Dashboard: The State of Small Business, 2024

[Music] welcome to another 21 hats dashboard brought to you by our sponsor the great game of business I'm Lauren Feldman and I'm here with John aons Meer who is founder and CEO of small business majority and advocacy group for businesses and entrepreneurs and also he happens to be a frequent guest here uh welcome back John good to be here Lauren John it's a new year uh there's a lot going on right now in terms of policy issues and economic issues that are likely to have an impact on small business owners and I'm always eager to hear uh the perspective of you and your organization maybe you could start could you remind us uh who your me members are well Lauren we're a National Organization of small business owners we have about 85,000 um business owners in our network uh we tend to focus on uh the the smallest businesses and and those in more underresourced communities um we represent a range of businesses across many Industries um and uh we've got offices across the country and we do really three main things we are a hub for education and resources for small businesses we work on um policy and advocacy in uh many states Plus at a national level and we continue to do a lot of research all different types of research into small business needs and concerns so what are you hearing from uh those businesses in your network um where where where do you think their heads are at these days well there's a fair amount of optimism I think we've turned the corner from the pandemic um and uh we're seeing as we've seen there's a lot of new business formation which is very exciting and among existing businesses I think uh many of the issues around uh supply chain um and others are are are getting resolved um there continues to be concern about Capital about access to Capital uh and also um continues to be a difficulty in hiring um and and addressing kind of a growing um level of Workforce issues um concern about um making sure that small business employees and independent entrepreneurs have access to benefits that people get in larger businesses and there's continued concern about uh competition about anti competitive practices from larger businesses but on the whole um we're seeing definitely uh an upswing in optimism and uh and you know we're looking at an economy that is really going to kind of turn the corner let's hit a couple of those uh issues that you raised tell me what what are your thoughts on access to Capital um how are businesses doing especially given the high interest rate environment we're in yeah well look it's always been uh structurally a challenge for small businesses to get access to Capital versus larger businesses versus businesses that have um more um sort of personal wealth to um to back them more collateral and so um for the smallest businesses and particularly those in more underresourced areas this continues to be um an issue uh and um we're seeing you know opportunities for expansion of of lending from different types of businesses uh I know we're going to get into a little more detail on this but expansion of government programs to help smaller businesses obviously there's been um a lot of a lot of um the SBA is doing a lot of work small business administration doing a lot of work to help reach those businesses and we're very involved in uh promoting and facilitating the um small state small business credit initiative ssbci which is uh 1010 billion in federal funding coming out of the American rescue plan that is going to States and tribes to then put in the hands of capital providers lenders and Venture providers um who will then provide that Capital to um the more um businesses and more underresourced communities uh we have a huge um program Nationwide uh that we're launching um over the next two years to work with states to work with um lenders Mission driven lenders and to work with small business owners and partners um who support small businesses uh in these states to help U make sure that that money is going getting in the hands of um the businesses was intended for and then to kind of do surveys and research to um kind of track how that's going and report that back to the lenders and to the state agencies which businesses is that money intended for it's intended for a whole range of businesses who um have struggle to get Capital through uh the typical means and that is businesses in in under resource communities uh women-owned businesses bipac owned businesses rural businesses and um look there's a it takes a little more work to make sure that that money is getting to those businesses it's lot easier to Simply lend larger amounts of money um to larger small businesses um who have maybe a more established credit record so making sure that we're going out there and identifying businesses who would be eligible for this supporting the Mission driven lenders and capital providers who support those businesses um it it takes it takes some more work and um you know the the states and the and the lenders in these states who are trying to get that money out um can really benefit from an organization like ours we really act as a hub and a connector between businesses and U the lenders and the state agencies and that's what where they're to do so this money's being distributed state by state so there 50 different places but you're a One-Stop shop where businesses can go if they want to figure out if they qualify and uh how to apply we are a One-Stop shop we will not be heavily involved in all 50 states plus the tribes that are doing this we're going to probably focus on 10 or 11 states um to work on those where we already are are very active um and yeah we're we we are we are the I don't know preeminent