Small Businesses Going the Way of the Dodo for These Reasons................

[PaleoMan]

Unless you're a multinational, you can't tread water these days with everyone wanting their piece of flesh...

http://www.zerohedge.com/news/2014-11-14/reason-small-businesses-are-disappearing-explained-small-business-owner

The reason small businesses are disappearing written by a small business owner.

I want to start out by saying that i am a 27 year old male with a small business in Sacramento CA. I started this business a few years ago with savings of 15k. With a lot of hard work and determination i have succeeded, but it sure as hell was not easy. I am a long time lurker and have never seen anyone go in depth about what its like to own a small business and the reason why they are disappearing. Without going into to much detail, i own a furniture store so obviously things are different then other businesses but a lot of the things are the same. I wanted to begin with the things that are killing small businesses. Also only my opinion.

Small Business Loans - Although they are not killing small business they sure as hell don't help anyone. Unless you are opening a unique small business you are not going to get any funding. By unique i mean something along the lines of creating solar panels. According to a recent investigation by the SBA Inspector General (ill post the article if you would like), over 75% of SBA loans went to large businesses. So basically if you want to open a normal business you need a ton of collateral and a miracle to get a loan.

Permits and Licensing - In opening my specific business the first year totaled about $2000.00.

Advertising - Many small business's cant afford to take out pages or flyers in the news paper or TV ads so they only have a few choices such as Yelp or the Penny-saver. (Don't get me started in Yelp).

Street Advertising - While this used to be a good portion of how you get business it is now off limits. Code enforcement will not allow you to put anything outside. No balloons, signs, anything with your store name, window paint more than 50%, or any mattresses. Also delivery vehicles can not be closer than 50 feet from the curb. In my case that means behind the building.

Board of Equalization - Cant go into to much detail here but they sure as hell aren't here to help.

Health Insurance - Now obviously with the people that have a large work force working full time they will be hit hard by obamacare, but i wanted to give you a perspective on a single person. The cheapest rate for myself and me only, and believe me i have looked around, is $250.00/month. Some might say oh that's not bad, but let me explain what that covers, NOTHING lol. Basically if something happens to me i have to shell out 6K before insurance gets involved. Also 100 dollar co pay every time i go.

The economy - While many know that when the President comes on TV and says the economy is doing great, we all know it is not, some people don't. Every month more people drop out of the Labor Force and the number of families on food stamps is sky rocketing. So for those of you who don't know the economy is terrible because of all the top stories of Kim Kardashian and whoever else, lots of people in america are struggling.

Merchant Fees - This is for credit card processing machines. The machine itself costs 600.00 plus the percentages on sales and cards. Companies such as BofA charge once a year on top of the regular fees $150.00 to protect you from fraud (which they can't even stop) and yes its mandatory. Paypal or Square seem to be the best options these days.

Fire Department - Yes even the Fire Department wants a piece. Starting last year you must do your own visual inspection and send them a check for 150! Basically if you don't they will come to your store and give you a million violations for wasting there time.

Something to watch out for is people who check fire extinguishers in business's. This is a huge scam where they come in without permission to inspect your extinguisher, get you a new one and bill you like 200 the following month. They have no right or permission to enter your business and jump all over you. You can simply tell them politely to get out. They dress like they are fire fighters but they are not.

[nots]

Unless you're a multinational, you can't tread water these days with everyone wanting their piece of flesh...

http://www.zerohedge.com/news/2014-11-14/reason-small-businesses-are-disappearing-explained-small-business-owner

The reason small businesses are disappearing written by a small business owner.

Having owned a small seasonal restaurant for 15 years, a lot of what he says is accurate. The licensing fees and the fire inspections for sure are a scam, as are the charges for accepting credit cards.

[Fresno Bob]

Does he expect that services will provide him credit card transactions for free? Would he prefer not to offer his employees healthcare? Boo fucking hoo, sounds more like he opened a furniture store near an IKEA and a Costco and can't make it work. I'm going to guess that the market for $3000 couches is a little soft.

[Midnight Otter]

Does he expect that services will provide him credit card transactions for free? Would he prefer not to offer his employees healthcare? Boo fucking hoo, sounds more like he opened a furniture store near an IKEA and a Costco and can't make it work. I'm going to guess that the market for $3000 couches is a little soft.

is the market soft or are the couches?

[johnnya24]

It's madness to start a small business these days unless you find a real niche and opportunity to exploit it. Impossible to compete with chains and multinationals, and they are creeping (more like cascading) into every conceivable field. For instance, non chain restaurants that aim at the middle end of the market ... they simply cannot afford to compete with chains who can give away 2 for 1 mains. That just gg, and that's everywhere in the UK, especially smaller towns. Look at this crap ... how can an isolated business compete with this? I must have witnessed hundreds of these kinds of small businesses going to wall over the past 15 years.

