Dashboard: A Warning for Small Businesses

[Music] welcome to another 21 hats dashboard I'm Lauren Felman I'm here with Jean Marks welcome back Jean thank you Lauren it's a pleasure to be back here in the US I know you've been traveling it's great to have you here and have a chance to chat again couple weeks in Norway uh is where I was and uh I can't I can't recommend it more highly it was fantastic place to go high taxes but free education and pension it's a weirdly uh socialist country you know because they pay all these taxes they have all these government services and yet the people that I met there were pretty like independent you know almost like right-wingers you know what I mean it was like a really weird mix um of a of a country um but the uh it's absolutely beautiful there and people were super nice anyway strongly recommend going interesting um all right I want to point out that we're actually recording this late on Friday uh things have been happening quickly lately in fact the Trump administ has just announced that the tariffs on Goods coming from Canada Mexico and China are in fact going to go into effect uh so I just want to acknowledge who knows what else is going to happen between now and Monday morning when this is uh published um so um the topic we want to talk about Jean is what this all means for small businesses you wrote a piece recently talking about small business optimism um noting that it's at a six-year High you started the the story with a quote from Bill dunberg who's the chief Economist for the national Federation of Independent businesses let me read it to you small business owners feel more certain and hopeful about the economic agenda of the new Administration expectations for economic growth lower inflation and positive business conditions have increased in anticipation of pro business policies and legislation in the new year uh you added that many of your clients are are equally bullish um the the line that really me was the one about small business owners feel more certain uh seems to me there's a lot of uncertainty out there uh what are you thinking yeah I agree I mean you know as you know I mean I'm I'm I'm also optimistic but I you know but not not for 2025 at least I mean I think 2025 is going to be a really uh a very uncertain Year let me let me lay out some things uh you're listening to this right now you got everybody listening to me here you got to be aware of some of this stuff that's happening this year um because you got businesses to run so let let me start actually with like labor okay just I'll start there um you know you know I do and you introduce me like I do you know this podcast with paychecks and um paychecks as a as a they're like a big HR company so I'm pretty close with them and you know they see so many of their customers um having compliance issues I mean that's the kind of services they provide um but there's the like there's this a lot more questions and a lot more activity there why well we have a pro business relatively Pro business administration now in Washington you know the Trump Administration we think um but you know his you know Trump's line his administration line is um more of a federalist pushing more of these things down to States so you know so you know we're going to see over the next few years not a whole lot of regulations coming out of the federal government you know overtime rules already have been rolled back um from what the Biden Administration proposed uh minimum wage is you know I don't expect there to see any change there any hope of there being any kind of like paid leave or anything more on the retirement side all of that stuff is is it's really going to be held back the only thing on the retirement side by the way just as an aside here Lauren is that um the secure act in 2025 now what goes into effect is if you have a relatively new 401k plan you're now required to automatically enroll your employees just want to make sure people are aware of that but that's that's like the biggest thing from like on the on the on the federal side it's all going down to the States so you're like okay it's you know that's great no big dictates coming in from the federal government yay they're Pro business but the states are active I mean you know more than 70 local jurisdictions in states are raising the minimum wages this year um a number of states um are have higher overtime regulations than the federal government has now uh a number of states have mandates for paid time off and sick leave and they're changing as well U mandatory retirement plans eight states this year are going to have have new laws around AI uh because again you know under the Trump Administration they're going to be hands off on this stuff so yeah it's like more Pro business you know from you know in Washington but now instead of just dealing with like a national regulation or a law now suddenly you're running a business you got to deal with like 50 different states regulations and I mean even if you're located in Illinois which you know well maybe that's a bad example say you're located in Georgia and there's relatively lesser ulations than New York state or California well the have remote employees that are all around the country they might be in New York or California you might have to be compliant with those rules you know so um you talk about uncertainty when it comes to the whole you know the the regulations the workplace regulations all that that's why like you know paychecks provides their services they're I'm going to buy some of their stock I mean