The Wall Street Journal recently published an article that discusses the outdated notion of “small business” in the U.S. The disconnect between small business policies and small business realities is making it so the benefits that were engineered specifically for “small businesses” don’t reach a large majority of the small business population. Here are some of the highlights from the article.
Outdated Programs Don’t Help Modern Startups
The Small Business Administration was created in 1953, a time when dynamic startups (such as Facebook) did not exist. It wasn’t until the 1990s that the boom of software and internet-based startups changed the small business landscape. Because the SBA did not contemplate this changing landscape, many of its programs are not tailored to meet the needs of newer, fast-growth startups.
Growth is Rare for the Traditional Small Business
In fact, many small business owners do not start their business with the goal of growing exponentially. Rather, they decide they want to be their own boss and are satisfied with maintaining the business to provide a steady income. Compare this to today’s startups that seek exponential growth and exit (i.e. sell off the startup) and you’ll notice a drastic divergence in the policies, goals, and operations of the “small business.” The problem is that the government places both types of businesses in the same category, as “small businesses.”
There’s No One-size Fits All for Small Businesses
Unfortunately, all businesses that have fewer than 500 employees do not have the same needs and don’t benefit from the same policies. One example of missing the mark is the government’s tax incentives for hiring new employees. While the local hardware store may benefit from this tax break, startup software companies are more focused on bringing in highly-skilled employees with specialized experience. Therefore, modern startups are often more concerned with immigration reform and science, engineering, technology, and math education, than receiving a tax break for hiring a worker.
The article suggests that a new approach to categorizing small businesses, making sure local businesses withmodest ambitions and dynamic startups both get the customized attention that they need. Recent legislation, including the JOBS Act, is beginning to take into account the changing landscape of startups.
Furthermore, policy makers should look at more than just the number of small businesses that are formed as a measure of success. Instead, success should also be based on revenue and job growth to determine whether startups in the U.S. are actually expanding our economy.
The bottom line, the article notes, is that “we can do better” when it comes to small business policy in the U.S. You can read the entire Wall Street Journal article here.
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