When it comes to business, size matters.
If you’re a small business — or solopreneur — you have a distinct disadvantage over big corporations.
There are the obvious disparities. Corporations have deeper pockets, bigger ad budgets, greater economies of scale.
But the biggest advantage of all is the political leverage big corporations have that small businesses don’t.
This political leverage can be used to crush competitors. All it takes is the flick of the pen by a Congressman who’s caved into lobbyist pressure.
Here’s how one author puts it in his article No Jobs:
You see, the truth is that over the past several decades the game has become dramatically stacked in favor of large businesses. Big corporations have the money to lobby Congress and other governmental institutions, they get almost all the tax breaks and they are the only ones who get bailouts. They even “help” write legislation on the federal level.
Many times large corporations will even lobby for more regulations for their own industry because they know that they can handle all of the rules and paperwork far easier than their smaller competitors can. After all, a large corporation with an accounting department can easily handle filling out a few thousand more forms, but for a small business with only a handful of employees that kind of paperwork is a major logistical nightmare.
For proof, look no further than the proposed tax increases that would target individual service providers — but not corporations with more than three shareholders!
Although I haven’t researched it, I wouldn’t be surprised to find that the new law had been encouraged in part by corporations trying to “stick it” to their more nimble competitors.
But big corporations don’t always go after small business. Believe it or not, UPS is currently trying to get a law passed designed to hurt their biggest competitor — FedEx. Check out this quick video…
The bottom line is this:
No business should be able to use the long arm of the federal government to club their competitors. It should be illegal for any business to get special advantages from the government.
Giving businesses the ability to lobby the federal government encourages bureaucracy, bribery, and all kinds of high-level shenanigans — none of which actually improves the business itself or makes it more competitive.
If big businesses focused on continuous improvement rather than gaining unfair legal advantages, we’d ALL be better off, consumers and small business owners alike.
What do you think?
-Ryan M. Healy
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- How Taxes Kill Business
About Ryan M. Healy
Ryan Healy is a direct response copywriter. Since 2002, he has worked with scores of clients, including BoostCTR, Alex Mandossian, Terry Dean, and Pulte Homes. He writes a popular blog about copywriting, advertising, and business growth, has been featured in publications like Feed Front magazine, and is a regular contributor to WordStream.com, BoostCTR.com, and MarketingForSuccess.com.
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{ 18 comments }
Ryan, to piggy back on what you said…
http://www.usataxaid.com/ustaxaid-blog/s-corp-payroll-trap/
Ben
Ryan,
The free enterprise system is what this great country was built on, more government is not the answer! But alas, politicians always have their hand out! A lot of business owners like the “easy, unscrupulous, way of doing business! Let's beat our competition any way possible! I like your way, Ryan!
I agree wholeheartedly.
It's become an almost insanely counterproductive laundry list of compliance for the very businesses that CAN and DO create REAL jobs (without asking for and receiving huge bailouts).
How can anyone wonder, why so many productive business people are frustrated, when the top down style of government (similar to large business) is propping up BIG (DYING) businesses by offering tax policy favoritism, while the smart and effective use of capital is being ignored by government and denied by (propped up) banks to those capable of using it wisely ?
Incredible !
Hello Ryan,
One thing that really gets to me (and this is true for US, Canada, and governments around the world), is how people don't seem to realize (or give more weight to the notion) that elected officials usually pose a potential conflict of interest. That is, elected officials have usually had the backing/support of big businesses. After all, a significant portion of their campaign budget relies on money provided by these big businesses.
We (at least, we who are a bit more aware) see this everywhere.
So, the conflict of interest is this: Who do the newly elected officials serve, the big businesses that helped them campaign, or the citizens who elected them? What if the big business wants the elected official to do something contrary to what the citizens would want?
This is something that people should really, really give a lot of weight to.
I don't know…maybe that's why a lot of people choose not to pay attention to politics.
