From the Bench: May 2011
Are you going Greek next semester?
One of the largest fraternities in the world is responsible for generating in the neighborhood of $30 billion in income in Florida alone, yet remains so enigmatic that it never bothered with assigning Greek letters to brand its countless members. I’m taking the liberty of giving a name to this enormous organization, let’s call them the men and women of Delta Alpha.
Delta Alpha is short-hand, as with most Greek membership groups, for the organization’s motto: Διακινδυνεύοντας Aύριο. Translated into English, the motto means “Risking Tomorrow.” It’s the international association of the millions of men and women who start and run small businesses.
There’s no rush period and no secret handshake; but the hazing rituals are severe. Activities designed to eliminate the weak and unworthy do not end—even after initiation. In fact, there are more unsuccessful pledges who have failed the “educational period” than those who have made it long enough to brag about it. Or perhaps we never hear Delta Alpha members brag because they know survival is so tenuous.
It is tempting to fill the remaining paragraphs with data taken from The Florida Scorecard (www.TheFloridaScorecard.com), the Florida Small Business Development Network (www.FloridaSBDC.org), NFIB-Florida (www.NFIB.com/Florida), and Grow Florida (www.GrowFL.com), among others, to share the statistics that make the overwhelming case for the importance of small business to the Sunshine State. Leaving some homework to the reader, let me share two stats, taken from the Organisation for Economic Co-Operation and Development (OECD), to make the case that small business is a big deal.
1. Small businesses account for approximately 99 percent of all enterprises and two-thirds of total employment.
2. Nearly all net job creation in the United States from 1977-2005 occurred in firms less than 5 years old.
As an alumnus of Delta Alpha, I believe it is time to share a few secrets to help members of the media and the bodies politic and bureaucratic understand the paradox often observed about small business owners: They are so critical to job creation, yet so very hard to help. Let’s look inside the mysterious activities of a small business owner to understand why and what to do about it.
Whether running a lemonade stand or a small manufacturing concern, more often than not it is very difficult to wrench an entrepreneur’s attention away from doing whatever it takes to survive. Having your life savings at risk does wonders for directing your focus. A small business owner must fulfill all the job functions not filled by those handful of valued employees under their employ. Things like accounting (taxes), marketing, janitorial services and compliance (read: dealing with all things regulatory or government) are non-core functions piled on top of the actual business of delivering the product or service to the customer.
And what about that pesky customer? The common objective of every member of Delta Alpha Fraternity is serving the needs and wants of customers faster, better and cheaper than anyone else for less than the costs to do so. It’s what is meant by the “sovereign customer.” Fail to provide value, and customers abandon you. This kind of voting is done with dollars; and with this much to do, anything that distracts a business owner from earning the votes of his or her customers, including the introduction of additional costs, interferes with prospect for success.
To be clear, the two primary secrets of success for Delta Alpha members is (1) avoid distraction and (2) minimize costs. Licenses, certificates, fees—all introduced into the free market by governments at multiple and duplicative layers—are among the bane of the small business owner’s existence chiefly because they introduce both distraction and cost. Such a perspective need not be taken to the extreme inference that business owners would choose anarchy in the market place. Reasonable controls for public protection and legal frameworks are necessary to enforce voluntary relationships. Even the most ardent free-market advocate can acknowledge a role of government in protecting its citizens from the harmful actions of others.
The third secret is the debilitative impact of uncertainty. Hints are found in Delta Alpha’s motto: Risking Tomorrow. Entrepreneurs are willing to risk today in order to gain additional benefit in the future with no guarantee whatsoever that success is secure. The chances taken at any given moment in time can only be based on what is known or reasonably anticipated. Clearly, entrepreneurs are far more comfortable with the unknown than those who have never started a business, but they’re not entirely oblivious to the benefits of some degrees of predictability of what the future brings.
So, what can government do to help small businesses create jobs? Reduce distractions, costs and uncertainty. Florida can start by exploring a one-stop portal for small businesses that take on the responsibility of guiding entrepreneurs through the maze of permits and certifications necessary to start an enterprise. Oregon has among the best in the country (http://tinyurl.com/OregonSmallBiz). Michigan’s is also worth examining (http://www.michigan.gov/business).
If government deems some red tape is necessary, surely those who create it can communicate the path to compliance. Play this game during a lunch break: Imagine you’re starting your own business and then Google your way to identifying the government agencies that need to bless your admirable ambition before you’re up and running. Don’t forget, however, that if you miss a required permit or certificate, your penalties can be so severe as to wipe out all you’re willing to risk. Feel your systolic and diastolic pressures go up a bit?
A web-based, one-stop shop that assumes the role of guiding a small business owner through the maze—and waves penalties if the system is followed as prescribed—creates a win-win-win situation. Distractions can be eliminated at the same time as uncertainty, and businesses in compliance are sure to be doing their part to protect the customers.
Finally, when you find a business distraction, you’re not far from a cost. Duplication is often the first culprit. This legislative session has the potential to do more for eliminating duplication and cost at the intersection of business and government than any in recent memory. For that, the small business community can cheer, just don’t expect to hear the applause because members of Delta Alpha Fraternity will be too busy taking care of customers and getting about the business of creating jobs.
