Is it Harder to Start and Run a Business Than 30 Years Ago?
Almost everyone decrying the demise of entrepreneurship in America is blaming either Walmart or rising health care costs for making it more difficult to start a business. But the biggest obstacle is a long-term shift in American culture and society that has little to do with big box businesses or heart attacks.
In a recent article titled “Are we Becoming Less Entrepreneurial?” Scott Shane cited 30-year trends going back to 1977 that fewer people are starting new businesses over that time. Other research conflicts with that to some degree, but virtually everyone seems to think that it’s harder to start and run a business these days.
As with most things, there is rarely an easy one-line answer. I see at least four factors that someone running a small business has to fight through these days:
- Long-term cultural shifts in the way we view life and opportunity
- The constantly increasing costs of running a small business due to government controls and regulations and other factors (such as health care)
- Pro-active resistance and disincentive by the SBA to start true small businesses.
- Pro-active support and incentive to mid and large-sized businesses by the congress and SBA that create artificial competition for small business.
The overwhelming uphill struggle is against #1, cultural shifts. Numbers two through four added together don’t come close to the problems number one presents.
Entrepreneurship is not declining because of Walmart. He who makes the rules wins. If you play by Walmart’s rules, you will lose, but millions of small businesses are figuring out they can build businesses around rules that Walmart can’t touch and are doing fabulously.
Nor is health care the reason. It doesn’t help, but it is only one in a pile of factors in the decline Shane cites. People who claim they aren’t going into business for themselves because of health care risks wouldn’t go into business anyway. They are risk adverse and if health care wasn’t an obstacle they would find another one as an excuse. Health care wasn’t any better for someone 75-100 years ago but people started businesses.
Also, the SBA has spent 50 years proudly killing people’s dreams by showing them empirically that their dream doesn’t work as an Excel spreadsheet. It doesn’t take a genius to know this – almost no small business makes financial sense out of the box, which is why they go through 5-7 iterations before they find the pot of gold. That’s what entrepreneurialism is all about, and the SBA’s SCORE advisors – mostly middle managers from large corporations who never started anything – are hell-bent on keeping you from the joy of that journey. They would much rather have you sit in a cubicle than give wings to that once in a lifetime longing you have.
Government regulations and a burdensome tax code are also factors. Regulations are never put in place in response to small business abuses and yet small business has the same regulations and tax code as the biggest businesses. That’s why Goldman Sachs was able to make $2 billion last year and not pay a cent in tax while most small businesses will pay a significant percentage of their revenue in tax.
But all of these are just bumps in the road compared to the cultural shifts that are undermining entrepreneurialism in America. In the last 50 years we have undergone a dramatic shift toward an entitlement society. Only 1% of entrepreneurs come from the upper class while fully 27% come from the lower class. Being soft and avoiding the struggle has not made us better. When we receive things without working hard for them we gain a sense of entitlement that leads to dependency that results in a full-blown sense of victimization when the handout I’ve been used to is no longer there.
None of that helps us start new businesses. Way too often I hear from business owners that conditions around them are keeping them from succeeding. This is a mindset of victimization – it’s not my fault, it’s the world around me.
Circumstances don’t make me who I am. How I respond to them does.
Relearn the joy of the struggle and shed your sense of dependency, entitlement and victimization. It’s a deadening mindset and will keep you from getting where you want to go.
He who makes the rules wins. If you decide you can’t make any of the rules (victim), you lose.
Being a business owner isn’t any harder than it was 30 years ago, it’s just harder to convince people they don’t have to lose.