Small businesses are a crucial part of the US economy; with almost 30 million small businesses operating in America today, small businesses are at the heart of America’s economy. Small businesses comprise over 90% of all employer firms, employ almost half of this country’s workforce and create roughly 60% of all new private sector jobs.
Small businesses are often treated as a political football – the Small Business Administration attempts to provide small businesses with special assistance, while politicians often call for inventory manufacturing to be kept onshore and for greater support for smaller firms. At the same time, small business leaders regularly suggest that state and federal governments are not doing enough. How are small businesses actually faring? Are small businesses struggling to keep pace, or are they thriving in spite of an increasingly competitive external environment?
Although the political and economic environment in the United States is reasonably turbulent, small businesses generally have a higher level of confidence than in previous years. Although business confidence is broadly on the up, an increasing number of small businesses are uncertain about the future trajectory of the economy.
SMEs are more attuned than ever to the business continuity risks posed by natural disasters and infrastructure disruption. These are some of the largest factors affecting inventory management. Some small businesses have experienced difficulty finding suppliers who are able to build sufficient redundancy into their supply chains to cope with adverse events.
The Tax Code
Current surveys suggest that tax policy is currently the number one concern among small businesses in the United States. Small businesses feel the effects of tax policy especially; SMEs often have relatively slim margins, and those margins are easily eroded by tax. Many small businesses also perceive that high business taxes are likely to hinder their ability to compete globally.
Although small businesses take a range of views on tax policy, a large number of small businesses appear to be in favour of the tax reform proposed by the current administration. Small business owners are hopeful that any tax package will reduce corporate tax rates and bring tax rates for sole traders and unincorporated partnerships in line with corporate taxes. Bringing corporate tax rates is likely to allow more small businesses to plough earnings back into business growth and further investment.
Access to Credit
Smaller businesses continue to struggle to finance future growth. Access to credit is a major small business issue, with many business owners blurring the lines between their personal and business finances in order to access a line of credit. Although medium sized businesses enjoy reasonable access to credit, businesses that are only bringing in several hundred thousand dollars per year are struggling to impress lenders. Small businesses are turning to capital funding earlier than before as a way to fund growth plans.
Small businesses are increasingly facing stiff competition from large businesses at home and abroad. In the retail sector, small stores are struggling to keep pace with ecommerce giants who can leverage scale to aggressively compete on price. Equally, small manufacturers are frequently being undercut by overseas manufacturers with lower labour and compliance costs who are manufacturing inventory for other United States businesses. But can globalisation be good for small businesses?