Hub um to connect the more underresourced businesses with the state agencies with the lenders and um that's what we do and now we do this in in you know we have relationships with about, 1500 um Partners across the country organizations who support um more underresourced businesses um whether that's uh local Chambers of Commerce um we work with the uh Small Business Development um uh the sdc's uh and uh women's business centers um so um and we work with a lot of cdfis and other mission driven lenders so we are um you know that's how we are our most effective is to be a hub and be a connector and that's what this expanded uh program is going to allow us to do so if somebody wants to check out that Hub they should go where uh our resource site is venture.org and we're are going to be putting more and more um uh information and resources on that site but we're also going to be reaching out directly to businesses and we're going to be working with many of those 1500 Partners across the country who have connections to those businesses so um you know go to the Venture eyes.org site we're going to be expanding that tremendously with information about the program over the next couple months but also we'll be working directly with organizations that that many businesses may already be working with to help uh support them along these lines the SBA uh has changed some of its programs I think in reaction to the affirmative action rulings of uh the Supreme Court uh and it's changing the way it deals with underrepresented entrepreneurs can you um help us out with that how is that affecting underrepresented entrepreneurs well at the moment it's not affecting any of the work we're doing we we work with we partner with any organization that is focused on um support for more underresourced businesses and some of those organizations are demographically focused um some are less demographically focused where're we go to where um there is a partner who we can work with and be helpful with and we're not particularly you know we have a broad-based approach um and obviously many a large percentage of the businesses who need the help do fall into um certain demographic categories they are bipac owned they are women-owned um and um we we go to where the where the organizations are that can be most helpful um as far as what the SBA is doing I can't speak to uh specifically um changes they're making we are going to continue to work with them and work with um many organizations out there that are supporting businesses uh who are are more are smaller and are in more underresourced communities you may not be able to answer this then but I I've read some stories that suggest that the the way the changes have affected the SBA the the difference is that it's not simply a matter of race or demographics anymore that there's um a greater need to establish need um but that the money is still going to be able to flow to these entrepreneurs it just may be a little bit more take a little bit more effort can you help me with that does does that make sense to you well I think you'd have to be blind to not understand that the biggest need um is in communities that may T that tend to be um um that tend to have a greater number of of bip business owners um uh women business owners I know the the gender issue hasn't been yet the Forefront of of litigation so you'd have to be blind to um to not realize that there's a there's a tremendous overlap um and intersection there um how the SBA chooses to uh make those determinations is up to them um I would think that if they are looking at need if they are basing this on economic need they are still going to end up focusing on the um the same businesses they were Fus fusing on when there was maybe a more overt um racial lens but um at the end of the day I think the work can be done um uh despite these um these these lawsuits and I think that you know we can all work together to make sure that the very businesses who need the help are going to get the help in those communities that's very helpful you mentioned uh early on uh looking at the the issue of uh businesses and the benefits they offer what are you seeing in terms of healthare and health insurance costs well and in terms of health care uh we were very happy that the um that in the uh inflation reduction act the subsidies for um purchasing Health Care on the exchange were continued for another two years uh those of course will run out at the end of this year so we're we're very concerned that that those um continue um look Healthcare continues to be um a real stress point and and and and on a big cost uh the other so on the one hand we're we're we're Focus on making sure there's maximum access to quality affordable healthcare but on the other hand we are working with many other business groups um to figure out ways to bring the cost down um that includes um pushing back against um sort of extreme Hospital consolidation uh there are bills in States um and there is a now and there's a very bipartisan Bill in Congress now that we're supporting I should add that the the whole area of of economic concentration which results in higher prices is actually a rare bipartisan issue and you look at um folks that are working on this uh on Capitol Hill it is a very interesting Coalition of more Progressive um members and um in some cases extremely conservative members working together um so that's the other side of the healthcare debate is yeah we want to make sure there's maximum access but we've got to make sure that we bring the costs down we're very happy that the inflation reduction act included ability to negotiate certain Medicaid Medicare drug prices um and we need to see more of that and we need to we