The Importance of Small Businesses

If you know me, or have been reading me for anytime, you probably have discerned that I am a human resources consultant. However, unlike most consultants who pursue big companies, I specialize in helping small companies deal with the challenges of having employees. So small business growth is important to me and apparently it is to country as a whole. In the Wall Street Journal this morning (11/19/2010) there is an article entitled “Few Businesses Sprout, With Even Fewer Jobs”. The article reports start-ups have failed to keep pace with closings, and even those that do open up are doing so with fewer employees and hiring at a slower pace. The authors of the article, Justin Lahart and Mark Whitehouse, say that “Research shows that new businesses are the most important source of jobs and a key driver of the innovation and productivity gains that raise long-term living standards. Without them there would be no net job growth at all.” Let me emphasize that

 “without them there would be NO net job growth at all.”

That is how important small business growth is to this country. Yet there are major roadblocks to that growth occuring. Since I spend a great deal of time talking to small business owners and leaders , and I am one as well,  I can give you a first hand account of the “why.” The biggest reason is UNCERTAINTY! They are uncertain about taxes and the impact of healthcare “reform.” Most businesses are concerned about those, but it is magnified in a small business. For big businesses it may be expensive, for small businesses it may mean the end of the business or the failure to even start up. So you are not going to see small businesses grow in any significant fashion until that uncertainty is cleared up. And if it is cleared up in a way that has a large negative impact then there will be no movement there either.

The article also went on to show that another hindering factor is money. Lack of it, inability to get it from banks, and even hesitation on the part of “angle” investors to put money in without taking large amounts out. One business owner friend of mine has explored getting money that way and opted not to pursue it because the investors wanted control of the business. Most of us who have started a business are going to be very hesitant to give up control.

Another factor, not mentioned typically in articles, is the amount of regulation that small business have to deal with in starting a business. Even companies with as few as two or three employees have a slew of federal and state laws they have to comply with as they start up. My experience has been that typically they don’t know what they don’t know and it is only later when they get in trouble that they understand how daunting the task of having employees is. It is also an indication that most business owners do not realize how important good HR is to their success. They would be much better off if they constructed good HR from the outset. Many mistakes would be avoided.

To that end I have decided to dedicate my Friday posts to issues of small business HR. So if you know anyone starting a small business have them check in on Fridays (actually have them check in everyday, they will learn a ton.)

 (And now the commercial, I am always happy to provide consultation to anyone starting up a business or growing it.)

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