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STRATEGY

Letters to Bush
 

Re: The entrepreneurial owners of successful, fast-growing companies have some suggestions, compliments, and a few grievances to air when it comes to doing business under the Bush administration. FYI, Mr. President!
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Dear President Bush: You've said that "the role of government is to create an environment in which the small-business owner can grow to be a big business, in which people with the entrepreneurial spirit flourish, in which job creation is strong and evident." We agree with you. Small businesses make up more than 99% of all employers, account for 52% of the GDP, and provide two-thirds of net new jobs, according to the Office of Economic Research. Taken as a whole, they're an economic powerhouse.

Unfortunately, the voices of small-business owners don't always get heard in Washington. They are too busy to latch themselves on to the D.C. cocktail party circuit, where they might forward their agenda with some local bigwigs. And they don't have millions of dollars to hire lobbyists who could bend your ear from time to time. When it comes to political influence, small firms lack access.

This, we decided, was a situation Inc. could help rectify. So we asked some of our readers--the owners of successful businesses--to write you letters, explaining what's on their minds when it comes to doing business under your administration. For the most part, these letters do not address the macroeconomic forces that affect big and small companies alike. Instead, they discuss specific ways in which you could help improve their businesses and foster a more entrepreneurial nation. We hope you will listen.

Dear President Bush:

For the most part, America is a magnificent place to advance entrepreneurialism. In the spirit of advancement, and as the founder of a 15-year defense services company now also at the forefront of homeland security, I offer these suggestions.

Please rejigger the Fair Labor Standards Act, which established the 40-hour workweek, so that it allows for more flexibility in work schedules. For example, one of my employees would like to work 60 hours one week and 20 hours another for personal reasons. That's fine with me, but because she's an hourly employee, I would have to pay her time and a half for the 20 hours she works overtime the first week, which I'm not willing to do. FLSA leaves us only two choices: salaried exempt or hourly nonexempt. This situation came before Congress a few years ago and remains a bone of contention between the donkeys and the elephants. You could resolve it.

Open up the Salary Reduction Simplified Employee Pension (SARSEP-IRA). This tax-deferred retirement plan that lets both the employer and the employee contribute to an IRA is one of the fairest and simplest plans on the planet--but drop the IRS provision that prevents its use for companies with more than 25 employees. The limit only forces us to spend money on big investment houses to manage 401(k) programs.

I am pleased and proud to have such a strong leader in the White House.

Sincerely,

R. L. Manganello
CEO
Windmill International
Nashua, N.H.


Dear President Bush:

One of my concerns is the lack of affordable debt financing for privately held service companies like mine, one of the world's largest telephone answering services, with more than 2,000 employees serving 40,000 businesses in the U.S. Although interest rates are very low, getting access to money at low rates can be difficult. Service companies often don't have the tangible assets, like real estate and equipment, that banks (and their regulators) require as collateral. Our staff is our main asset. But banks won't accept people as security (and the employees would get really angry if banks tried to auction them off).

The government sponsors programs such as the Small Business Investment Corporations, which are privately managed financial institutions that finance only small businesses and are backed with both private capital and government loans. However, in my experience, these companies are run by venture capitalists who often look for returns in excess of 25%, which isn't inexpensive. These programs can help businesses grow, but the costs are often too high both economically and personally--because SBIC companies get equity in the company and often take positions on the company's board of directors.

Small businesses like mine need better programs that allow us to take advantage of the low cost of money. If you could make programs like that available, small companies would start to spend money and further stimulate the economy.

Respectfully submitted,

Gary A. Pudles
President & CEO
AnswerNet Network
Princeton, N.J.


Dear President Bush:

We have an obesity crisis in our country--with more than 59 million obese Americans, it's no surprise that obesity-related deaths are projected to overtake tobacco-related fatalities within 10 years. You might think there's not much a President can do about this. But that's not true.

Since it is unlikely obesity can be legislated away, the problem requires Presidential leadership--you need to help people recognize that fighting obesity is not an issue of fashion, it is a matter of life and death, or at least runaway health care costs.

There are two main causes of the problem: lack of exercise and poor diet. You are already setting a good example in terms of fitness. Now you need to address the role of added sugar in the diet. According to the USDA, the average American consumes about 45 pounds of processed sugar every year, well over what the World Health Organization recommends. If P. Diddy can spark national interest in running, imagine what you can do as President by speaking out on eating healthy. We're doing our part by making Honest Tea, a variety of organic teas that taste great and have only 4 to 10 grams of sugar per 16-ounce bottle. Here's what we'd like you to do:

(1) Ask the FDA to set a recommended daily allowance for added sugar and encourage food companies to disclose on their labels how much added sugar is in their products. If consumers start paying attention to how much added sugar is in the foods they buy, they will start to make informed and healthier choices.

