Update: Congress averted a government shutdown until December 11, but another crisis looms. Lawmakers will need to raise or suspend the debt ceiling by Nov. 5th to avoid defaulting on its debts. That's when the U.S. Treasury is expected to exhaust special accounting measures helping the U.S. Stay under its legal borrowing limit.
Government shutdowns are always painful, and they're really bad for the economy, whether your business is directly affected or not.
That's the sentiment of numerous entrepreneurs, as they reacted to the prospect of yet another, looming budget crisis. Congressional Republicans say they will shut down the government if money for Planned Parenthood isn't removed from the budget. They want the women's health care agency defunded in reaction to undercover videos of officials from the group allegedly discussing the sale of fetal tissue.
For many, the current skirmish is reminiscent of the 2013 shutdown, and wounds from it are still fresh. Two years ago, some members of congress closed down the government for nearly three weeks in an effort to defund the Affordable Care Act. Although they were ultimately unsuccessful, the shutdown shaved an estimated $24 billion of U.S. economic vitality, as measured by gross domestic product, or GDP.
Overnight, hundreds of public parks across the nation shuttered; close to a million federal workers were furloughed without pay, sending ripple effects through local economies. (The workers were ultimately paid retroactively when the government reopened, after a congressional vote). Businesses that depend on government contracts were unable to function as paperwork piled up without authorization. The same goes for business owners waiting for approval on loans backed by the Small Business Administration. And, of course, the inability of the U.S. government to come together to pass a budget and continue functioning riled markets, creating uncertainty in the economy at home and abroad.
Here's a look at five businesses, some of which went through the previous government shutdown, and how they expect the current stalemate over the budget will affect them.
1. Lumi Organics
Back in 2013, organic juice maker Lumi was still in startup phase. The company's idea -- to use a high-pressure, cold-press process to purify juice, needed approval from the Food and Drug Administration before its planned launch in October. Unfortunately, that approval got held up for three weeks as budget talks languished, wasting $10,000 worth of organic fruit and vegetables. Additionally, a 12,000-square-foot manufacturing facility that Hillary Lewis, the company's founder and president, had retrofitted to manufacture her product near Charlottesville, Virginia, sat idle. Today, the company has 18 full-time employees and close to $1 million in sales. Yet Lewis fears another shutdown will throw a cold towel on one of her biggest markets -- Washington, D.C., particularly if government workers there are furloughed, as they were two years ago.
"Government shutdowns very definitely have a negative impact on businesses of all sizes across the U.S.," Lewis says.
2. Knox Payments
The San Francisco-based startup is on the cutting edge of technology that authenticates users' identities, and lets them pay merchants directly from their bank accounts using automated clearing house technology. The service also lets futures traders accept instant payments from their clients' bank accounts to fund trades. Founder and chief executive Thomas Eide recently raised $1.6 million from angel investors, but he fears a government shutdown will throttle markets and put a damper on use of the company's product, particularly by its big foreign exchange trading customers. "We are a volume-based business, and our revenues come from volume," Eide says. He adds that a government shutdown of just two weeks would cause him to shed 20 to 30 percent of his 20-person workforce. "When there's a shutdown, everyone shuts their engines off, and then you have to ramp back up," Eide says.
A service-disabled, veteran-owned business and an Inc. 5000 company based in Lovettsville, Virginia, BNL provides advisory, security, investigative analysis, HR management, and IT consulting services to government departments including Veterans Affairs, the Department of Defense and the Department of Homeland Security, among others. The company currently has 65 employees and expects revenue of $8 million for 2015. In 2013, however, founder and chief executive Larry Miller says the shutdown cost the company two government contracts worth $2 million, and also led him to lay off eight employees. Miller says he fears similar economic damage this time around, which could have an even greater impact now, because his company's headcount and revenue have increased by a third since 2013. As a hedge, Miller says he's tried to diversify away from solely depending on government contract work, to more commercial work. He says he's also seeking opportunities in international contracts.
"It is absurd our lawmakers would hold our country hostage to their inability to make decisions, and come together as a caucus," Miller says. "I am embarrassed as a Republican."
4. Five Stones Research
The woman-owned government contracting business in Huntsville, Alabama, provides engineering, logistics, and information management to the Department of Defense, including the Air Force, Army, and Navy, and lost $450,000 in new revenue opportunities as a result of the three-week shutdown in 2013. It also caused delays for the Inc. 5000 company. "Half of my contracts were not being funded," Five Stones founder and chief executive Joni Green says. "It was a big deal."
In the intervening two years, Five Stones has added 60 employees -- it currently has 168 -- and doubled its revenue to $20 million. Green says the blow of another government shutdown would be even bigger this time, particularly as competing for contracts has gotten increasingly competitive, with thinner margins for her jobs.
"Regardless of political party, there is a disconnect between what happens on a daily basis, with working everyday Americans, and what happens in the Beltway, where politicians seem to live in a bubble," Green says.
5. LaSalle Network
The employee staffing firm and nine-time Inc. 5000 company was largely insulated from the last shutdown. Founder and chief executive Tom Gimbel says business-to-business companies such as his did not experience a direct hit the last time around, thanks in part to the short duration of the shutdown. Gimbel is circumspect about what could come to pass, however. If the current one lasts longer than a month, he might feel some pain, says Gimbel. In 2013, revenues grew 10 percent to more than $35 million, and employee headcount increased 15 percent to 65 full-time workers. Since 2013, LaSalle has increased revenues by 42 percent to $50 million, while the employee base has nearly doubled to 125 workers. Still, the idea that the government would shut down over a social issue is outrageous to Gimbel, who says that businesses that deal directly with consumers, and companies that do business with government, are likely to feel the burden.
"The fact they would shut down the government over funding Planned Parenthood, which would primarily affect lower income people, is a joke," Gimbel says. "And they should be ashamed of the way that affects us as entrepreneurs and workers and parents, and as Americans."