Welcome to the Small Business Rundown. Each day, we bring you stories that impact small business owners and their workforce.
Hello, hello. A new study from Federal Reserve Banks examines the relationship between increasing revenue and stagnant profitability, while a roundup of new federal and state laws points to some expected — and unexpected — increases in the cost of doing business. Plus, a victory for McDonald’s means a big win for many small business owners!
Small biz revenue increases as profitability stays the same
The 12 Federal Reserve Banks Small Business Credit Survey (SBCR) Report highlights some interesting trends in performance, borrowing patterns, and financing needs for U.S. businesses with 500 or fewer employees. While more than half of companies reported seeing their revenue increase in 2018 — and one-third of businesses added to their payroll — the study found that the number of companies making a profit remains unchanged. Curious to know why? Read on…
The Number: 73%. The cost of doing business has increased over the past year according to 73% of small biz respondents.
The Quote: “Firms that increased their prices were twice as likely to see profitability growth as firms that did not pass on cost increases to customers …”
Labor (and other) costs set to rise in 2020
The rising minimum wage and the price of complying with new laws will contribute to an increase in the cost of doing business for many small companies in the coming year. Nearly a quarter of U.S. states, as well as some cities and municipalities, are moving toward a $15 minimum wage threshold, while changes to federal overtime laws and the IRS W-4 form, as well as California privacy and worker classification laws, will increase compliance costs for small businesses.
The Number: 1.3 million. New Department of Labor overtime laws mean that approximately 1.3 million Americans will see their pay go up in 2020.
The Quote: “While many businesses pay hourly workers above the minimum, when there’s an increase in the wage, many owners give all their staffers a raise to stay competitive amid a tight labor market.”
NLRB upholds rights of McDonald’s, franchise owners say “I’m lovin’ it”
A recent National Labor Relations Board ruling in favor of mega-chain McDonald’s Corporation has a significant impact on small business franchisees. The decision dealt with the issue of joint employment and ruled, essentially, that the hamburger corporation can not be held responsible for franchisee labor practices.
This is what the lawyers have to say about the decision: “Indeed, the list of businesses that operate on the franchise model is almost endless. People buy franchises because they want to be business owners and make their own decisions, within reasonable parameters such as products offered and other restrictions necessary for branding. While it may be nice to have the backing of a large corporation when money is at stake, if a franchise owner becomes liable for everything regarding employees, it is likely that it would seize control of everything else, as well. And if the corporation has control of everything, there is no point in franchising.”
The Number: 90%. Nearly 90% of McDonald’s locations are franchises — or de facto small businesses. The ruling upheld the right of franchise owners to operate independently.
The Quote: “Thus, this decision, declaring that McDonald’s is not a joint employer, is not only pro-big business, but pro-small business owners, allowing franchisee owners independence in how they run their franchised stores, and, therefore, allowing this franchise model to continue.”