(2) Show people that great-tasting, healthy alternatives exist by drinking Honest Tea in public. We'd be happy to send over a case or two. Avoid being photographed holding a bottle of soda or sweetened iced tea; one 16-ounce bottle of those drinks can contain up to 60 grams of sugar--25% more sugar than the World Health Organization recommends for an entire day. Life is sweet enough.

We understand that you are a teetotaler. Why not become an Honest Tea totaler?

Honestly yours,

Seth Goldman and Barry Nalebuff
Co-founders
Honest Tea
Bethesda, Md.


Dear President Bush:

I appreciate your efforts to help companies like mine through the recent tax cut legislation, but I sure wish you'd made it easier for us to understand what was in it. In all due respect, your administration has done a pretty poor job of explaining how businesses can take advantage of, for example, the additional first-year bonus depreciation on capital investments. That provision alone will save my company tens of thousands of dollars this year while making it possible for us to improve our productivity and boost our equity value.

But we're lucky in that regard. Few small companies have access to the accounting expertise that might alert them in advance to the tax implications of what they're doing, or could be doing, and so the vast majority won't learn about the bonus depreciation provision until tax time. If the company operates on a calendar year, that will be next March.

If you really want to help small companies, Mr. President, you have to be willing to make things comic-book simple. In this case, you could use a company like mine as an example. Of the 20 different businesses that make up SRC Holdings, 11 are involved in some type of manufacturing. Let's say we invest $1 million in new machine tools that have a 10-year useful life. We can deduct half of that amount--$500,000--from our pretax income and depreciate the remaining $500,000 over 10 years, including this one. So we'd actually be deducting $550,000 this year. Our overall tax rate is 40%--34% federal and 6% state. That means we'll be saving $220,000 (40% x $550,000) that we'd otherwise be spending on taxes. Yes, we'll eventually wind up paying the same amount of taxes we would have paid anyway--we're just taking more of the depreciation up front--but in the meantime we'll be able to enjoy the benefits of the new equipment, which will increase our after-tax profits and thereby boost our equity value. We'll also be creating jobs for the people who supply the goods we're buying.

It's a great deal for any company that earns a profit and therefore pays taxes. It helps us overcome the fear we have that the recovery won't continue and we'll be stuck paying for capital equipment we don't need and can't afford. But I doubt the provision will have the effect you hope for unless you get out there and sell it.

Yours truly,

Jack Stack
President & CEO
SRC Holdings
Springfield, Mo.


Dear President Bush:

Thank you for providing an example of leadership based in faith. In crisis or in victory, you confidently assert your faith in the American people and your faith in God. This has had as much of a positive impact on our company and our economy as any policy decisions you could make.

If there is one specific issue that would assist emerging businesses, I believe it is tort reform. Most business owners live with a nagging fear that they could lose much of what they and their associates have built with one frivolous lawsuit. I would guess that in your business career you experienced some of those same moments. I realize this is a tough issue complicated by the number of legislators who have enjoyed careers in the legal profession. But I hope you can help find a way to compensate those who are legitimately wronged while lessening the burden on growing businesses.

Sincerely,

Steven M. Craig
President
Gameplan Financial Marketing
Woodstock, Ga.


Dear Mr. President:

The perception that no firm foreign policy exists has created the reality of business stagnation. Small-business owners are reluctant, if not unable, to implement strategies or make long-term financial commitments because they do not know what to expect with regard to our foreign policy, in general, or our military involvement in Iraq and North Korea, in particular. From the perspective of a business owner, the lack of an articulated, actionable plan is unacceptable. Our company could not afford to employ a manager incapable of formulating or executing a plan, nor could we tolerate being kept in the dark.

It is time to clearly define American foreign policy, agree on the best plan, rally the strongest internal and external support, and, within the guidelines of national security, inform the American people. Serious economic atrophy is gradually setting in as business waits for the other combat boot to drop.

Respectfully,

Jeffrey G. Suss
President & CEO
Complex Litigation Integrators
Tinton Falls, N.J.


Dear Mr. President:

For more than a year, the Department of Transportation and many travel industry players have been debating potential revisions to the rules that regulate the computer reservations systems (CRSs) used by travel agents to book airline tickets. There's been discussion about expanding these rules to include Web-based travel sales, too. So far, your administration appears to be avoiding the temptation to burden the online travel sector with cumbersome new legislation. I urge you to stick to your guns.

The rules that govern the display of CRS information to travel agents were created for good reason. There are only four major reservation systems for travel agents. The members of this oligopoly have had significant market power and have historically had stronger relationships and even ownership interests with particular airlines. If CRS companies had the freedom to bias the display of flights as they saw fit, the potential for abuse would be immense. Allowing a few companies to decide which flights and prices are shown first is bad for the consumer.

