Treading water | The growing costs of government weigh on businesses just trying to stay afloat
I relate Maine’s current economic climate to a bunch of business owners, large and small, treading water in a very chilly pool, each one looking at the other and wondering, “How much longer can I do this?” In my business, my partner and I have had the unfortunate task of meeting a number of business owners too exhausted to continue. They can no longer tread water and have exhausted the funds they need to continue operations. We struggle to find some way that we can help, some appropriate suggestion to make. Unfortunately, we rarely succeed.
Companies get themselves into trouble for a variety of reasons. A single fatal management decision was made, for example. Or, like a thousand bee stings, a bunch of smaller bad decisions piled up until the company could no longer handle the toxic overload. The most common route to demise, however, seems to be the ostrich approach: business owners hiding their heads in the sand and hoping things will get better.
In many ways, while I wish they had made better decisions, I admire the ostriches. Their biggest concern has most often been the welfare of their employees. The vast majority of privately held Maine companies are small, so employers tend to know their staff and their families well. The ostriches usually feel that their company’s previous success resulted from the efforts and dedication of their staff. To eliminate an employee’s position and income is perceived as a personal failure by most small business owners. As an objective observer, it is easy to say to a struggling employer that eliminating four jobs might save the remaining six. However, we’re not the ones who have to deliver the news to those four employees. It’s often more than a business owner’s conscience can handle.
A taxing matter
I thought of these folks a lot during the recent tax “cut” debates. First of all, the debate was actually about tax increases, not cuts. The choices were to leave things as they were or to enact tax increases. On a number of occasions, I heard that we needed to stop providing cuts to these “millionaire” small business owners. While I’m certain there are some “millionaire” small business owners in Maine, they definitely are not in the majority. I wondered, “Does anybody in Washington really understand how a Subchapter S corporation’s taxable income is figured?” The same politicians who wanted to tax these “millionaires” also want those business owners to invest in new technologies, launch new products, buy more goods and hire more people. Where do they think the capital to do that comes from?
The vast majority of business owners we meet with are doing everything they can to keep their employees employed. The fact is that during this protracted time of treading water there has been only one growth industry: government. While virtually every other employer has cut and made sacrifices, government has grown exponentially. Who pays the costs for increased government? The people treading water. Something is very, very wrong with this picture.
The big question, of course, is how do we get Maine business owners out of the pool? What do we have to do to eliminate the need to tread water? Since only one out of every 10 of us has the gumption to start a business, we need these people on dry land. We need them motivated. We need them committed. Most importantly, we need them to be creating jobs. So what do we do?
I’m not smart enough to provide that answer; my solution is way too simple. If I was the guy in charge, I would just let businesses keep more of what they earned. I would let them spend that extra money on employees, infrastructure, equipment, new markets and other such mundane stuff. If that meant businesses paid less in taxes and, consequently, there was less for government to spend, then I would suggest that government trim itself to meet its resources. Maybe government should take a turn in the pool.
I don’t expect anyone to buy my simple plan. I have this crazy notion, however, that the founding fathers of this country would love it. If you have better ideas then, by all means, share them. Put your solutions to work. We need our businesses to be profitable, our banks to be lending and our employers to be hiring. Please do not suggest, however, that we need higher taxes. If we give Maine businesses the support they need, we’ll get our economy back on track. It’s the only way economic recovery is going to happen.
Our rallying cry: Everybody out of the pool.
Stephen Vlachos, principal at Caswell Vlachos Group LLC, a business brokerage firm in Portland, is a serial entrepreneur and business consultant. He can be reached at svlachos@caswellvlachos.com. Read more On Your Own here.
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