it's like they're you know they're they're going to be busy because as a business owner how do you keep up with all of this stuff that's a lot of uncertainty right there and that's just that that issue and I well you're talking about Labor and you haven't even mentioned the immigration issue which could be the big factor so let's let's talk about that as well yeah so as you know as you know I've always been like hey man if you're employing illegal immigrants you know tough [ __ ] on you you're breaking the law and that is what it is well I'm going to rate a piece next week for the inquire um that is going to be about um even if you think you're in compliance you need to make triple sure that you are because there's going to be more you know enforcement on this stuff and potentially more raids on it and you know even just going through the exercise to make sure that all of your workers have the documentation and blah blah blah that's a that's going to be a pain in the neck and it's going to be like more work for business owners and um if those illegal immigrants do get deported and they disappear and yes those businesses should not have been hiring them anyway those businesses if they don't want to go out of business are still going to need to find employees and it's a shrinking pool of employees so there's there's that issue you know which means it's going to affect potentially all business businesses not just businesses who lose employees exactly right and then of course you know if there is a pullback on the H1B visas or you know people with you know with talent that you want to stay here and there's there's rules around there it's messy I mean like we don't you and I don't have to have the debate about whether this should be done or how it's being done or whatever it's just it's that more uncertainty it's going to be more tightening in the labor market which is going to be tougher if you're like in the construction business if you're in the like Hotel Hospitality restaurant business it's it's just going to be more challenging and and again I know a lot of business owners that are 100% behind what you know the Trump Administration is doing with uh their immigration policy but they also you know are bracing for the fact that it's going to be tough-going for you know potentially tough-going if they're in certain industries which then brings me to tariffs you know I mean I know a lot of business owners that are behind Trump's policies behind tariffs but they also know that they could very well be inflationary and Trump is using could be well it depends on the products it depends on the mix it depends where you're getting your products from it depends on the industry it's a lot of depends on there but there are some compan well I think if you do put in 25% tariffs on Canada and Mexico there there's going to be inflation mean that you're buying goods from Canada and Mexico I don't know I don't I mean you know right I mean I don't yeah but it's going to it's going to have broad impact it's just like the immigration it's not just going to affect the businesses that do the importing right and then the question is you don't know how long of an impact it will have if businesses can absorb these these costs and they can do something else other than raise their prices there's a lot that we don't know um and we also don't even know how long these tariffs are going to last because as we've seen you know Trump is going to be is using these not just as an economic thing but as a you know as a negotiating tactic for whatever his reasons are and that's just Canada and Mexico obviously we got China and Southeast Asia and other areas that's more uncertainty and again in the end this might all play out great for the American economy and great for America and all that kind of stuff um and and business owners are saying they're optimistic cool they're all optimistic but you know there's there's going to be some some waves we have to go through this year and I have another one which is the whole tax thing you and I have talked about taxes before um and I'm like you know I'm I very very happy that um it seems like my taxes will not go up because the Trump Administration and the GOP is supporting you know making permanent the 2017 tax cuts and jobs act but but listen there's no guarantee on that they have a slim majority in Congress and the Democrats are asking reasonable questions like how the hell is this going to be paid for you know so there's going to be a lot of give and take we don't know what's going to be go through what's not going to go through will the small business pass to you pass through deduction survive will will will the will like the capital expenditures to deduction well research and development all that we don't know and I'm expecting there to be more clarity about this stuff by the middle of the year once Congress turns its attention to it and debates it and all of that but in the meantime again you're running a business this is like 20% of your income usually somewhere around that for your taxes so like what do you do you know what I mean like you know you so that's my point is that it's I I get that businesses are optimistic Lauren and I am optimistic long term I really am but you know maybe because I'm just glasses half full but at the same time I like let's let's all wake up guys like this year there's going to be a lot of [ __ ] that we're going to have to be dealing with so buckle up and be prepared right I mean how I feel um I guess I'm a little bit surprised because this is kind of the agenda that