Saturday, April 16, 2011

The Business of Business

Small business is the backbone of this country and I think that is defined as 200 employees or less.  For a while I had as many as fifteen but the average for my 35 years in construction was only five.  I also had steady, reliable sub-contractors, plumbers, masons, roofers, electricians and such.  It is a lot of responsibility.
   The cost of doing business does not begin here though.  In my town this type of business can't be run out of your home so first you need a place for business, somewhere the employees can gather to go to work and a place to store equipment and supplies.  I had a small shop I rented in one of those series of shops that every town has.  This costs me about $600 per month.
   Electrical rates for business are more expensive than residential rates so with only a small office heated this added about $200 to my monthly expense.  I had a lot of tools which I sometimes forget as an expense of doing business but you have to have them.  I would guess at one time this might have been $10,000 worth of tools, and then, a little truck, a big truck and a van.  I had to have insurance of these, of course, and commercial insurance is more expensive than personal insurance, and then you need liability insurance on everything you touch!  My "insurance package" came to over $500 a month.
    Without opening my doors and going to work, actually finding a job to pay for all this I figure my base cost of operations was close to $2,000 a month!  And I sometimes, except for around tax time, forget the yearly expenses that just seem to come up!  Accounting and bookkeeping was another grand a year!
    And, have I mentioned Taxes yet?  I am retired now and I have forgotten most of them but everyone wanted a piece of my action!  First, without making a dime, there were property taxes and inventory taxes and taxes on the equipment and vehicles!  And when you really get that first job the tax people are at your door.  It is like working for the Mafia!  In my county we have a bus system that is employer subsidized.  It makes no difference that we can't actually take our ladders and saws onto the bus, we pay for it anyway!
We have a great on the job injury insurance in our state but it is extremely expensive, averaging 17% of a paycheck in the construction trades, over 40% for roofers.  Social Security costs another 15%, the employer contributing 8% of this.  I have always been self employed so I paid the entire 15% on myself.
   I know there were more taxes but like any painful memory, as you get away from this you have a tendency to forget them.  Then, of course, there is the great bug a boo, the thing we hate to talk about and hope will just go away or solve itself:  Health Insurance!  When I began my company over 35 years ago I could get an adequate, although not perfect, policy for my employees for about $100 each per month.  When I retired this expense had grown to over $900 each per month.  It has become a burden that business can no longer bare.
The cost of health care adds about $1,700 to the price of an American automobile, almost nothing to the cost of an imported car!
    As an average, the last year I was in business, my employees made about $12 per hour, some more, some less.  I had to divide my expense of business by five, the number of employees I had.  Sometimes I am competing with a guy out of his car with a Black and Decker skill saw and a fifteen foot extension cord with no license, no insurance, no cost of doing business at all.
    I guess I am writing all this so you can appreciate how complicated all of this is.  I take my hat off to the small business person of this country.  They work hard with high risks and little appreciation for being the backbone of our American system.

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3 comments:

AutumnLeaves said...

I always worry over small businesses. The expenses are relatively high and they don't have the volume of the big business neighbor. They have to charge higher prices to make ends meet and the higher prices drive customers to the big business anyway. A vicious circle with no end.

Kay said...

wow..I knew it was tough being in a small business but your figures are an eye opener!!!

stonepost said...

Thank you Autumn Leaves and Kay! I keep telling ya I have all the experience to be a Republican! But I have the Heart of a Democrat and I know what is fair. I know for anything to work, money needs to circulate. It is not complicated math.