By KAREN KERRIGAN, TIPP Insights
Entrepreneurs are great at sniffing out opportunities, and they are also pretty good at foretelling economic pitfalls. With relentless headwinds that are driving business costs higher, and policies being pushed in Washington, D.C. that seem hell-bent on making things worse, it’s no surprise that 88% of small business owners expect a recession to hit in the next 6 to 12 months, according to the latest SBE Council-TechnoMetrica “Small Business Policy and Economy Survey.”
Moreover, the actions small business owners are taking in response to inflationary pressures – 62% of business owners are cutting back on their spending and investments – will have an adverse impact on many sectors across the U.S. economy. At the top of the list of cutbacks is business travel (49%) followed by updating equipment and technology (48%), new hiring (46%), donations and charity (42%), advertising (41%), marketing/business development (41%), memberships/subscriptions (39%), payroll (25%) and benefits (22%).
The curtailing of investment, spending, and employment by millions of small businesses will deeply wound local and regional economies. It will prevent the economy and our supply chains from fully recovering from the disruptive effects of the COVID-19 shutdowns. Indeed, the solutions to getting supply chains and our economy back on track are policies that enable and encourage our businesses – of all sizes – to invest, innovate and operate with confidence. But policies being pursued by the Biden Administration and Congress are not only goading market and economic chaos, they are fully detached from those that resolve the pain points of businesses.
Similar to our early 2022 survey of pandemic-era startups – where only 5% of entrepreneurs said Congress’s policies are helping their startups, and a mere 9% thought President Biden’s policies make it easy to start or grow a business – our current survey of more established small businesses shows a deep disconnect between what these businesses need and what President Biden and Congress are pushing.
Small businesses are screaming for relief from inflation, high gas prices and government-related burdens, yet President Biden is sticking with his archaic playbook, as he calls and pushes for higher taxes, more government spending, and more punitive regulation on businesses. The federal regulatory agencies – from the Departments of Labor to the Securities and Exchange Commission, and many others in between – are going full throttle against private enterprise, and that includes small businesses.
Make no mistake- this is not an Administration that supports entrepreneurs and small businesses. With a Labor Department moving at warp speed to invalidate the status of millions of independent contractors, and raise small business costs and undermine workplace flexibility by potentially (and unnecessarily) expanding overtime regulations – just to name two policies out of dozens being pursued – this Administration itself is working overtime to destroy our small business economy.
So, it should come as no surprise that small business owners in our survey have a dim view of the current Biden economy: 44% report that conditions are “poor” and 33% say economic conditions are “fair.” Nearly all small business owners (92%) are concerned about inflation.
A piece of good news is that most small business owners in our survey are optimistic they will survive. Still, 28% believe they only have a “fair” shot at survival and 7% believe their prospects are “poor.” Even if 7% of small businesses close their doors, that’s nearly 2 million firm closures. That’s a lot of economic carnage and job loss.
According to our survey, the priorities of small business owners are falling on deaf ears both in the halls of Congress and within the Biden Administration. Not surprisingly, “inflation” tops the list, followed by affordable health coverage, supply chain issues, tax relief and certainty, cybersecurity, interest rates, and the labor shortage and access to skilled workers.
At the very bottom of the list? Breaking up and regulating U.S. technology leaders – aka “Big Tech.” That is not surprising given that 75% of small business owners say that digital tools and platforms are important to the success and growth of their businesses. Moreover, 55% express worry that legislation and regulatory efforts targeting “Big Tech” would negatively impact business sales and operations, and the broader economy. Specifically:
- 48% believe regulatory actions or breaking up big tech will have a negative impact on small business, thus hurting the economy and its recovery.
- 44% are concern they will need to start paying for services they currently receive for free.
- 36% believe it will be more expensive to access and retain customers.
- 36% say proposed regulatory actions will harm U.S. investment and innovation.
- 32% think it will be harder for customers to find their businesses.
- 31% believe singling out U.S. companies will give global competitors like China an advantage.
Business owners also expressed concern about the disruption of communications with customers, the erosion or loss of privacy and security protections, difficulty in acquiring new customers, and the disruption of back-office support such as packaging and shipping.
If federal legislative or regulatory actions trigger the imposition of new or higher costs, or if certain digital services were discontinued, 45% of small business owners say larger or more established businesses would benefit, and 24% report their business may be forced to close. In addition:
- 40% express concern about these higher costs.
- 37% say their business would have a difficult time growing.
- 37% believe they would have less capital to invest in their business.
- 36% say they would not be able to compete with larger or more established firms.
- 35% say their sales will decrease.
- 33% believe their hiring ability would be negatively impacted.
Small business owners have little breathing room, and it is critical that Congress and President Biden get it right on policy. That means doing a 180 on their current policy agenda. This costly and damaging activist agenda is bad for all U.S. businesses, but is more keenly felt by our small businesses.
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