Where did you go to grab your coffee this morning? If it wasn’t Starbucks, it was probably a small business frequented by caffeine addicts in your neighborhood. Ladies, as you sipped your morning joe, you may have absent-mindedly admired your freshly painted nails. The place you got your gel manicure? Was it also local owned? Gulping down the last of your latte and rushing into work, you realize the place you clock into from 9-5 is also local. And you’re not alone.
More than half of working Americans either own a small business or work for one. (To put this into context, that number is larger than the entire population of Germany.)
So, what’s a small business? The specifics vary according to job industry according to the SBA, so it can be hard to pin down. The question becomes clearer when it comes to healthcare; the ACA defines a small business as one with fewer than 50 employees. The Small Business and Entrepreneurship Council uses the definition most people think of: fewer than 100 employees.
While fewer people may seem to equate to fewer problems, it doesn’t quite work that way. Like any system, small businesses have their own sets of challenges.
So you wanna be the boss huh? Consider this.
Here are 5 top issues small businesses face today:
Staying profitable and procuring financing
It’s a constant challenge for small businesses to secure the financing they need to run and grow their operations. Large overheads; the high cost of real estate; employee compensation; the cost of group health insurance: With all these financial concerns, it’s a wonder CEOs of small businesses can sleep at night. And some lenders and investors are hesitant to offer financial assistance to businesses that don’t have the amount of equity a larger corporation may have.
The high costs of employee healthcare
Speaking of health insurance, the Affordable Care Act forced big changes once it went into effect, including changes in the employer-sponsored health coverage market.
As a result, employers have had to swallow at least a four percent increase in health insurance costs. (That’s a lot when you employ 50 people.)
According to an INC.com report, “For many firms (this) posed a great obstacle to small business growth. Employers are expected to pass increased healthcare costs onto employees (or) if managers choose not to pass on the costs, they may dramatically reduce their own profits.” Small businesses are struggling to give workers what they deserve without compromising the business or workers’ salaries, in the process.
Recruiting and Retention
The high cost of healthcare is directly related to the next issue: hiring and maintaining employees. For example, if a small business is struggling to stay financially afloat, it may not opt for the best (and likely most expensive) employee healthcare plan. But health benefits and retirement saving options are a big deal to salaried workers and other wage earners, so it can be a tough choice for an employee to choose to work for a company with less security.
Small businesses are also faced with the costs of onboarding and training new employees. According to Investopedia, even an $8/hour employee can end up costing a company around $3,500 in turnover costs. Small businesses can’t usually offer what the “big dogs” can, making it difficult to recruit top talent and reduce employee turnover.
Taxes and liability
Things can get a little hairy for small businesses once April rolls around. Reports suggest the IRS has increasingly targeted small businesses for audits in recent years.
One reason? Because it’s just plain hard to do your taxes correctly as a small business. Self-employed people (which many small business owners are) are responsible for making quarterly estimated tax payments throughout the year. However, estimation can be tricky when your business’ income directly correlates to unpredictable clients or sales revenue. It’s like predicting winter weather in North Carolina — almost impossible.
Small business owners must also pay self-employment taxes (Social Security and Medicare). Yikes.
What’s more, federal and state regulations change annually. With so many rules and regulations to keep up with, it’s vital that small businesses stay on top of accounting, which is tricky when you’re your own accountant. Tax compliance has been the nail in the coffin for many a beloved corner store.
Marketing, networking, and staying current
What’s the first thing you do when you hear about a new restaurant, local gym, or clothing boutique? You Google it, naturally. Your first impression of a business is its online presence. Marketing, logos, social media, and websites have never been so important for small businesses than in this digital age. But unlike corporations, many small businesses don’t have the financial or human resources to dedicate to a thriving digital presence.
“I think marketing is the biggest challenge small businesses face in 2016. Getting the word out about your business is crucial to its success,” says executive recruiter Biron Clark. “Technology has made it easier… but it’s difficult to cut through the noise on social media and other marketing channels and differentiate your business and brand.”
Last, but not least, a lesson:
America doesn’t run on Dunkin’. It runs on small businesses. There are over 28 million small businesses in the U.S., and North Carolina small businesses alone employed 1.6 million people in 2013 — more than a third of our working population. We think those people should go home after a hard day’s work knowing that health insurance is one less thing they have to worry about. Do you?