The online travel landscape is different. Consumers have a plethora of sources from which they can buy airline tickets, along with the ability to shift from one to the next with the click of a mouse. The companies that will thrive in online travel are those that foster consumer choice, not those that stifle it. In this vibrant new marketplace, we should let competition--not legislation--drive the behavior of market participants. As we've seen with the debate sparked by the Department of Transportation, some will attempt to convince you otherwise. We hope you will resist.

Respectfully,

Brian Barth
CEO
SideStep
Santa Clara, Calif.


Dear Mr. President:

During the Clinton era an effort was made to simplify the contracting process, and a new set of regulations known as the Simplified Acquisition Procedures (SAP) was introduced. Now, contracts are awarded not necessarily to the lowest bidder but to the one who gives the "perceived best value." That means government evaluators are free to make award decisions based on literally any criteria and the decisions cannot be challenged. Isn't this the first step to the kind of cronyism that once led to $600 hammers and $5,000 coffeepots?

One of your first acts as President was to rescind the rule that made it impossible for a business to get a government contract if it had received a negative performance evaluation by a government employee. Thank you for that step. Now you need to return competition to the contracting process; revive the Fraud, Waste & Abuse program; and remind government employees to serve the public good, not their friends.

This issue deserves very high-level and immediate attention. My entire team and I stand ready to serve at your request in support of this Important Mission.

Sincerely yours,

Sandra D. Brittain-Pescion
Founder & CEO
Denali Ventures
Cheyenne, Wyo.


Dear President Bush:

Small businesses remain at a distinct disadvantage to larger ones when it comes to health insurance. According to the Medical Expenditure Panel Survey on national health care spending in 2000, only 47% of small firms with fewer than 50 employees offer health plans, as opposed to 97% of firms with 50 or more employees. Typically, the deterrent is cost.

Small businesses and sole proprietors represent a large number of working people in our nation. We should be entitled to benefit from economies of scale, just as large companies do. Legislation should be put in place to support associated health plans and other programs that allow small businesses to unify and negotiate better rates and benefits for ourselves and our employees.

Sincerely,

Michele Meek
Founder & President
BuyIndies.com
Boston, Mass.


Dear Mr. President:

Food-borne illness is a huge problem for the general public and the restaurant industry specifically. Though the government has tried to create a better situation through regulation, I know another way to help eliminate the problem.

Several years ago, two of my competitors suffered outbreaks of hepatitis A, which is often spread by poor hygiene. Sadly, a patron died as a result. Hepatitis A is a terrible illness. I contracted it as a child and was so sick I wanted to die.

After these outbreaks, I decided to vaccinate everyone on my staff who handled food. The cost was $60 per person for the original shot and a booster shot one year later. I inoculated hundreds. Today, with the help of the local health department, the cost has fallen to $28.

We can drastically reduce hepatitis A outbreaks, such as the tragic one that occurred in Chi-Chi's Restaurant late last year. There is a vaccine, and it is cheap. Federal law must mandate use of this vaccine as a condition for food service employment. Please help.

Very truly yours,

Matt Prentice
President & CEO
Unique Restaurant Corporation
Bingham Farms, Mich.


Dear President Bush:

As an entrepreneur who runs an outsourcing company, I've noted with great interest your efforts to get more government functions performed by independent private contractors. As you've recognized, the private sector has been able to increase its efficiency by using free-market incentives that cannot be built into government agencies running identical functions.

Unfortunately, the government does not get the best results in what could be its most effective strategy to reduce federal spending. Why? Because of a flaw in the contract procurement process known as A-76. Under A-76, the agency in question develops the specifications for contracting out a given function. Once the competing bids have been submitted and reviewed, the agency can then come up with an alternative plan for keeping the function in-house. Given an agency's natural desire for self-preservation, it's no wonder that only 40% or so of the functions put up for outsourcing under A-76 end up being awarded to private companies. With such poor odds, many potential contractors do not bother to prepare a proposal. They regard the whole process as a costly and time-consuming crapshoot.

If you want to outsource more functions faster, don't begin the competitive bidding process until there's a clear commitment to outsource a function. If your agencies want to retain the function, force them to prove up front that the public interest will be harmed if the work is done by private contractors. You'll have more companies willing to bid on a contract, and they'll come in with lower prices, since you've removed the guessing game of whether it's a true contracting opportunity in the first place.

Oh, and by the way, you'll also be creating more private-sector jobs. You won't get much objection to that.

Sincerely,

Martin Babinec
President & CEO
TriNet Group
San Leandro, Calif.


Dear Mr. President:

As an entrepreneur and leader of a midsize business based in NYC that cleaned up much of downtown Manhattan following the attack on the World Trade Center, I appreciate the depth of responsibilities you have accepted as the leader of our nation.

