Around this time last October, the federal goverment shutdown sapped the wind from the sails of what might otherwise have been an extraordinary year for Joni Green, co-founder of Five Stones Research. And Green says she hopes we're not headed toward another budget showdown again this year after the midterm elections. But it's not looking good.
Five Stones, which has made both the Inc. 500 and Inc. 5000 lists of fastest growing companies, provides engineering, logistics, and information management services to the Department of Defense and other federal agencies. In Green's city of Huntsville, Alabama, another shut down would certainly lead to a wave of business closures, she says, as well as troubling consequences for her own fast-growth company.
Unfortunately, experts are predicting another shutdown, most likely after the midterm elections, and possibly before the end of the year. The House of Representatives is unlikely to repeat the scenario from a year ago. But if Republicans succeed in taking the Senate, the chances of a shutdown would escalate substantially, as a show of power, before the 2016 presidential election, says Robert Shapiro, a senior policy scholar at Georgetown's Center for Business and Public Policy, and former economic advisor to President Clinton.
Like a lot of business owners, Green says she's tired of all the political squabbling that's led to government closures, unnecessarily harsh cutbacks, and self-inflicted wounds to the economy. So she wants Congress--Democrats and Republicans both-- to sit down and get to work passing meaningful legislation on taxes and health care, which will help small businesses like hers.
"The shutdown wiped out our bottom line last year," Green says. Among the causualites: end of the year performance bonuses and much of Five Stone's profit margin.
Green, whose company had revenue of more than $5 million in 2012, had forecast that sales would nearly double in 2013 to about $9 million. But sales actually came in about $1 million short of that, which she attributes to the shutdown.
Despite the economic recovery, Green says the ongoing sequester, which has reduced all sorts of government funding, including on public parks and education, has also sliced spending for her biggest customer, the Department of Defense. And that compresses her margins further, making it harder to expand.
Green currently has 130 employees, but held off on hiring this year because the DOD contracts have tended to go the very lowest bidder, she says. When the company does win contracts, 43 percent of revenue now goes to employee health care, Green says. In fact, the Affordable Care Act added $35,000 in additional health care costs to the company as Five Stones made its benefits compliant with the new standards, she says. That combined with the high corporate tax rate the company pays--38 percent--makes it a challenging environment in which to operate, says Green.
"It makes it more difficult to reinvest every dollar we make, and try to grow," Green says.
What Green would like, she says, is tax reform that would lower her corporate rate, as well as changes to the ACA that would help small businesses like hers pay for the care she wants to give her workers.
"Hopefully our elected officials will beign to focus on what the people need and begin to work together," she says, "regardless of party."