For Small Businesses, Small Matters
Warren Meyer, whose company operates campgrounds, is getting the hell out of Dodge, by which I mean Ventura County, California:
- It took years in Ventura County to make even the simplest modifications to the campground we ran. For example, it took 7 separate permits from the County (each requiring a substantial payment) just to remove a wooden deck that the County inspector had condemned. In order to allow us to temporarily park a small concession trailer in the parking lot, we had to (among other steps) take a soil sample of the dirt under the asphalt of the parking lot. It took 3 years to permit a simply 500 gallon fuel tank with CARB and the County equivilent. The entire campground desperately needed a major renovation but the smallest change would have triggered millions of dollars of new facility requirements from the County that we simply could not afford.
- In most states we pay a percent or two of wages for unemployment insurance. In California we pay almost 7%. Our summer seasonal employees often take the winter off, working only in the summer, but claim unemployment insurance anyway. They are supposed to be looking for work, but they seldom are and California refuses to police the matter. Several couples spend the whole winter in Mexico, collecting unemployment all the while. So I have to pay a fortune to support these folks' winter vacations.
- California is raising minimum wages over the next 2 years by $2. Many of our prices are frozen by our landlord based on past agreements they have entered into, so we had no way to offset these extra costs. At some point, Obamacare will stop waiving its employer mandate and we will owe $2000-$3000 extra additional for each employee. There was simply no way to support these costs without expanding to increase our size, which is impossible (see above) due to County regulations.
- A local attorney held regular evening meetings with my employees to brainstorm new ways the could sue our company under arcane California law. For example, we went through three iterations of rules and procedures trying to comply with California break law and changing "safe" harbors supposedly provided by California court decisions. We only successfully stopped the suits by implementing a fingerprint timekeeping system and making it an automatic termination offense to work through lunch. This operation has about 25 employees vs. 400 for the rest of the company. 100% of our lawsuits from employees over our entire 10-year history came from this one site. At first we thought it was a manager issue, so we kept sending in our best managers from around the country to run the place, but the suits just continued.
- Ask anyone in the recreation business where their most difficult customers are, and they likely will name the Los Angeles area. It is impossible to generalize of course, because there are great customers from any location, but LA seems to have more than its fair share of difficult, unruly, entitled customers. LA residents are, for example, by far the worst litterers in the country, at least from our experience. Draw a map of California with concentric circles around LA and the further out one gets, the lower the litter clean-up costs we have. But what really killed it for me in Ventura County was the crazy irresponsible drinking and behavior. Ventura County is the only location out of nearly 200 in the country where we had to hire full-time law enforcement help to provide security. At most locations, we would get 1 arrest every month or two (at most). In Ventura we could get 5-10 arrests a day. In the end, I found myself running a location where I would never take my own family.
This is what I meant when I wrote:We tend to think of the policy issue of the day as being the key issue for everyone. But entrepreneurs think about a lot of things when they're deciding to start a business, or grow it; health insurance is only one of many. Things such as market conditions, access to capital and overall labor costs loom much larger. Even for someone with a family or an expensive chronic condition, issues such as "How will I pay for food and shelter?" and "Can I really put in the 16- to 18-hour days that are needed to get a new business off the ground?" will often be more important than "How will I afford health insurance?"
On that list, the health-care overhaul is only one item -- and it's a negative for a business, not a positive.
We tend to talk of entrepreneurship and business growth as if it were a matter of tweaking a few simple policy buttons: lowering taxes, making health insurance cheaper, hamstringing the EPA. Unsurprisingly, these issues map well onto big national policy battles. And yet, when I talk to small-business owners, I'm more likely to get an earful about their state's workers' compensation scheme or the local utility's pricing schedule than I am about the federal tax rate. Yet almost none of the policy journalists I know could even describe in detail how workers' compensation insurance works, much less articulate a coherent policy agenda for it.
Then there are the sort of soft institutional issues that Meyer highlights, such as whether the local legal system encourages frivolous lawsuits, or some arcane regulatory issue that's specific to businesses. These things matter a lot, but they're hard to measure and even harder to fix.
There are a few lessons in this: If you want to encourage entrepreneurship, talk to business owners, not policy wonks. And you often need to think local, not global.
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Megan McArdle at email@example.com