However, I wish that you would turn more of your attention to education. Today's children are our future entrepreneurs, leaders, skilled workers, and artists, but it seems that we have increasingly given more lip service and less resources to education. Congress recently approved $87 billion for the rebuilding of Iraq, which shows that resources are available when a priority presents itself. There is, quite simply, no greater priority than education.

Respectfully submitted,

Damon Gersh
President & CEO
Maxons Restorations
New York, N.Y.


Dear President Bush:

As the owners of a financial advisory firm, we want to take this opportunity and thank you for the Economic Growth Tax Reconciliation and Relief Act (EGTRRA) of 2001. This piece of legislation, the largest tax cut in two decades, has given employees, executives, and business owners the formula to take charge of their own retirement in a prudent and rich way. EGTRRA impacts IRAs, profit sharing, unified credit, estate planning, and defined benefit plans, to name a few. There are literally hundreds of enhancements and increased limits embedded within this piece of legislation.

We are writing to you so that other advisers and consultants might recognize the huge value that EGTRRA can deliver. I feel that owing to the lack of awareness about this legislation, this tax jewel has not been fully discovered. Your administration could help educate the American people about this valuable benefit.

President Bush, thank you and your administration once again.

Sincerely and respectfully,

Matthew Gaglio, CEP & Harry J. Abrahamsen
Partners
Integrity Advisors Pension Consultants
White Plains, N.Y.


Dear President Bush:

This year, you increased the small-business tax deduction for new depreciable equipment, Section 179, from $37,000 to $100,000. That was extremely important in helping to stimulate the economy, and I thank you. However, I believe this exemption should be increased further or the cap eliminated entirely for small businesses. In one poll of fast-growing companies, CEOs overwhelmingly cited this as more important than the reduction of personal taxes on dividends. Providing no limitation on Section 179 deductions would allow these businesses to greatly increase their employment and capital spending. One surveyed owner commented: "If Congress passes a tax cut on capital equipment expenditures today, I will be writing checks tomorrow."

Another way you can create jobsÊis to increase the Small Business Innovation Research (SBIR) percentage from 2.5% to 10% of all government research. It's a well-known fact that small businesses can create more jobs and patents per federal R&D dollar than can larger companies. By shifting money from large corporations to smaller ones, you will create more American jobs and patents without spending more money.

Sincerely,

Robert N. Schmidt
President,
Cleveland Medical Devices
Chairman, Orbital Research
Cleveland, Ohio


Dear President Bush:

Your compassionate concern about the health of Americans and your respect for the vital role small business plays in this nation lead me to ask you to look again at a policy currently espoused by your administration--a policy that would limit access and increase the cost of some of our most proven and useful drug therapies. I am speaking of certain drugs (for example, guaifenesin, an expectorant used for coughs and colds) that came into wide use decades ago--even before the establishment of the Food and Drug Administration. Many of these prescription drugs are manufactured by small businesses like mine. Over time they have been used safely and effectively.

Recently the Food and Drug Administration (FDA) stated its intention to put these drugs through an FDA approval process. This will remove them from the market for the length of the approval process, which can take years, and create a monopoly for whichever company first gains approval of each drug as a "new" drug. Smaller businesses will have a hard time bearing the costs inherent in this process, and consumers will end up paying more for these drugs. Small-business owners in the drug industry trust that the FDA is invoking this policy to promote public health. But, Mr. President, I ask you to help create a system which would bolster but not destroy what the agency's unwritten enforcement policy has been for decades: regulation and oversight without individual approval.

The FDA is scheduled to deliver a report to Congress on the feasibility and costs of such a system. We ask that your administration seriously consider a way to meet the objective of ensuring the safety of American prescription drugs without disrupting the livelihood of many owners and employees of American small businesses and without raising the costs and availability of these old drugs.

Respectfully yours,

Darlene M. Ryan
President & CEO
PharmaFab
Grand Prairie, Texas


Dear Mr. President:

I realize you are a very busy man and probably have a lot of things on your mind right now. As I write this letter I can't help feeling like a little kid asking Dad for an allowance--but here goes.

May I please borrow $1,000,000 to take my very successful company to the next level? Since my dad would want to know what I would do with my allowance, I think it is only fair to tell you that I'd use the money to hire additional staff, thus reducing the unemployment rate, and I'd move into larger (but still reasonably priced) office space.

I feel funny having to write to you but I've tried various financial institutions who said, "You're just not big enough yet." I'll understand if you're unable to advance me the $1,000,000 right now, but I would gladly take any suggestions you might have for a successful small business trying to secure additional financing.

It is important for you to know that I will repay this loan.

All the best,

Marc Richman
CEO
For Any Occasion
Tampa, Fla.

P.S. If you get a minute, check out our website: www.cleverpromos.com. Let me know if you need a quote on any gifts, coffee mugs, or stress balls.

Last updated: Jan 1, 2004




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