This is National Small Business Week, an annual moment to celebrate the nation’s economic engine. 

We cannot underscore enough how important small businesses are in America. They underpin economic growth and support communities.

Policymakers must ensure that the laws and regulations they enact do not hamper small businesses but encourage them to start and grow.

Unfortunately, the Biden Administration has enacted many policies that directly undercut small businesses by raising the costs of doing business, restricting how businesses can operate, and increasing red tape that takes small business owners away from growing their businesses. 

6 Eye-Popping Facts about Small Businesses in America 

The Small Business Administration defines a small business as an independent business with fewer than 500 employees.

  1. Nearly ALL businesses are small businesses: 33.3 million small businesses in the U.S. make up 99.9% of all U.S. businesses.
  2. Nearly HALF of workers are employed by small businesses: 62 million Americans, totaling 46% of private sector employees, are employed by small businesses.
  3. MOST small businesses are solo-enterprises: Over 80% of small enterprises operate without any staff.
  4. MOST new jobs are created by small businesses: Small businesses accounted for 63% of net new jobs from 1995 to 2021.
  5. A THIRD of small businesses are women-owned: Women own more than 12 million businesses and employ over 10.7 million workers.
  6. Nearly ALL women-owned businesses are solo-enterprises: 11 million women-owned businesses have no staff. 

Headwinds 

Small businesses face significant economic headwinds, and they are treading water. Small business optimism has fallen to its lowest level since December 2012, according to the National Federation of Independent Business’s Optimism Index. 

Some of the challenges small businesses face today include:

  • Inflation:  35% of owners reported that inflation was their single most important problem in operating their business.
  • Weak sales
  • Unfilled positions: 37% of small business owners reported job openings they could not fill in the current period, and 18% reported labor quality as their top small business operating problem. Just 11% plan to create new jobs in the next three months.
  • Rising labor costs: 38% of small business owners reported raising compensation to attract scant workers. 
  • Increased regulations: New overtime, energy, manufacturing, labor restrictions, and reporting rules increase labor costs and time and money spent to comply with new regulations. 

Policy matters

Burdensome and unnecessary regulations can prevent small businesses from forming or inhibit them from growing. Regulations are not only restrictive but also costly.

As we wrote in the Working for Women Report 3.0:

Analysis by the U.S. Chamber of Commerce finds that regulatory costs amount to, on average, $11,700 per employee each year. Businesses with 50 or fewer employees incur regulatory costs that are nearly 20% higher than for the average firm. Cumulatively, economically significant federal rules for small businesses amount to over $40 billion per year in regulatory costs. This is overwhelming for small businesses, especially if they are solo enterprises.

Federal, state, and local policymakers should not impose new regulations without careful consideration of how they will impact small businesses. 

For example, the Department of Labor’s new independent contracting rule will make it difficult for freelancers to remain classified as independent contractors. Small businesses, which often do not have steady work to hire staff, will contract workers on a temporary or project basis. Under this new rule, those businesses may be forced to hire their contractors even if they cannot afford to do so. That raises costs for small businesses or may force them out of business.

It should also be a requirement that all regulations are regularly reviewed, scaled back, or eliminated if unnecessary. 

When the Trump Administration started, one of the former president’s earliest directives was that any federal agency proposing a new rule must eliminate two regulations in its place. If overall regulations cost nearly $2 trillion every year, cutting two regulations for every new one would be both a savings and an economic stimulus. 

Bottom Line

The economy is showing signs of slowing. Meanwhile, inflation is accelerating. The best way for policymakers to support small businesses is to get out of their way and take burdensome regulations and red tape with them.