The Big Issues for Small Concerns

  • Call them the forgotten majority: America's small businesses. This element of the U.S. economy is probably the most misunderstood in the land--from Madison Avenue to Washington--because it's such an eclectic and disparate group. It ranges from venture capital-backed dotcoms to mom-and-pop retailers to family-owned manufacturers. But they all seem to agree on certain things: taxes are too high and too complicated, health insurance is too expensive, and politicians--especially those inside the Beltway--should just go to you-know-where.

    In the past, Washington has largely ignored such views, but this year seems different. "During this presidential campaign, candidates are at least acknowledging the plight of small-business owners by introducing some policies on health care and taxes," says Dennis Whitfield, senior vice president of the National Federation of Independent Business in Washington.

    With that in mind, we decided to go to small-business owners and ask their views on the major issues of the day--and how they would like the all-but-anointed presidential candidates, George W. Bush and Vice President Al Gore, to address them. FSB (FORTUNE Small Business) assembled its first CEO round table at the Four Seasons Hotel in Chicago in May. Participants included nine business owners from the Chicago area representing a cross section of industries: Len Batterson, a founder of AOL and now chairman and CEO of https://Vcapital.com , an online venture-capital marketplace; Paul Cooper, CEO of Perceptual Robotics, a maker of video software for the Web; Andrew Cory, president of Cory & Associates, an insurance brokerage and employee-leasing firm; Keith Hasty, president and CEO of Best Foam Fabricators, a family-owned manufacturer of foam for the auto industry; Leticia Herrera, CEO of ECI Inc., a restoration and maintenance company; Kevin Kerns, president of Apropos Technology Inc., a maker of software for managing e-mail, voice and Web content; Tom Schroeder, a self-employed lawyer; Max Suzenaar Jr., president of Minding Your Business, an event-planning company; and Dan Zigulich, president and executive producer of Z Group Films Ltd.

    Excerpts from the session:

    What are the most important issues you would like the candidates to address?

    Kerns: The No. 1 issue for me is the cost of skilled labor. There is a lack of talent for companies big and small in the technology area. Universities are not coming close to filling demand. As a result, wages are inflating, and we're going overseas to find talent. We need to create incentives to retrain the existing low-skilled work force and entice students to pursue education in these fields. That might mean introducing a more aggressive student-loan program or creating co-ops with companies to guarantee summer jobs to help students pay for loans.

    Hasty: I face this too, and I believe we're being fooled in this economy. The gap is widening between the skilled and the unskilled. In Chicago I was surprised to learn that in certain inner-city communities, the unemployment rate is as high as 15%. In these areas you see a lot of despair, a lot of hopelessness, and I think it's because the economy is changing from a muscles-and-brawn type of economy to one that requires a lot more education.

    Leticia, you're in the service sector. Do you have the same concerns?

    Herrera: My biggest concern is taxes. After 10 years of building my business, I'm finally at the point that I'm making some profit. But guess what? I have to go and get a loan to pay my taxes. Maybe I should have done more advance planning, but still, there has to be something that helps small businesses with this dilemma.

    Batterson: Yeah, I agree. Add to that the blizzard of tax forms you have to fill out and the additional taxes you have to pay local and state governments. There are just too many taxing agencies and entities for small businesses to deal with. I just had a shock earlier this year. We had a nice capital gain on an investment, and my accountant calls me and says, "Oh, guess what, the state of Illinois passed some new tax on capital gains that I never heard of and, by the way, that's going to be $70,000."

    Schroeder: In addition to the tax burden that you both talked about, the burden of preparing all these various forms and tax filings on a timely basis is overwhelming.

    Cory: Just to give you an idea how onerous this is, last year alone there were 37 new federal and state regulations that affected small businesses. It's a nightmare. You have to hire advisers and cpas to help you. Then you have to pray they make no mistakes.

    So what would you suggest to help solve the problem?

    Herrera: A moratorium on certain taxes until a company is profitable.

    Hasty: One possible solution is not to tax a certain base of equity. This would help start-ups a lot. It would help emerging companies reinvest cash back into their businesses and stimulate growth. For it to work, the Federal Government and probably the state governments would have to set some sort of cap or float ceiling noting where that tax would start and how it would rise. It would probably have to vary by industry, because some businesses are more capital-intensive than others.

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