The small businesses are normally faced with a lot of issues; taxation, labor, government regulators and unions, management and issues of environmental concern. Operation costs are increasing due to taxation while labor laws are always enforced by the government and unions into which they belong; these unions and government regulators sometimes make too many demands from the small business owners. Some of these demands could be a possible cause of collapse for certain business enterprises. Some of the regulations set by the government to safeguard the operations of the small businesses are quite costly for the small businesses. Some of the small companies use traditional techniques in their operations; this makes their goods seem substandard and as a result they experience a challenge of market competition. Waste disposal is a problem facing various businesses. It is important that the small businesses too take the responsibility of waste management through such means like recycling and so on (Lucy, 2009).
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Issues Affecting Small Businesses
The ongoing economic slowdown has had a lot of negative effects on business enterprise across the globe. Small businesses have been the hardest hit by the economic crisis and some of them have been forced to close down or cut down their working capital. Others have had to limit their operations through downsizing and restructuring, sending home millions of people. Some of these issues are high taxes, health care management, government regulations, labor, legal reform and international issues.
The healthcare insurance cover is becoming too expensive to afford due to an annual increase in the amount of premiums to be paid. This makes it very expensive for the small business owners to provide the medical cover for their employees. According to the American health care system regulations, the employer is normally expected to pay the lion’s share of the total cost of the insurance cover while the employee is expected just to pay a small portion of the total cost. This has made the employees to make demands for unnecessary cover and as a result the health cost cover has gone up.
Even though there has been a reduction on the amount of taxes paid, the tax code is still very complicated for the small businesses to comprehend making the payment process a tall order for them (U.S government printing, 2006, p. 43). The profit made by the small businesses is normally minimal and the cost of operation is also higher in comparison to the large business enterprises. This is because big companies can easily get most of the inputs such as raw materials, electricity and water and so on, in large scale, making them to operate at a relatively low cost. Therefore in a situation where the taxes paid are high, then it means that the small businesses will not be in a position to operate efficiently and make enough profit. When a business is spending most of its earnings on operational costs and taxes, then it implies that the business will not be in a position to expand its operations and increase its production due to financial constraint. Such companies are normally made vulnerable to unfavorable economic situations like the current economic downturn (Hendy, 2009).
Government regulations such as the environmental laws require the businesses to spend some of their earnings on social activities and environmental preservation. Such costs may be prohibitive for a small business which may mean giving most of its profit earnings for the sake of these regulations. Such charges limit a business’ financial base hence making it almost impossible for such enterprises to increase production or even to employ experienced personnel to enhance efficiency (U.Schamber.com 2009).
The government regulators and the employee unions normally put a lot of pressure on the employers. They normally make the employers appear like enemies of the employees who are out to take advantage of them. As much as such regulators and unions fight for the rights of the employees; some of the demands they make only harm instead of building the. Some of these demands could be very high wages or demands for a medical cover which the business may not manage to pay.
As a result of globalization, the world has become a global market. Businesses compete for the market of their commodities at an international level and a lot of investment is needed to enable one’s goods and services compete favorably. It may be important that the small businesses are helped to take their services beyond the borders in order to increase their consumer base. This will help the small business to increase its production and as a result maximize on its profits. It also helps in advertising businesses services and commodities to the outside world.
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Small businesses normally experience higher costs of operation. They also have a limited access to the market than the larger businesses due to the high cost of promotion that they are often unable to cater for. Larger businesses also tend to dominate the market making it difficult for the small businesses to compete effectively. This high competition and monopoly enjoyed by the bigger companies sometimes, is a great threat to the survival of the smaller companies. For instance, high competition has led to the collapse of some smaller businesses. Lack of financial endowment also makes small businesses to lose ground to cheap imports.
As a result of the economic crisis, most companies require financial aid to boost working capital. However, due to lack of collateral, small businesses are unable to access finances from lending institutions. The United States government through the Recovery Act has provided quite a number of loans to the small businesses to boost them during this time of economic crisis (Agency Group 09, 2009). The president of the United States also asked the treasury to disburse some financial support to the small community banks and the credit unions as they are normally the major lenders to the small businesses (Dugas, 2009). The government hopes that such initiatives will help in creating more jobs to the jobless and as a result help in pulling the country out of the economic crisis. Though it research has shown that the small business owners feel that this is not going to change much and that the economy is getting worse (Small Business Owners Confidence Dips, 2009).
In Italy, the traditional small companies have been adversely affected by the economic crisis. Suggestions are being made that the cluster should transform themselves into districts, implement new innovations, design and introduce new goods. But they can also consider manufacturing most of the goods abroad where they will be able to take advantage of the cheap labor and lower cost of production (Sinking together, 2009).
Another issue affecting the small businesses is the environmental issue. Some small companies are involved in production and manufacturing activities and as a result have a lot of impact on the environment. Companies and businesses need to take responsibility of their activities; they need to properly manage their wastes, avoid the unnecessary release of harmful gases into the atmosphere and if possible recycle the resources such as water (Lucy, 2009). When the environment is well taken care of, it favorably promotes life future sustainability. There are a lot of calls from various professions and stakeholders in the economy to preserve the environment. Release of wastes into the environment has resulted into a lot of pollution causing various social problems and global warming. It will therefore be a collective responsibility of all the business owners that they take responsibility of their wastes and preserve the environment.
Small businesses usually operate at smaller capacity, have fewer employees and manufacture fewer products. They are normally faced with various issues that may interfere with their operations. Some of these issues include high taxes and complicated tax codes, a lot of regulations set in place by the government, and the unions and environmental; challenges. The small businesses are the major employers; it is therefore important that these issues affecting them are addressed taking note that they can significantly contribute to the economic growth and development.
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