I work for a business that has as its explicit philosophy the desire to be #1 or #2 in every market it competes in.
So how do you think we do it? Do we try to sabotage other companies? Do we buy up their suppliers and cut them off? Do we dump products on the market under cost, in an attempt to put them out of business? Just what is the mechanism? Bear in mind that I work for one of the largest companies in the world, and we could no doubt direct enough resources to destroy just about any of the smaller companies we compete against.
So how do we try to maintain this dominant position? I’ll tell you: By working our asses off. By demanding excellence from everyone. By constantly evaluating the market and the competition, trying to understand what they’re doing that we’re not doing. By trying to make better products than the other guy.
I’ve been in lots and lots of meetings where the long-term strategy of market dominance was discussed. I have NEVER heard anyone suggest trying to use monopoly power to crush our opponents or buying up a competitor’s suppliers, or anything else remotely nefarious. The strategy is always the same - higher quality, more efficient production, better product plans, more sensitivity to what customers want.
I ran my own business for ten years. Those of you who have not done this have no idea how hard it is. You are faced with decisions almost daily that could cost you serious money or put you out of business. If you’re a small business, every employee you hire is a potential disaster. Every deal you make carries risk. If you have an idea for a new product, or for upgrading your current product, you have to put your own hard-earned cash on the line.
You have to pay employees money you could have kept for yourself. You have to buy raw materials, upgrade computers, buy machining equipment - all of which will lose money until your product sells enough to recoup your investment. IF it does. If you read the market wrong, or underestimate development costs, or if any one of a million things go wrong, all your planning can be wiped out.
Small businesses are responsible for about 70% of new jobs. Most of them are under-capitalized, operating on a shoestring, and only one or two big unexpected costs away from having to cut back investment or go bankrupt.
I can tell you from personal experience that hiring my first employee was a terrifying thing to do. Because I basically had to give him my own salary, and then hope that adding him would raise sales enough to pay me back. It would have been easy for me to decide not to hire someone and scale back my plan for growth and be happy as a one-man shop.
You think uncertainty isn’t an issue? Tell you what: You hire someone today, and a year or two from now I’ll tell you if you’re going to have to pay an extra $3,000 per year for his health insurance. You go ahead and take out that $500,000 loan to build your machine shop, and later on I’ll decide what interest rate you’re going to have to pay. Hire a full staff, and later on I’ll tell you if I’m going to pass a law that allows them to unionize, make any demands of you they want, and if you don’t agree you’ll be shut down until a government arbitrator decides how much you can afford.
When uncertainty goes up, the profit requirement increases. It’s like investing in stocks - the higher risk stocks generally return the most. People demand more reward for taking on more risk. It’s easy to see how this costs jobs. Jobs in all ventures that have low marginal rates of return or require long-term investment are lost.
Most small businessmen work like dogs. The successful ones, anyway. They have to supervise all operations during the day, and sometimes they’re the ones out making the product or doing the service. Then at night or on weekends they have to do their books, prepare their tax forms, and do all the other stuff the government requires of them.
Take the new health care bill - buried in there is a requirement that businesses have to file a 1099 form to the government for every supplier who provides more than $600 in goods. this is a 1099 form. Bear in mind that for a small business, accountants are expensive. The smallest of businesses have to do this work themselves. Also bear in mind that the small business owner is probably not an accountant, and is often someone who started a small business from a trade. He may not be university educated. Paperwork like this is not easy for him - it might be terrifying.
That one little requirement in the health care bill could easily require a small businessman to have to file dozens of 1099’s per year. And not only that, all the people he supplies to will have to file their own 1099’s, and he has to take time to provide the information to them they need such as his tax number, legal company name, etc. And this is but a couple of paragraphs from a 2,000 page bill. The financial reform bill is another 2300 pages. A small businessman may have to pay an accountant or a tax lawyer or a business consultant just to tell him what new regulations he is now responsible for.
In an environment where idiot senators come up with ideas like this every day, and they get signed into law with no scrutiny, no fanfare, and no warning, businessmen get understandably worried. And frustrated. Every new law puts another burden on them.
If you can’t see how that can cause small businesspeople to say “The hell with it” and stop hiring, then you don’t know what it’s like to be in that position.