Hello Ryan,
Me again. I wanted to post a second time because I thought that what I have to say in this comment deserves it's own space.
I clicked on the reference to No Jobs, and was a bit saddened at what I read. To give a bit of background info, first consider this:
“Traditionally, about 75 percent of all new jobs are created by small businesses.”
I've heard of stats like this. Okay, so here's what saddened me:
“I've polled all my friends who own small businesses — many of them in the Internet and high-tech fields. They all agree that in this new Obama world of high business taxes, income taxes, payroll taxes, capital gains taxes, and workers compensation taxes, the key to success is to avoid employees. The only way to survive as a business owner today is by keeping the payroll very low and by hiring only independent contractors or part-time employees provided by temp agencies.”
Did you see that?
Again:
“The only way to survive as a business owner today is by keeping the payroll very low and by hiring only independent contractors or part-time employees provided by temp agencies.”
Yipes! Granted, I do do a bit of outsourcing, but still…for this to go to the extent of being “the only way to survive” is really dismal.
If it's us small entrepreneurs who are eventually going to create jobs, and we need jobs in our current system to survive, yet we small businesses are regulated to the Nth degree…
Anyway. Something to think about.
That's another important issue that's related to this one: Should corporations be allowed to donate to political campaigns? Definitely creates conflicts of interests because politicians feel more indebted to the corporations that funded their campaigns than they do to the people who elected them.
This Administration has a 1930s mentality of trying to preserve 1950s institutions via central planning.
Keep in mind: Big Business is no friend of free enterprise…and never has been! (For a good history lesson, check out Jonah Goldberg's book Liberal Fascism)…
The issue is that many citizens also support Big Business…via their unions, their employer, as consumers, etc. Case in point: General Motors.
I'm as guilty as anybody from a consumer perspective. For instance, I still drink Starbucks coffee, although it seems they're doing more now to support coffee growers.
And it's basically impossible to buy a new car from anybody but a big corporation. Same thing with computers. Seems there are certain industries where you really are forced into supporting big business no matter what.
That's good news the bill didn't pass. I just hope they don't resurrect it…
Jobs as we know them in the traditional sense are changing. If as stated above the government is forcing small business to hire contract workers instead of employees then those that can provide service to small business should be looking for how they can do it on a contract basis. If one business will hire them for that service then there are others that will likely do the same.
We will see much more freelance and contract work in the future because the traditional job model is being forced out.
Peter
I agree with you, Peter. Unless you have a large business that's producing consistent monthly cash flow, it doesn't make any sense to hire employees.
Even if you can afford employees, it doesn't mean you should. Employees often waste a lot of time (and money). And I'd hate to deal with all the extra administrative burden (and tax burden) of having employees. Ugh.
I believe there will be an increase in contractors as well as people seeking contractors — which is good news for those of us who've already transitioned into a freelance model.
Ryan
P.S. Even when I hire contractors, I prefer to hire Canadians because then I don't have to issue any 1099s. The federal government makes you file more paperwork when you hire American contractors. Go figure.
Thanks,you are right! We have the same problems in Norway.
It's getting scarier (& sadder) by the day, that the entrepreneurial spirit that made America great, is slowly eroding. Thanks for the informative post Ryan.
Here is a glimmer of hope, The Economic Freedom Act of 2010. http://www.conservative.org/the-economic-freedo...
It's none of my business. Should, could would… sounds like words for young people trying to change the world.
There are bad people in the world. There are goverments in the world. There are businesses who like to cheat. There are business who like to cheat by using goverment to bully other businesses.
And there are people who mind their own business and ignore all of the trivial nonsense. It doesn't affect us one bit.
“And there are people who mind their own business and ignore all of the trivial nonsense. It doesn't affect us one bit.”
Perhaps. What UPS is trying to do will certainly affect FedEx, and I think FedEx is doing the right thing by being proactive about it.
Likewise, I think it's important to be aware of legal changes that will significantly handicap small business so we can be proactive if we choose.
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