Those of us that have started small businesses, especially ones with actual employees, become rather intimate with government bureaucracy… local, state, and federal. And to carry that sidewise analogy a step further, that intimacy does not necessarily suggest understanding or desire. Sometimes you just succumb and comply.
After dealing with form after form, most completely unrelated to my niche contract manufacturing business, taxes of all types imaginable, and permits, I was not at all surprised when I learned about the magnitude of compliance costs, particularly on small businesses. I distinctly remember in the early days how I wanted… or needed… to hire an additional person, but couldn’t due to regulatory compliance cash outflow.
The Small Business Administration’s Office of Advocacy has determined that small firms are unfairly burdened by the costs associated with federal regulation compliance. According to the Office of Advocacy, businesses that employ fewer than twenty people spend $7,647 per employee in compliance costs (compared to the $5,282 spent per employee for businesses that employ more than 500 people). In addition, many small businesses lack the employees, expertise, and resources to efficiently navigate the myriad number of federal regulations.
There’s a bipartisan bill grinding its way through Congress that tries to improve this situation… sort of. The Small Business Compliance Assistance Act tries to help out small businesses by requiring "plain English" instructions.
U.S. Senator Olympia J. Snowe (R-Maine) has introduced legislation that would simplify small business regulations and reduce the burden of compliance for American small businesses. The Small Business Compliance Assistance Enhancement Act of 2007 would clarify the Federal law that mandates agencies publish useful small business compliance assistance guides that explain, in plain language, the compliance requirements of complex Federal rules. Senator Snowe was joined by Senators John Kerry (D-MA), Mike Enzi (R-WY), and Mary Landrieu (D-LA) in introducing the bill.
The bill would require clear deadlines, new compliance guides, and of course reports to Congress on their activities in this regard.
A band-aid by any other name, and a rather pathetic one at that. Basically small businesses will be receiving new guides, supposedly simpler than the previous ones. But if those businesses are anything like mine was, anything complex would be immediately shipped off to the CPA or attorney for analysis. Additional simplicity is nice, but the big problem was sheer volume. Cost of course, but the nightmare of an almost daily barrage of forms had the most impact by taking my time away from growing the business.
If you’re going to try to fix a problem, dig deeper. Use root cause analysis, the "5 Why’s", and other tools to understand what is really creating the problem. Are those forms really necessary? What value are they creating? If they do create value, does everyone need to receive them? What original condition created the need for the form? What caused that original condition?
Don’t just slap another band-aid on the problem and pat yourself on the back.