More than half of 2016 is now gone. It's been nearly seven months since that yearly flood of "business prediction" posts appeared online. Now it's time for your annual "How accurate were those listicles anyway?" post. Here we go.
Late last year and early this year, trend prediction listicles featured everything from best industries for starting a business to millennial engagement. While those two issues always get coverage, it's often less sexy list items, like lending and employment rights that have been keeping small business owners up at night in 2016. I tried to go for some of the less sexy ones here and see how we stand now that we're a little way past the half year mark.
Money and Investing
As traditional lenders have drastically reduced the number of small business loans they're making, "Fintech" has expanded and so have funding options for small business. Companies like Kabbage and OnDeck specialize in small business loans and often have a quick turnaround time. But, whereas a traditional bank loan is likely to have a 5 or 6 percent interest rate, many online lenders have interest rates that can top 30 percent. It's worth remembering that the Small Business Administration can often step in to guarantee a loan, allowing businesses that might otherwise be turned down to secure traditional bank loans.
Rather than looking for a microloan, some entrepreneurs and even established small businesses waded into the crowdfunding waters on platforms like Kickstarter, which don't allow investors a financial interest in the company. But in May small businesses began equity crowdfunding up to $1 million on sites like SeedInvest.
Trend pieces that talked about how these developments could have a dramatic impact on the investing landscape were right. Funding alternatives have made a splash. However, it remains to be seen if it evolves into a viable funding option in the long term. I'm sure many of the listicles at the end of 2016 will have something to say about it, though.
Needless to say, it's been quite a year for employment rights. Regardless of what one thinks about the new rules individually, people who wrote about these issues noted early on that there were a lot of ways small businesses had to adjust in a short space of time.
For instance, the Department of Labor revised its overtime rule. Effective December 1, the Department is raising the salary threshold for overtime-eligible workers from $23,660 to $47,476. There have also been minimum wage increases, as well as mandatory paid sick leave and paid parental leave in several places.
The major employment news this year has been the minimum wage increases happening across the country. While the Federal minimum wage is still $7.25/hour, as it has been since 2009, 29 states plus Washington, D.C., currently have a higher minimum wage. California and New York recently passed legislation that will raise the state minimum wage to $15/hour over the next several years, and, as of June 7, so has Washington, D.C. Meanwhile, cities--including Kansas City, MO, Bangor, ME, and Birmingham, AL--are increasingly enacting their own wage hikes independent of federal or state raises.
Following President Obama's mandating sick leave for employees of federal contractors last year, mandatory paid sick and parental leave policies are also on the horizon in a few places, suggesting that employers across the country may soon have to start planning for those costs, as well. Currently, D.C., Connecticut, California, Massachusetts, Oregon, and starting January 2017, Vermont, have mandatory paid sick leave. Like minimum wage increases, a handful of cities in New Jersey, Washington, and Pennsylvania have also instituted paid sick leave policies.
California, New Jersey, and Rhode Island already provide some paid parental leave. New York recently followed suit, passing legislation that mandates up to 12 weeks of paid parental leave. Not surprisingly, my hometown of San Francisco is among the vanguard extending paid parental leave. San Francisco's new mandatory paid parental leave will require businesses to supplement the state's 55 percent of pay with the remaining 45 percent, giving new parents full paid leave. The state is even considering increasing its contribution to 70 percent, leaving San Francisco employers to only have to make up 30 percent.
Before paid sick leave and parental leave took center stage, the employer-sponsored healthcare provisions of the Affordable Care Act were creating chaos for small businesses. Regulations that changed mid-stream or were delayed have resulted in different, sometimes contradictory information from carriers and state agencies. As a result, employers are worried about being found non-compliant and at-risk for penalties, as well as concerned about the changes in healthcare cost and coverage and how to communicate those changes to their employees.
Rohit Prakash, founder and CEO of Townsquared, an online community for local small businesses, says based on research done with members, "The bottom line is that small businesses are going to have a tough time absorbing so many new financial responsibilities over a brief space of time."
As long as I'm wading into controversial subjects around healthcare and employment, I might as well dive into the effect of the presidential campaign on small business owners. To be fair, probably nobody (except maybe the Republican nominee) seriously imagined in the beginning that the presidential campaign would shake out the way it has. But poll after poll has shown that the election is top of mind for a majority of small business owners, and often not in a good way. The uncertainty is eating away at their peace of mind, and the resulting pessimism may be worse than "normal" election years. Specific concerns include taxes, economic growth, healthcare regulations, and, as a group, small business owners tend to feel like candidates aren't really addressing them.
Small businesses are big business in the U.S.--more than 96 percent of all businesses are small, and those businesses employ more than 44 percent of the country's workforce. So small business owner anxiety can have serious repercussions on the national economy. Even though most 2016 trend pieces didn't predict the rise of Trump the way it has occurred, there was certainly the usual conventional wisdom that election years can be economically rocky. That, if nothing else, turned out to be a very accurate prediction.