I lived in a town of about 100,000 people near London for 12 years. Over the years that small town gradually accumulated these chain restaurants: Ask, Cafe Rouge, Zizzi, Strada, Pizza Express, Prezzo ... and 6 or 7 more I can't recall off hand. 6 of us used to go to Prezzo and order 8 mains for like ~£40 ... just stupid. The ONLY non chain / hotel restaurants that survived were Chinese or Indian, because the chains hadn't quite caught up with them yet. Everything else was gradually squeezed out. All the pubs were priced out by chains; retail is almost all chains. If you wanna start a small business these days, set up an Employment Agency and exploit the shit out of the minimum wage and the fact that businesses no longer hand out contracts to non-essential employees.

Aiming at the higher-end market would seem like the best opportunity for a small business, but that comes with an even higher risk / reward gamble because of start-up costs.

... not even mentioning the impact of the Internet, which ironically is really the last bastion of the small business entrepreneur ... well that's is until they get the ban on Net Neutrality through, then the direct and indirect costs of running a business online will get more and more severe.

[chancellor]

Can't speak to the UK, but in the US the assessment is roaringly stupid. Is it tough to get a small business off the ground? Sure it is. Harder than 20 years ago? Meh...maybe.
But getting a small business off the ground has always been tough and incredibly hard work.

I see all this stuff about small businesses only succeeding in "niche" areas, and I just laugh. We have three local grocery store chains in my state that are kicking the snot out of WalMart and Target right now; all started from one or two stores. And there's hardly a business tougher than grocery stores - the margins are low to razor-thin. We have two local higher-end burger places that have obliterated all comers except one Five Guys. Our local craft stores have driven out all comers except Hobby Lobby. Three other chains closed up. I could come up with another half-dozen examples if I thought about it a while. There's still a lot of larger chains in just about all areas, but they hardly dominate. But if you're a small or medium sized business, OF COURSE you have to have a niche, or specialty, or do something better - that's how you deliver value to your customer base.

[chancellor]

Lol, zerohedge.

I hear you, but let's review the poster's complaints. IMO, a number of them are legit.

Small Business Loans/SBA - Yeah, the SBA is screwed up beyond all recognition. I'm actually old enough to remember when they actually helped small businesses and encouraged entrepreneurship. In fairness to Democrats, this has been screwed up for a long time - starting with Bush I, GWHB. And the Clinton admin actually made it a little better for a while. And then the GWB admin screwed it up more, and the Obama admin screwed it up even further.

Permits and Licensing - Having done this for a startup in my state, $2000 is on the high side. But my costs ran about $1200 10 years ago, and the dude is in California, so $2000 may be possible and if not, doesn't seem to be much of an exaggeration.

Advertising - No sympathy from me here. If he didn't plan for how he'd advertise before starting his business, he planned to fail.

Street Advertising - More sympathy. A lot of city ordinances are just plain stupid in this regard.

Health Insurance - If he's under 50 employees, he's exempt from Obamacare. His plan is a catastrophic plan. I'd think he could do better, but maybe not in Sacramento.

The economy - Yes, it's tough. And he still started a small business. Better have planned for the client base in that case....

Merchant fees - I can't believe I'm seeing Fresno Bob support credit card companies. Shoot, even I think credit card companies are disease spreading parasites that should be banned from emitting carbon dioxide. Of course they screw small businesses - because they can, with impunity. Some fees are reasonable; credit card fees are ridiculous.

Fire Department/City Fees - Ours are less, but I'm in a state that's been a lot better managed than the state of California and many cities in California have been.

[Fresno Bob]

hey, if you don't like credit card companies, just take cash or checks, but good luck with all the bad checks you are going to get. Dude, I was just in Australia, where every business charged me an extra 2% to use my credit card, that's madness when I'm paying for something like a hotel, gee, sorry, I don't have $900 on me to pay for my 4 night stay....

[Pogues]

Some of his points seem quite valid...but some he strays into Raving Lunatic mode. That jump from economy to Kardashian made my head spin.

[johnnya24]

hey, if you don't like credit card companies, just take cash or checks, but good luck with all the bad checks you are going to get. Dude, I was just in Australia, where every business charged me an extra 2% to use my credit card, that's madness when I'm paying for something like a hotel, gee, sorry, I don't have $900 on me to pay for my 4 night stay....

Yeah that's pretty standard here also. With anything that isn't retail based, anything between 2 and 5% is just normal for non-debit cards. They are usually just passing the credit card charges onto the customer. I don't necessarily have a problem with this, because I don't see why a small businesses especially should cover the charges for my choice of payment.

[johnnya24]

Can't speak to the UK, but in the US the assessment is roaringly stupid. Is it tough to get a small business off the ground? Sure it is. Harder than 20 years ago? Meh...maybe.
But getting a small business off the ground has always been tough and incredibly hard work.

