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The SBA’s Office of the Advocacy just released their research regarding "gazelles" – those small companies that undergo rapid growth (something that we all want to happen to our companies) and their impact on employment as they pursue an eventual IPO.
And, they found some very interesting facts – facts that could help some businesses decide on the best place to start and grow their companies.
To begin with, this is the first time I have heard these rapid growth companies called "gazelles". While this is a charming name for this group of companies – I do believe that we could come up with something better – something more fitting. Would welcome your suggestions here.
First, the report states:
Building a new firm, and particularly a fast-growing gazelle, requires the recruitment of various resources including skilled labor, capital, customers, and suppliers. The entrepreneur must bring together a network that will provide them with tangible resources (such as finance) and less tangible ones (such as legitimacy). These make up the entrepreneurial support network or ESN.
Clearly, for a small business to reach the point that it can conduct a successful IPO, it needs support around it. Money support (VCs and the like) as well as legal, investment bankers, workers, etc. So, when seeking a good location for your business – look for these networks or at least those needed pieces to form a network for your company.
Considerable research has shown that "gazelles," are a significant source of employment creation both in the United States and abroad.
I guess this is not really news but it does show why these types of companies are very important to our economies and that why more should be done to help them get from their starting point to their IPO.
The senate just passed their version of an Online Sales Tax bill – even after the Supreme Court ruled in 1992 that businesses did not have to collect sales taxes in states they did not have a physical presence in.
Thus, for those online retailers that generate more then $1 million in sales, if the senate bill passes the house, will have to collect sales taxes on all purchases in the state where the consumer resides – not where the business operates.
Some state and local government officials are backing this bill – as it has the potential to put more money in their coffers – some $11 billion + annually (estimated).
Big box store retailers are also backing this because they claim that it gives the online retailers a 5% to 10% price advantage - this from companies that ship jobs overseas, export foreign products – many of which are harmful to American consumers and our environment – and get more then 10% in cost (and thus price advantage) through economies of scales.
On the other hand, small online businesses are against this. They claim that the administration of trying to understand and collect sales taxes in all the states that have sales tax laws will not only hurt their businesses but could kill them.
Some online companies are already trying to find ways to reduce their sales under the $1 million mark. Lower sales also means that they will probably have to cut staff, buy less (less input in our economy) and contribute a smaller amount to the communities in which they do operate.
Other online businesses are talking about just shutting down altogether – as that would be the simpler and less costly path forward.
Just last month, Fox Business released a story based on Chase’s 2013 Business Leaders Outlook survey, which polled 2,600 small business owners with annual revenues between $100,000 and $20 million regarding small business optimism for 2013.
But, their results and thus their message were a bit mixed.
From the survey;
Small business owners are starting off 2013 with a half-full glass, with 70% feeling optimistic about their performance this year.
U.S. entrepreneurs are also looking at the local economy through rose-colored glasses, with more than half feeling good about the future in their area. But when it comes to the national economy, the mood shifts: 40% feel pessimistic about the future when it comes to the U.S.
While nearly 60% feel revenues or sales will increase over the year, about the same number of business owners don’t plan to hire either full-time or part-time staff.
Which, if you look at the latest jobs report – confirms that small businesses are not hiring. They are not even trying to hire.
So, good outlook for small business owners but not good enough to increase payroll – even for those employees already on the books? Strange. Maybe the optimism is just wishful thinking or a fear to let others know that they don’t think their businesses will do very well this year.
Why this might be true?
While some in our country publicize that our economy is finally turning around most people, especially small businesses, just do not feel it.
Regarding small businesses, they continue to face many daily challenges – challenges that affect the very foundation of their business; like:
- Continued limited spending by consumers - which affects small business revenue – no revenue, no business.
- Increased inflation – not just for other consumer goods but from their suppliers, vendors and other partners.
- Limited access to capital markets – the very thing that can help small businesses grow and prosper. And,
- Increased regulation and taxes - which takes needed money out of these businesses while adding little, if any, benefit to them.
The one thing that small businesses do get more of them anything else is talk. They get talked about a lot, their benefits to our economy, our country and the communities in which they operate. But, it is only that - talk – never action.
Further, there remains talk that our economy is on the edge of another devastating recession – a recession that will force even more small businesses to close their door in the coming years – taking the jobs they provide with them.
Even Jay Leno jokes that our administration wants to close Gitmo but doesn’t know how to do it. He states that all they have to do is to treat it like a small business and then tax it out of existence. ~ Jay Leno on the Tonight Show.
The Rate Of Business Closures
Did you know that over the last few years, we have had more business closures then business starts – a trend that just cannot continue:
From a prior post titled; "Interesting Small Business Facts In 2013"
From the U.S. Census Data, prior to the financial crisis, we were creating about 50,000 net new small businesses each year then we were losing. And, since the market crash in 2000, this number (net new businesses) has been climbing each year.
But, since the great recession, the trend has reversed itself. In fact, in 2008, we ended up losing about 50,000 net small businesses that year and in 2009 – that number (that loss of small businesses) jump to a whopping 162,000 plus compan
There is now a renewed push in our government (at both the state and federal level) to force online businesses to collect sales taxes – regardless if that business has a presence in that state of not.
According to WebProNews, the Marketplace Fairness Act would "allow states to collect taxes from online purchases even if the online store doesn’t have a physical presence in the state."
Clearly, online businesses are NOT in support of this new, proposed legislation as not only will it hurt their businesses (maybe – maybe not) but having to understand 50 difference state sales tax laws, collect those funds and remit them to each state in accordance with those state and local entities’ ever changing tax programs just will become too cumbersome for most.
Now, the major proponents of this legislation are the brick and mortar stores that claim that online businesses have an unfair advantage by not having to collect local sales taxes – thus the name of the potential new bill - the Marketplace Fairness Act.
But, let’s talk about fairness. Brick and mortar stores have an unfair shipping structure – economies of scale so to say – that online businesses do not. For these brick and mortar stores, they can bulk ship goods to their locations saving them tons on shipping costs – which does get pass through to the consumer. On the other hand, online stores have to pay high shipping costs as each individual product has to be shipped individually – again, which is push on to the consumer.
If brick and mortar stores have lower shipping cost per item and those costs are passed on – their overall prices would be lower then online stores who have to pass on their higher shipping costs. Is that not unfair? Given the same reasons that brick and mortar stores think that online entities should collect state and local sales taxes.
What about the fact that these online stores would have to follow 50 difference state’s sales tax laws and regulations – that brick and mortar stores would not if the brick and mortar store did not have a physical presence in all those states. Is that not unfair?
Personally, it seems that with one grou
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