you've been backing for some time we've had numerous conversations about these issues this is kind of what you wanted I think yeah I I I don't know why you're surprised I just said to you I'm optimistic as well long term yeah it doesn't mean that we're not going to have to go through some pain and some uh turbulence during this year I mean of course I mean there's going to be all of that it kind of seems like um we're we're going after pain that we didn't have to go after um so sure I mean you know I think you know again we can argue the reasons and the whys and all that and I think that's more of a political discussion that we can have as to why it's being done um but I I can tell you that it is being done there is everybody's been very surprised at all the stuff that Trump has been done been doing over the past two weeks and I'm like I don't know why you're so surprised he said he was going to do all of these things beforehand so if it's a business owner and i' telling us to my clients since November um you know make your plans perfect example is tariffs I mean I have I've I've won like decent siiz manufacturing client that's based in central Pennsylvania that buys stuff uh you know from China and overseas when Trump got elected um they went into action they started buying a lot of inventory in advance and re negotiating deals and finding other sources of Supply I mean they're not idiots they can see what's coming and they're Trump supporters they think longterm the tariffs will have a good effect and change you know the the landscape for trade that'll be more favorable to them long term but they realize you know they're running a business they got to make you know they got to make their plans and make sure they can navigate the disruption that's going to be occurring um while this stuff shakes out so that's what it is we've actually had a lot of conversations about the tariffs on on this podcast and I would just say it's it's it's not you don't have to be an idiot to not be sure what your next step is there uh there are a lot of complications it's not obvious for everybody and I and I also point out you know again we're talking on Friday the Wall Street Journal ran a story today saying that Trump's own advisers are you know working around the clock trying to avoid the implementation of these tariffs so yes he said all along he's going to do this it's not a complete surprise but even right up until today there's been speculation that you know maybe it was kind of a bluff and he's going to get what he wants out of it and we won't have the tariffs um which also undercuts kind of the the main argument in favor of the tariffs I think which is the the idea that it's going to encourage Manufacturing in this country if you don't know for sure what the playing field is going to look like it's hard to invest money in increasing domestic Manufacturing don't you think yeah I understand Lauren but I mean also if just where where Trump is coming from Canada's economy is the size of Texas Texas Mexico's economy is the size of Florida okay so we our economy is so much larger than Canada and Mexico and if Trump feels that there is a trade imbalance or that American companies are not getting a fair deal however he feels um there is the American you know from his standpoint he has way more negotiating influence and if that means if Canada or Mexico are going to let these tariffs go through America has way more resources and ability to withstand uh a tariff negotiation or a tariff fight or a tariff War than Canada and Mexico do and ultimately he's you know this is his bet is that you know given our size and are are proportionate overproportional for a lot of collateral damage along the way it could be along the way but then again there's you know it's I think he's looking longer term that's what he is but again like I said we don't you know I don't want to get political as to why he's doing it I think this is a small business show and I think that business owners you know they're optimistic which gets back to my my my column um and you know fair enough that they're optimistic but let's all be you know be aware that this year is going to be very disruptive and tumultuous so we need to make sure we're buckling up I I guess listening to your talk I'm I'm almost wondering you know why were they so optimistic I mean you the the the certainty issue is something that business owners talk about all the time they just want to know what the rules are going to be and be able to uh uh adapt accordingly and so much is now up in the air that that wasn't up in the air before so that's one thing plus you've got I mean the reason why they're up in the air is because a lot of the you know the rules the regulations in Washington the uh the trade imbalances that we have with all of these countries um these are all things that were disfavorable to the US so they're going to need to change and change is hard I mean it's the whole who move my cheese issue so yeah you know things have to change I mean unrelated to small business you know uh you Trump has proposed you know disbanding the entire Department of Education in Washington just discontinuing it and let me tell you there are a lot of Educators that I know when they see the test scores that were just reported this past week at a 30 or low but take a step back and say yeah you know what maybe that is what needs to happen in this country is that there is significant change and of course it's going to be disruptive but maybe that's for the good for the long term and I think that's why some