As part of our annual State of Small Business survey, Inc. magazine asked leaders of the fastest-growing private companies to identify the nation's most pressing concerns. Entrepreneurs are born problem-solvers, so we weren't surprised when some not only diagnosed ailments but also prescribed treatments. Here are some of their provocative ideas for addressing our greatest challenges.
1. Create a Public-Sector Sand Hill
People who fret about reducing immigration have the wrong end of the stick, says Stephan Aarstol, founder of Tower Paddle Boats, an $8 million maker of beach-lifestyle products. The country should instead focus its resources on attracting top talent--particularly entrepreneurial talent--from all over the world. To do so, Aarstol proposes the government invest in immigrants' startups.
"You want to start a business? Come to the United States and start a business. Here's a quarter million dollars," says Aarstol. "The U.S. government owns 30 percent of your business, and it can't be moved outside the country. If people see that, they would flock here."
2. Bridge the Capital Gap
The challenge of scaling is that entrepreneurs who could benefit most from borrowing money lack the hard assets to borrow against, says Paul Sandefer, founder and president of ComplianceSigns, a $10.5 million maker of safety, Braille, and directional signage. Sandefer would like to see a limited tax referral to bridge that "capital gap"--an idea first promoted by Doug Tatum, author of the book No Man's Land: Where Growing Companies Fail.
Under such a program, companies with less than $10 million in annual revenues and at least 10 percent growth could get a temporary deferral of $250,000 in federal tax liability. Two years after the deferral they would begin repayment on a four-year plan. "That essentially makes the government a bank. But the government will make money because their borrowing costs are obviously lower than what the small business's would be," says Sandefer. "There is no collateral required other than that you are a growing, profitable business."
3. Hire Those Who Both Do and Teach
Like many respondents, Chris Berry, CEO of Visionist, a $15 million engineering-services firm, would like to see greater emphasis on technology, science and math in grades 1 through 12. Berry's not concerned just with the quantity of instruction in those subjects but also with the quality. He worries that, for example, many computer teachers in middle and high schools aren't up to snuff. The solution? Adopt the adjunct professor model.
"If someone is a decent software person, they can make twice the amount coming out of college and working for a company like mine versus teaching," says Berry. "Universities hire adjunct professors who teach maybe one course a semester. For their normal jobs they can be software developers. I'd like to see something like that in middle schools, particularly, because that is the age when students get passionate."
4. Rethink the R&D Credit
Taxes are the universal bane of entrepreneurs. Bruce Ballengee, CEO of the $70 million technology services company Pariveda Solutions, would like to see a reduced marginal rate for small businesses. He calls his approach to paying for it "fairly heretical:" eliminate the R&D credit.
Although small and midsized companies invest in R&D, and many are eligible for the credit, large corporations are by far the greater beneficiaries, says Ballengee. And are those corporations "trying to create entire new industries or being disruptive in the marketplace? Many, many times they are out there trying to prevent a small business from becoming a large business," says Ballengee. "So basically the government is subsidizing a lack of innovation, a lack of competition." Reduced marginal rates, by contrast, "would benefit everyone."