Home » Entrepreneur » 9 Biggest Challenges to Small Business Owners

9 Biggest Challenges to Small Business Owners

Small-Business-Owners

The Small Business Tax

A recent survey showed that the biggest challenge being faced by small businesses in the US is government regulation. Even in a fledgling economic recovery, this factor ranked higher than cash flow and credit availability problems, lack of consumer demand, and lack of jobs. In fact, government regulation compliance was cited as the biggest obstacle by 22% of those surveyed. This is disturbing considering that more than 89% of businesses in America are small businesses.

Government Costs to Business

The government incorrectly estimates that 14% of the national revenue will go towards taxes and regulatory costs. But the truth is that 35% of national revenue, or $1.75 trillion each year, actually goes to these regulatory costs and taxes. These costs can vary from OSHHS and tax compliance to Environmental and Economic costs and fees. The economic regulations make up the bulk of this, costing $1,236 billion. OSHHS is the lowest of these costs at $75 billion. While the government estimates federal regulation costs at $51-60 billion, the reality is much higher, totaling at $1,752 billion, $970 billion of which lands directly on the shoulders of small business.

This amounts to $161,000 in costs for each company, or about 19% of payroll costs. The cost per employee is estimated at $8,000. Obviously, this makes it difficult for businesses to consider expansion and hiring. Sadly, these costs hit small businesses hardest. Where a business with less than 20 employees can expect to pay more than $10,000 for government regulations, a company with more than 500 employees can expect to pay less than $8,000. A mid-size company with 20-499 employees will pay slightly less than the large company. In fact, small businesses can look forward to paying 36% more than their large business counterparts.

The per employee cost of environmental regulatory costs is over 4 times more in small businesses than large businesses.

Fixed Cost

A small business employing five people, amazingly, will pay the same amount of taxes and regulations as a company with 5,000 employees. This is because the United States works on a fixed cost system that sets most regulatory fees as a fixed amount regardless of the size of the business. Obviously, this high overhead before any profits can be made is a major challenge for small business. And according to Professor Scott Shane as quoted in SmallBizTrends, “the regulatory burdens on U.S. small business are getting worse.”

About The Author
Although millions of people visit Brandon's blog each month, his path to success was not easy. Go here to read his incredible story, "From Disabled and $500k in Debt to a Pro Blogger with 5 Million Monthly Visitors." If you want to send Brandon a quick message, then visit his contact page here.