What happens when small business regains the spring in its step? Let’s hope we’re about to find out; 2018 could be a historic year for the half of our economy that has always made America great.
In 2017, small-business owners returned to their characteristic optimism, reversing years of discouragement with a level of cheer and hopefulness that can only be found in American entrepreneurs who feel free, and who feel appreciated (or at the very least not persecuted) by their government.
By the end of last year, the optimism levels of small-business owners – which have been tracked by the National Federation of Independent Business for almost 45 years – were near an all-time high. According to NFIB Chief Economist William Dunkelberg, “The change in the management team in Washington has dramatically improved expectations.”
I used to work with Dunkelberg; he’s very smart and very diplomatic. I think what he meant was: Small business owners like Trump, and his policies, a lot more than they liked Obama. They sense that Trump “gets” them – he’s a business owner himself, so he understands the realities of being a risk-taker, an employer and a jack-of-all-trades (from marketing to personnel, from regulatory and tax compliance to sales, independent business owners wear an incredible number of hats and bravely shoulder an enormous amount of responsibility).
When small business does well, America does well – and a new generation of entrepreneurs, and financiers, are inspired to be part of this uniquely American phenomenon.
What will determine the success of small business in 2018? Sentiment will matter, just as it does on Wall Street and with consumers. Fortunately for our economy, those feelings of freedom and appreciation that entrepreneurs have been experiencing of late are likely to be bolstered by the reality of public policy, and presidential leadership, in 2018.
Small-business owners want to feel heard and understood, and they watch their elected leaders closely on three particular issues:
1. Taxes (which they find to be too high, too complicated and too many);
2. Regulations (which they see as too confusing, too burdensome and too many); and
3. Health care (which, for them, is so expensive that the price of premiums can make them re-think their decision to be self-employed).
Fortunately, recently enacted tax reform will bring significant relief to small firms, who were not forgotten by Congress – something that’s easy to do when big corporate lobbyists, and their big political donations, are around (and they always are).
Regulatory relief should be real for small firms in 2018 as well. President Trump’s commitment to reducing the number of federal regulations is likely to continue – it is already one of his most prominent accomplishments as president.
Health care costs, unfortunately, are still only getting worse for small business. The individual and small-group market, in health insurance, received no favors from ObamaCare. Seismic reforms around how the government regulates health insurance are unlikely to happen, so small business’ suffering on this front will continue for some time. Eventually, entrepreneurs will be part of the solutions around health insurance and health care – but in the meantime, this pain point will remain a drag on this important group of job creators.
The shrinking of the community banking sector is another potential limitation on small business births and growth, and there is cause for concern about cultural shifts – younger generations claim to aspire to business ownership, but also display an aversion to risk which is antithetical to starting and running a business.
But those longer-term challenges are not set in stone. When small business does well, America does well – and a new generation of entrepreneurs, and financiers, are inspired to be part of this uniquely American phenomenon.
Happy small-business-new-year, America. It’s looking like it will be a great one.