need to work on both fronts to expand coverage but also um try to bring health care costs down overall you mentioned competition there I think you're looking at that not just in the healthcare area but in other areas as well is is is that correct that's correct yeah Healthcare is obviously one major area um but there's there is um there is a extreme um levels of unfair competition that go on in our economy and this cuts across every industry it cuts across uh it cuts across the entire economy and the ability to deal with you can't just sort of pass one law and solve all of it it takes so many different forms there's um price discrimination um uh we've got business owners in our Network who report that U big chains are getting um much better pricing than they're getting for for the for products uh we had a a business owner at an event with the Federal Trade commissioner um chairman Lena Khan um it was actually highlighted in a in a political article recently speaking up about how he can't get seven up for his store and meanwhile down the street the B the big chains are getting big deliveries to seven up at favorable prices uh we've had cases of why can't you get it what's going on there because the um large businesses are getting access through volume discounts to much more favorable pricing than smaller businesses and you create a situation where uh you start to put tremendous pressure on smaller businesses and um and uh put them in in tremendous Jeopardy and there's a law it was passed many years ago um the rums and Patman act which prohibits price discrimination and that law has not been enforced for decades and the Federal Trade Commission is now um looking at ways that they can do a better job of uh enforcing that law and you know this it goes to the heart of of comp competition if you're if you have a um situation out there where large companies are getting much better pricing than smaller companies you're you're going to exacerbate um problems and at the end of the day um small businesses can't survive if big businesses are able to to price them out I suspect that the defense the big businesses would use is that this is not discrimination against small businesses it's just a matter of volume discounts and anybody who's willing to buy in a certain volume can get the uh the price no discrimination would how does the law handle that do you know you can make that argument across the entire economy you can make the argument well you know uh mergers you know we should allow them to happen because hey that's just the way the world works but we have laws we have whether it's Robinson padman we have antitrust laws um we have laws that say that um government has uh there's a need for government to step in and make sure that we don't allow unfair competition to drive uh smaller players out of the market and so um that argument sort of falls on its face if you're trying to make sure you have a robust uh fully competitive capitalist system out there um and uh as I said you can take that argument to logical logical conclusion but at the end of the day you end up with a um an economic system that does not benefit uh large swats of our economy and ultimately doesn't doesn't benefit consumers so there are a hand full of stories going around right now that have gotten a lot of coverage I think they've produced some outrage and I'm really not sure what to to make of them um one is the the change in the rules involving uh franchises I mean it's not direct I guess the wording is different it's not directed specifically at franchises but um the the law was changed so that the franchisors are now more responsible for the actions of franchisees uh what do you see in terms of the relationship between franchise ORS and franchises what's going on there well franchising is a very valuable um economic structure for many people particularly for um immigrants particularly for um Ur in in um bipo communities and uh we want to see a franchising system that works and is fair and where everybody thrives what we've seen is a greater uh a growing amount of of un unfair uneven um relationships between franchisors and franchisees there was a big article in the New York Times week or two ago about hotels across the country as more and more of the main Hotel changes merge um they are in a position to put more and more pressure on franchisees as private Equity comes in and buys up um um invest in many of these these large franchise operations um they're looking to get kind of a quick and not ensure that we have a long-term healthy um franchise system that supports both the franchisors and the franchisees we see this in terms of um you know the ability of franchisors to come in and just shut down franchises for the smallest uh quote unquote violation of an agreement um we see this in terms of increased costs costs that aren't disclosed at the time that someone signs a franchise agreement uh that get imposed um uh willy-nilly over time and um again the FTC is looking into what they can do to make sure that we can maintain a healthy um franchise operation um in terms of the your question about the franchisors being more involved for the um for the actions of the franchisees to the extent that they are exerting control over uh specific operations of the franchisees that make sense to the extent that they are allowing franchisees to kind of set their own rules um to to compete um with less sort of um oppression from the top then um then no there there should be um you know they they shouldn't be as as as um held as liable so it really is based on the fact that franchise ores do um and again there's differences among franchise relationships so they're not all um the same in terms of how much um