failure similar to that of the Soviet Union. That failure represents socialism’s negative impact on maintaining and growing a good quality standard of living which the U.S. enjoyed for so long. We don’t want to be another Soviet Union for any reason. China also represents a low standard of living in comparison to the U.S. Independent business owners are much more capable of taking care of employees and their needs than the government will ever be. The difference is in taking a number to stand in line for benefits or having an employer who needs and wants to keep employees healthy and happy so they can be much more productive. When a business and its employees are successful they have a direct positive impact on the economy and are more able to expand and provide more products and services.
SMID partners must create opportunity as well. Partners are those who use the services or provide services to a business. If the efficiency of the business and its employees is high, then the services and demands they represent are high as well. Customers benefit from a lower overall cost since they receive higher efficiency, and this directly impacts the next customers in line. Nobody wants to purchase low quality goods and services since the replacement costs end up doubling the overall cost! Example: In the past, Xerox offered copier equipment with a 5 year fix or replace guarantee which none of their competitors offered. To compare total cost of ownership on a $15,000 copier all one had to do was assume that in any of the 5 years the unit could fail to the point it might have to be replaced. A one to one comparison showed that a competing unit discounted to $12,000 had a 5-year risk of actually costing $24,000 if it failed and had to be purchased again. Which would you buy? It was a simple decision. Quality of employees and quality of services is important to the economy and the ability of increasing the number of consumers, of which the Federal Reserve is always hopeful of.
SMIDs as consumers are the segment most likely to grow our standard of living and consumer economy. Because small and mid-size business owners enjoy economies of scale, even if their net revenue is low, they can purchase more goods and services. If they expand their business and customer base they also expand their economies of scale. This can happen rapidly! Remember the technology bubble? The expansion, based on demand, was incredible. The money available to invest in these ventures seemed unlimited. Yes, it got out of hand, but look at the previous expansion of the SMIDs in the 1980s and 1990s. Prior to the tech bubble we were enjoying a comparably low cost of capitalization, expansion of good quality services, an increase in technological breakthroughs, and at the same time an increase in employee benefits to a level never before seen. Prior to the 80s hardly anyone had a retirement plan and most people were on a cash basis for retirement based on what they had saved in the bank. Our standard of living increased dramatically throughout the 80s and early 90s.
Every successful SMID is like adding another wealthy or near-wealthy entity to the country even if the owners do not become very wealthy. A business owner may take home only 5 figures but the business itself may generate a gross in multiples of 7 figures. That cash flow has to go somewhere! It does. It goes to employees, suppliers, taxes, fees to banks and professional services, utilities, charities, and in some ways to customers who save money on convenience and services. A well-run business can spend money like a very wealthy individual can. Yes, I realize not all businesses are run efficiently but many are — just look around you and especially in the older business districts of your community. Some of those companies have been around long enough that their low overhead cost alone allows them to hire more people and expand into new products because they can afford to do so. When they finally decide to spend they are more likely to make a quality decision that not only makes more money for the business but also for all of those involved.
SMIDs can employ more people rapidly. SMIDs are quick to notice uptrends in the economy and because of their size they are able to move quicker on new business opportunities than their large corporate counterparts. They have the ability as a group to suddenly expand the employment base since they have fewer obstacle between the decision maker and the employee in the form of a ridiculous legal moat called Human Resources ,which so often is merely a group of attorneys trying to protect the firm from what they believe could be rogue employee complaints. This wouldn’t be such a problem if the government didn’t automatically impose higher expenses each time an employee needs to be terminated. It’s still a problem for SMIDs but there are fewer layers to go through. Remember the days when managers hired and fired? Now corporations refer potential employees to HR at the home office.
Small and mid-sized businesses only survive if they benefit people. Unlike the Government which is neither intended to benefit employees nor able to do so, it seems, at least not in an efficient form; SMIDs must create value for everyone involved. Employees, providers, and customers must feel it is worth doing business or they will go elsewhere. This really goes without saying. A government entity can only enforce participation in the form of regulations that reduce choice and cause stress, as it flexes its muscle to impose its position on the citizens. As a competitor of SMIDs the government is truly a destructive force to society.