small business owners are optimistic about that some changes need to happen they recognize though that whenever you have change there's always going to be stuff to deal with but you know it's a it's a long-term decision you get through with it and you you you know it's better for themselves and their employees and their children over the longer term that's why they're optimistic if you believe that it's going to be better um it is all do you believe I agree I couldn't agree with anymore I mean you don't I can tell you know I do but well there's a lot of uncertainty and uh of course you know but then again I believe the Phillies would make it to the World Series so what the [ __ ] do I know well that's come that happened fairly recently that's a better bet um I mean you know even looking at the the tax situation that you described my guess is that that the 20% pass through that you were referring to I think that's going to survive now I I don't have any special information I could be wrong but I believe it will survive that's you believe I and I'm acknowledging I do not know I have no inside information um but you know that's the kind of thing that it's hard for politicians to be against to take away a uh small business uh benefit like that so I'll argue against that I'll say like that 20% deduction didn't exist before 2017 understood that was a whole new thing you know what I mean understood and so you can make the argument saying like what we're like how bad were small businesses doing before 2017 what this was you know what I mean well and here's the here's the point I would make about that which is that it it's been beneficial to a lot of small businesses I think it's going to stick around uh I think there might be better ways to do it there's some adjustments that could be made but basically I you know I want it to stick around I you know I work with small business owners uh I am a small business owner not making enough money that it makes a real big difference to me yeah I'm assuming it does make a big difference to you yeah exactly it does not no cuz I don't make enough money but but you're a p but you're you're a pass through business right is 21 like escort right well then you get so I I do not for myself but I do I think in some form it should continue that said it only helps businesses that make a profit uh if you're not making a profit that tax break that deduction doesn't do you any good whatsoever and a lot of the uncertainty that's being introduced has the potential to do real damage to all businesses uh in the form of inflation in the form of the changes to the labor market so you know when you're weighing the tax the potential for preserving that tax break versus the the risk that's being introduced I think that makes for uh a very volatile environment yeah I mean it'll be volatile but like you just said I think the tax break is good I just I mean again I I hope it stays as well I think it's you know it's great for small businesses but just taking the contrarian view I mean you know my God you know Lauren I mean the the numbers you know our deficits are 7% of GDP now you know I mean it's like it's unbelievable you know our spending is like you know we we we are spending close to7 trillion a year and bringing in $5 trillion a year and our our national debt is like $ 36 trillion doll you know it's it's unbelievable of which interest is now our interest spending is now 177% of total government spending in 2020 it was is 10% just so you know so there's going to be some hard battles in Congress when they start talking about reducing taxes you know what I mean um and even that small business pass through deduction it's expensive and people are saying like geez I mean you know again small business didn't have this before 2017 if they take it away you know they they'll be back to then it's not like there was the end of the world then for sure and we got to do something to reduce these deficits in debt I'm just saying that's that's the argument that the Democrats will make and it's a pretty damn good argument so I'm not sure they will I don't know and know we'll be talking a lot about this as because it's going to be back in but it is it's a it's a fascinating issue and it's it keeps getting back you mentioned earlier and I was like you know teasing you about you know like what you well you believe that this will happen you it's the same thing with the whole tax thing I mean you know you can have all these economists from you know pen or Wharton make their projections but in the end it's like a crapshoot if you reduce taxes by this much what the effect will be in 2040 you know what I mean so you know people are just like well I believe this will be good for business that will you know small businesses will hire more and invest more with lower taxes but um a lot of it is is just a it's a belief thing you know so well and that certainly applies to immigration and tariffs and everything else we're talking about it seems pretty scary to me it's change people don't like change what are you working on Gan anything we should be looking for in the coming week I guess we won't have time to talk about deep seek but we can talk about that next week I uh I could tell you what I am working on laen I went uh last week to uh Microsoft did their uh AI tour in uh in New York City I went down to the Javit Center and spent the day there going to sessions about AI from Microsoft standpoint and uh there was a lot of interesting things I learned I'm going to write about in Forbes this week so it'll be fun the the one