Earlier this year, entrepreneur and founder of The School for Startups, Doug Richard, published his Entrepreneurs' Manifesto – a "declaration of rights" for small businesses.
The manifesto sets out eight demands to a new government, each of which addresses a different key concern for businesses. In the build-up to the 6 May general election, Donut MD Rory MccGwire is offering his thoughts on the issues raised by Doug Richard.
In his manifesto, Doug Richard argues that business regulation should be streamlined so that people can start businesses more quickly and run them more easily.
I agree. But in order to achieve this, I think the law must make an important distinction between small and large businesses. They have different regulatory requirements. What is fair and suitable for one is often neither fair nor suitable for the other.
It's also important to recognise the natural bias in our regulations, a bias that stems from the fact that regulations are always going to favour the people who make them. So our regulatory system is heavily skewed towards the preferences of the government, the public sector, big business and the trade unions.
The seemingly simple task of taking a chunk of time off for a family holiday is a struggle for many people running a small business, so it's hardly surprising that they do not have time to assist in the law-making process.
Nor do the various small business membership organisations have the power to make much of a difference. Think back to when the government raised CGT by 80 per cent without realising until afterwards that for many small businesses the only "pension" available at retirement is the proceeds of the sale of the business. A £1m threshold was hastily added, but not before it became obvious that the small business lobby groups had not even been consulted on this legislation, let alone listened to.
Yet it's small businesses that end up paying the price for so much of the legislation. Take a law requiring organisations to offer wheelchair access to their premises. I'm sure everyone agrees that society wants to help make life less difficult for disabled people. But few people stop to consider who will be forced to pay for the door widening. We all pay for the doors to be widened in the public sector buildings and the corporate buildings, through our taxes, pensions and savings (some of which are invested in listed shares), which seems completely fair.
But when it comes to all the properties owned by small businesses, it's the business owner who pays. So if I earn a £20k salary working for the local council or for a big company, I am not affected at all, but if I would have earned £20k from owning a shop, I might be left with just £17k after the adjustments to my shop front. How can that be fair? It's not. It is merely convenient, both for the lawmakers and for the Treasury.
It's the same with employee rights. Nobody questions the need for new parents to spend more time with their children. But who pays? There's no compensation to any of the small business owners who pick up these costs. In a small business, every member of staff is a key person and losing them, even temporarily, is a considerable blow. Larger businesses have the resources to cushion the blow; small businesses don't.
Given that small businesses employ a very considerable proportion of the workforce, I suggest that society ought to compensate small businesses if we all want to have those benefits. If not, you end up with a situation where business owners are terrified of employing women of a certain age. It's discriminatory, but it happens; the law has massive unintended consequences.
Sensible regulation is essential to protect customers, employers and employees. But it must recognise the reality of running a small business.
So much of our business regulation is designed for Hewlett Packard and Rolls Royce, not for "mom and pop" businesses. But, in my view, firms with fewer than five employees should have a completely different set of regulations. If you choose to work for them, perhaps you shouldn't have quite the same rights as employees in larger companies, simply because these rights amount to robbing Peter (the employer, who is a person) to pay Paul (the employee). But then you would be discriminating against employees of small businesses, which is clearly wrong.
So the only fair solution is for society (aka the taxpayer) to face up to, and pay for, the cost of implementing all these rights, instead of turning a blind eye while the costs fall onto the shoulders of small business owners.
Doug Richard is right and all the political parties seem to agree. We need to do something to enable the moms and pops to run their businesses in a more flexible and efficient way. Now let's see if anyone actually does anything.
What do you think?
What do you think about the regulations affecting small businesses? Please leave your comment below.