Running a small business isn’t easy. Being your own boss might sound appealing, but it means putting in lots of hard work to make it happen. Among the many things an owner has to think about are balancing the books, hiring and keeping employees, and pleasing customers. Increasingly, something else weighs on the minds of owners: regulations.
Small business owners frequently cite regulations as one of the largest obstacles in operating their company. Every four years, the National Federation of Independent Business asks small business owners to evaluate and rank 75 potential business problems. In 2016, they told us that their second biggest problem was “unreasonable government regulations.”
A new NFIB survey delves deeper into the red tape problems faced by small businesses. We asked small employers across the country a variety of questions about how regulations impact their business.
First, about one in two small employers says that regulations are a “very serious” or “somewhat serious” problem for them. Also, half of small employers tell us that in the last three years they’ve experienced an increase in the number of regulations they must comply with. By contrast, only 2 percent of respondents said they had seen a decline in regulations.
So how do regulations make it difficult to run a business? Twenty-eight percent of small employers say that the cost of compliance is the biggest problem. For others, 18 percent, the largest problem is the difficulty understanding what they are supposed to do to be in compliance. Close behind that, 17 percent of small business owners find the extra paperwork to be the biggest hassle. Other issues for employers include the time delays caused by regulations and the difficulty discovering new regulations.
We asked small employers about what level of government gives them the most regulatory headaches. Only 15 percent said local government is the biggest problem. Double that number, 30 percent, said state rules had the biggest impact. A full 50 percent said it was the federal government that caused them the most stress when it comes to rules and regulations.
Big companies hire a legion of lawyers, accountants and compliance specialists to make sure they are following all the rules. At a typical small business, however, the owner must wear all these hats alone. According to our survey, 69 percent of small employers research compliance requirements themselves. Only 15 percent rely on an expert for information.
With all that said, there are positive developments for small business owners on the regulatory front. One of the first executive orders signed by President Donald Trump asked federal agencies to identify two regulations that can be rolled back for each new regulation proposed. To us, that sounds like a worthy idea, and we’ll be closely watching how that order is implemented.
Also, the president nominated federal Judge Neil Gorsuch for the Supreme Court. In his previous opinions, Gorsuch has stated his distaste for court precedents that defer to regulators’ interpretations of the law. He could be a powerful voice defending small businesses from creeping bureaucracy.
If legislators want to unleash small business growth, they must push forward regulatory reform. Most small businesses operate with thin margins. Every new requirement, every moment of their time spent on a new rule, means less time an owner must focus on their business. Reducing the time and expense of regulations and giving small business owners more freedom to innovate would pay off in solid economic growth and increased employment. We need to remove the regulatory ball-and-chain holding back small business.
Tom Scott is the state executive director for NFIB California, which represents 22,000 dues-paying small business owners across the state.
Originally published in the Orange County Register.