takeaway like you know first of all they did a great job it was is very nice completely free lot thousands of people there I mean it was like high interest but uh I went to a couple sessions where people were afraid people from Microsoft were afraid to do live [Laughter] demos work yeah yeah and I was like wow like I was thinking to myself you're from Microsoft and you were afraid to demo live this application they have like a caned demo that they're showing and they admitted like well you never know you know I'm like okay well that's not very you comforting to know if you're selling this to businesses so did you see anything that got you excited that yeah I mean the I could tell you what another big takeaway is you know before before you know we end up is this um you know AI continues to be in 2025 a big company game because people are spending millions and millions of dollars on it um very little mentions of deep seek that's a whole other conversation but I I will say compared to a year ago because I went to it last year as well there are so many many more tools available Lauren that if you're a business and you've got a couple hundred grand that you want to that you want to invest in your own system of AI there are so many tools available now their Microsoft their their co-pilot studio and Google has got their things open of AI got their tools where you can connect your databases all together create a large language model uh you know there's tools very low code applications for writing um to train that model and then start bringing back really good information about your business like chat GPT for your customers and your employees yeah small businesses can build this stuff on their own if they want to it's still not cheap again it's probably a couple hundred thousand doar but the tools are definitely there and available for small businesses if you were so inclined and I was like huh okay you know there are some companies out there that might want to go down that road and um they're they're more apt to do that this year than they were say a year ago it's interesting did you use AI for your uh your travel did you do anything uh yeah I am uh I mean I am on I use chat GPT and perplexity perplexity for research and chat GPT um I'm the typical small business owner like I I use the Gen AI products because none of my applications are have ai in them yet you know QuickBooks and Zoho their AI is nowhere near mature enough to use it will be but the they when they start introducing good agents which will be happening in the next year or two but for now I'm just I'm on my mobile chat GPT app all the time asking it questions it's great it is great and you know what I started to do Lauren is uh is you know you know I do Consulting work for companies so I go and I visit them for a few days and uh talk to people and tour around I do like a handful of these a year and then I identify a bunch of areas where they can increase profits based on all the writings and stuff that I do and then I um write it up and then I have a six-month I follow up to make sure that things are getting done now I'm leaning on chat GPT a lot more like how so because I'll have a whole conversation with say like um a manager of customer service you know a 45 minute conversation I'm recording it on on Otter for example which is an AI app that that does the transcription and then summarizes it I use that for my podcast it's great and then I upload it to chat GPT and I asked chat GPT what recommendations would you have for this person based on this conversation for uh improving their productivity or doing a better job or adding profits to the company and gbt gives me like suggestions and things some of them are good some not but it just adds to my own thoughts do you worry do you worry that your clients are going to start using chat GPT to ask those questions instead of you it's so great I'm glad you asked that question because I think that is the that's the the fundamental disconnect that people have with AI no because the clients that I'm talking to are so [ __ ] busy running their own businesses they don't have the time to do that on their own they are literally paying me to to come back to them with recommend ations and advice and then to make sure that their people are implementing those recommendations and advice and they don't really care where it comes from like fine you got from chat gbt good for you came from your brain good for you they just they don't they can't do this themselves because they're running their businesses do you know what I mean so the answer is no I'm not concerned about my clients doing it on their own any more than I was concerned with uh somebody you know I don't mow my own lawn when I had a house because I sucked at it you you pay somebody to do it for you do you know what I mean well as you've told me before I could find a gener of AI uh app to uh do this podcast with Jean so be careful what you wish for you can you can take this you know use Google's notebook llm make a huge language model like upload all these podcasts and then we can slice and dice it in different formats telling you it'd be awesome Gene marks is a CPA who writes weekly on small business for the guardian the hill the Philadelphia inquire the Washington Times the Chicago Daily Herald Forbes and Entre rur you can also hear him on ABC radio's ey on the world with John Bachelor Jean host two small business podcasts with paychecks Corporation and the Hartford thank you Jean thank you Lauren we'll talk to you next week have a great week everybody [Music]