21% of small businesses on brink

March 12, 2010

By ELISE VIEBECK

A report released last week showed that 21 percent of California small businesses believe they will fold in the next three years. The annual survey, conducted by advocacy group Small Business California, revealed low confidence in the state’s business and political climate among business owners.

“That 21-percent figure is particularly shocking,” says Hauge, who also owns a small insurance firm. “That should be unsettling for policymakers.”

Other research confirms this trend. According to analysts at Equifax, a credit firm, bankruptcies among small businesses in California have increased 81 percent since last year.

Small Business California has conducted the survey since 2005. That year, 68 percent of respondents said California on the “wrong track.” This year, it was 83 percent. Those who believed that the business climate may improve over the next few years also sank this year — from 59 percent in 2009 to 37 percent — and 33 percent of respondents said that neither political party represented their interests.

According to the federal Small Business Administration, small businesses account for more than 60 percent of job creation in the United States every year. It estimates that are 3 million small businesses in California, two-thirds of which are sole proprietors.

Hauge noted one positive figure — that 24 percent of survey respondents said they would be hiring in the next year. The Bay Area Council, another business group, released similar numbers last week.

Small Business California received widespread criticism from its peers in 2006, when it supported the passage of AB 32, California’s major climate change bill. Hauge confirms that it was the only small business group in the state to do so.

“The Air Resources Board has not done a good job putting in mechanisms for small businesses to provide input,” Hauge says. “Still, we have confidence there is a lot of potential for job creation in AB 32.”

The Small Business Roundtable, a similar group that opposed AB 32, was not available for comment.

The cost of regulations to small business has been widely debated in California. The national Small Business Administration reported last year that small firms spend 45 percent more per employee than large firms to comply with federal regulations. More than half of that amount — roughly $3,296 per employee — is targeted at environmental programs, specifically. In 2006, during the lead-up to AB 32’s passage, commerce groups reported that the bill would cost $77 billion in lost revenue for small businesses.

Hauge’s views may be unorthodox for a small business advocate, but like his peers, he remains concerned about Sacramento’s role in regulating business.

“There is a lot of misinformation about AB 32, but it is not the only program to criticize,” he says. “Most bills go without a solid economic impact report. The state has got to do something to reign in regulations, and to make sure that they make sense.”