Why should you care about small businesses?

I have a sense that many people who have not paused to think about the differences between small and large businesses would naturally lump their feelings for all businesses into one big pot. This would be fine if the sentiment was positive. I hear a lot of negativity about corporations and what they are doing to America.

The question is why care at all?

Small business makes up a driving part of the National economy. Employing over half of all workers in the U.S. small business's still struggle to make it and to grow. The relationship with small business and the average person is good. It is not the same as big business. Big business's can fend for themselves and have resources that small businesses just don't have.

By fostering small business to grow, new jobs are created and new tax bases bring wealth into an area. With that wealth comes increased standard of living and more happiness.

You should go out and hug your small business today!

If you are a business owner that has a story to tell about doing business in Maryland - good or bad - please share it. I would love to post your story and add it to the what I hope will be an instructional list for our state representatives. - joro

The case for the lost real estate business

This is the next case I want to briefly talk about and hopefully will have some insight shared by other by posting this here.

A local real estate business owner told me that his business had been doing well. He had a niche in that he could reach people from out of state and help them buy second homes in Maryland. He basically created a new niche and nailed it. Our state legislators again saw an opportunity to once again skim off of a Maryland small business and increased the amount of taxes owed for out of state buyers verses in state buyers. Seems like an innocent thing to do. They are after all buying "second" homes and they are from out of state so who will that hurt? Right?

Unfortunately this small business owner tells me his niche business has nearly dried up. He has had to change  his business model to survive by becoming yet another common real estate company. The niche he built was taken away by way of extra taxation. Tough for him in this harsh economic climate.

What happened? He tells me that all of his potential customers were actually indeed aware of the difference in taxes between Maryland and Delaware and that they are nearly all choosing to buy second homes in Delaware now.

So instead of the state receiving a steady stream of tax revenue from an entrepreneur who made something new and unique happen, the state gets virtually nothing from that revenue stream now. We have once again taxed ourselves out of getting any taxes at all!

If you are a business owner that has a story to tell about doing business in Maryland - good or bad - please share it. I would love to post your story and add it to the what I hope will be an instructional list for our state representatives. - joro

It's a race with Virginia that Maryland is losing.

I have grown more and more concerned over the years that I moved my business from Virginia to Maryland. A few years after I did this the state representatives passed a bill to tax IT firms an additional 6% over other firms. Now while I am not opposed to paying taxes and in return creating a standard of living in our state. This bill was quickly reversed after a large outcry from Maryland businesses that got caught by surprise. My company and hundreds of others wrote dozens of letters to as many representatives as we could to ask for its repeal.

The problem is that it is indicative of the thinking of our representative base, and wrong thinking about small businesses. I have dozens of examples from friends across all industries.  I will post individual stories to this blog but for now lets just look at the effect this one bill would have had from the perspective of a small business.

Much of the IT business done in this state is federal in nature.  My company is a federal contractor getting 100% of our work from federal contracts that we compete for. Companies like mine are bound by the Federal Acquisition Rules (FAR). The FAR along with other guides from organizations like the GSA establish guidelines (although not specifics) about what a fair level of margin (profit) is on government contracts. That level on a competitive bid may be anywhere from about 6% to 15%. I have seen bids with margins as low as 2% or 3%. Companies in Maryland are in a fierce competition with all the companies in the surrounding states (Virginia, DC, Delaware, Pennsylvania and beyond). In order to win the contracts that bring money into the state in the form of salaries, taxes and increased standard of living, Maryland companies need to be very competitive with their pricing. In some cases I have seen bids that barely keep the lights on. Unless the company is a non profit, most companies are not in  business for free. They must make money to employ workers and need profits to hire additional people and invest in new products and services.

To have been taxed an additional 6% by the state would have meant that Maryland companies would have had to raise their bid prices making them less able to win business, a most undesired effect for all Marylanders.

Maryland representation at the federal level is quite good. With both Dutch Ruppersberger and Barbara Mikulski working hard to make Maryland a mecca for cyber security. But our state level representatives are not in sync with our Federal reps. Read this excerpt out of the recent clearancejobs.com compensation survey:

Virginia and Maryland are both working hard to attract and retain cybersecurity and defense industry business. A new marketing campaign launched by Virginia governor Bob McDonnell touts the over 300 cybersecurity companies based in Virginia, and Forbes recently ranked Virginia the second best state to do business. In the past five years defense contractors including Computer Sciences Corporation, BAE Systems and Northrop Grumman have moved their headquarters to Virginia. 

Maryland has actually been given a golden egg by the department of defense and has not in my mind really embraced it. The survey goes on to state:

BRAC and the standing up of U.S. Cyber Command have brought thousands of new jobs and companies to Maryland in the past several years, as well. An estimated 51 cybersecurity companies have relocated to Maryland, bringing about 5,000 new jobs, according to state representative James Malone.

Does governor O'malley believe that the real effect of the BRAC will be to help increase the republican base in Ann Arundel and surrounding counties? Instead of embracing the BRAC he is redistricting around it. If you want to read more on that just check this link out. This was unbelievably passed by the people. Upon further review of the way it was worded on the ballot, it asked the people if they were in favor of upholding the Maryland constitution. A sly trick indeed.

Our Maryland state representatives need to have a serious small business summit and learn how their legislation affects the Maryland economy. I am not against casinos but with the current favoring of casinos with tax breaks over small businesses surely in the long run Maryland will suffer. Besides it is in very poor form to beat up governor Bob Ehrlich over slot machines calling it immoral  and then hypocritically jumping on board with full fanfare and shady tax deals (any speakers of the house willing to claim that one?)

Every Maryland state level representative should be required to read Jim Clifton's book "The Coming Jobs War". Jim Clifton is the CEO of Gallop, a very respected organization. He describes the importance of supporting small businesses and how creating new and high quality jobs affects the local economy. One of those effects is that the tax base increases on its own without the need to focus on raising taxes and making Maryland companies non competitive.

If you are a business owner that has a story to tell about doing business in Maryland - good or bad - please share it. I would love to post your story and add it to the what I hope will be an instructional list for our state representatives. - joro