I see all this stuff about small businesses only succeeding in "niche" areas, and I just laugh. We have three local grocery store chains in my state that are kicking the snot out of WalMart and Target right now; all started from one or two stores. And there's hardly a business tougher than grocery stores - the margins are low to razor-thin. We have two local higher-end burger places that have obliterated all comers except one Five Guys. Our local craft stores have driven out all comers except Hobby Lobby. Three other chains closed up. I could come up with another half-dozen examples if I thought about it a while. There's still a lot of larger chains in just about all areas, but they hardly dominate. But if you're a small or medium sized business, OF COURSE you have to have a niche, or specialty, or do something better - that's how you deliver value to your customer base.

Still livin' the dream I see.

I clearly mentioned that the higher-end market still has start up potential, because a certain class of people wouldn't be seen dead in a place like Walmart. High-end food places and craft stores are niche markets which generally exist and cater to an upmarket audience in niche areas.

So yeah ... I agree. Kinda my roaringly stupid point.

... but no, you didn't always need to have a niche business, in a niche market, in a field that doesn't have strong Internet based competition. You didn't have to have some perfect idea in the perfect location. That is a recent phenomenon that has made traditional bricks and mortar small businesses perilous at best. In the past it was sufficient to work hard and provide a better service than the competition to have a decent chance of success. Well, you can't afford to do that anymore if your competition can charge a fraction of the price for the same product / service. How the heck can you afford to open a restaurant that caters to the middle market, and then give away half your food for free? You can't, but the chains can. Now if you have a niche market where the local folk for some reason resist chains (class, financial, quality, social), then you have an opportunity. But those niche markets are tiny compared to the mass market where the real money is, and where most traditional small businesses were targeted in the past.

Upmarket chains won't be far behind.

[heyelander]

i don't know the laws in Sac proper, but I have never seen so much street advertising as I have here in the burbs. Basically every corner has at least one dude on it twirling a sign for some local business or other.

[chancellor]

Still livin' the dream I see.

Actually, I did for four years and got out. As a result, I still have a lot of acquaintances and friends that run businesses. But, yeah, I ran a small business for four years, and did all that went with that.

I clearly mentioned that the higher-end market still has start up potential, because a certain class of people wouldn't be seen dead in a place like Walmart. High-end food places and craft stores are niche markets which generally exist and cater to an upmarket audience in niche areas.

May be true in the UK, as I haven't done work there for 15 years, but it's different in the States. The grocery stores I mentioned run from high end to warehouse-type, all catering to different market niches. The restaurant and pub business is loaded with microbreweries, diner-type places, and specialty restaurants. Again, low end to high end. Sure, a lot of chains are successful - you can find an Applebees, Chilis, or dozens of other chains just about anywhere - but finding local eating at any level is pretty easy where I live.

Distribution efficiency in the US has become so high that a lot of the big businesses that depended on that as their "edge" are really getting dug into in terms of market share. WalMart here is the most obvious example; they're a victim of their own success in distribution.

IMO, if you're business involves selling "stuff", Amazon is the most dangerous threat, not WalMart.

[Pogues]

Yeah that's pretty standard here also. With anything that isn't retail based, anything between 2 and 5% is just normal for non-debit cards. They are usually just passing the credit card charges onto the customer. I don't necessarily have a problem with this, because I don't see why a small businesses especially should cover the charges for my choice of payment.

Or maybe they could just slightly raise the prices of their products and cover it that way and not looking like jerks by charging the % more for credit card payments....you know be sneaky.

I have a bank debit card that if companies charge me extra to use "credit," I'm paying either way. My bank charges me for using "debit."

I just avoid businesses that tack on extra for credit purchases.

[Teenwolf]

Or maybe they could just slightly raise the prices of their products and cover it that way and not looking like jerks by charging the % more for credit card payments....you know be sneaky.

I have a bank debit card that if companies charge me extra to use "credit," I'm paying either way. My bank charges me for using "debit."

I just avoid businesses that tack on extra for credit purchases.

Evidence to PaleoMan's initial point, big companies can afford the micro-fee nature of transactions that exist today, but small businesses can't afford to do the same! My dad runs a bait and tackle shop and still doesn't make enough to afford the 0.8% fee that gets charged to everything he sells (this is the current Visa payment scheme, on top of regular payments for the machines themselves).

Don't get me wrong, I understand how business works, and if you can't afford the luxury of giving your customers free card service, then you have to weigh whether it's better to offer card service with the fee attached, or if you prefer to say "there's an ATM across the street", as my dad does, or using a payment app, or whatever suits your business. There are workarounds, but nothing like the "free shipping, 24/7 customer support, etc." of big business like wal-mart or amazon.