any any competitions going on but um I think there's there's a need for um for govern to step in and make sure that we can have rules of the road that allow um Health a healthy franchise relationships you said that the FTC is looking into that are you optimistic that it will lead to action well they have asked for input from and they've taken comments from um from everyone on that issue we don't know what they might do in terms of proposing rules but uh we do know that they have asked for input which we and many others have provided and and we do know that they're looking into it all right here's another issue uh that I've been reading about the corporate transparency act uh it's a new regulation requiring business owners to disclose their ownership uh there's con some concern about just how onerous a requirement this will be what do you think a lot of has been made of this the reality is as follows the vast majority of small businesses this it's a simple form to fill out who are your owners most small businesses that's pretty simple and that's that for businesses that have more complex corporate structures they've already got lawyers and accountants whove helped them set this up and they those lawyers and accountants can figure out how how to fill out the forms I should add that this law was a super bipartisan effort P Republicans and Democrats to try to get some control over um over uh corruption um in then and businesses being used to facilitate um corrupt business practices um so um businesses where they the owners were Anonymous and people didn't know who actually controlled the business right people didn't know who who was who was Behind These businesses and this is an attempt to bring that out in the open and again let me repeat the vast majority of businesses can um uh have no problem saying who their ownership is and for those that have more complex structures they've got lawyers and accounts to help them we've got information on this on our ventur eyes.org site and would urge any businesses to go there and quickly get access to information uh businesses that were set up before the first of the year have a year to fill this out and for businesses that are being established now there are connections between um the U filings at Secretary of State's officers across the country to the uh forms being required under this law and it is a very seamless process great one last issue I gather there's something of a a tax fight looming uh coming up in 2025 I believe this is because of the sunsetting of some of the provisions in the Trump tax cuts but it's likely to have a real impact on small businesses do I have that right you are right 2025 is going to be a huge year for debating um what we do about um either extending or or letting Sunset the um the provisions in the 2017 so-call Trump tax bill and uh those Provisions sunset at the end of 2025 uh so right now uh we we don't think there's going to be a lot of of of of of bills passed in this this Congress but there is a lot of um conversation and debate about what to do about those that we're going to be involved with our focus is going to be what in the tax law can uh currently or can truly benefit the small businesses how do we have tax Provisions that are uh actually um focused on on their needs uh and not sort of top down um and and trickle down effects and um we want to make sure that we're positioned so that in 2025 we can make the case for um changes that may need to be made in the tax laws to make sure that truly small businesses are going to benefit um from our tax law I'm going on memory here but but my sense is that a lot of the focus with the Trump tax cuts was on the billions that went to huge corporations but there were really substantial benefits for smaller businesses as well and I think the the biggest being I I think it was a 20% reduction in uh P pass through income uh for pass through uh structur businesses is that one of the things that's um that's on The Cutting Board here yeah that's well that definitely is one of the provisions that will that will sunset if if if no changes made um the way that is structured the pass through deduction that you're talking about if you look at if you do the math and you look at uh where the biggest benefits are um 75% of the benefit goes to the largest 4% of pass through entities so it is it is skewed in terms of its benefit to the the very small number or small percentage businesses um who are are larger who who have their income uh who are taxed uh based on individual rates from the past through income um we want to make sure that any um changes that we make changes to that so that if we're going to have uh a um deduction for small business income then it be flipped around and be bottom up um potentially that's a standard deduction for um businesses um that would just be you know a certain amount 25,000 um or or or some some level and it would benefit the smallest businesses in terms of percentage of their income more than the larger small businesses so it is being touted as a benefit for small businesses what it really is is a benefit for pass through entities with the vast majority of the benefit going to the small percentage of of of larger pass through entities not to the truly small Main Street businesses who need the help the most John this has been great you we've covered a lot of ground here I appreciate you taking the time John arensmeyer is founder and CEO of small business majority uh this episode was brought to you by the great game of business which helps businesses use an open book management system to help build healthier companies you can learn more at Great game.com thank you John thank you Lauren have a great week everybody [Music]