Search This Blog

Monday, July 25, 2016

Harder Than It Looks

There is something oh-so-thrilling about the idea of being an entrepreneur! Who cares if you have to start small? The dream may include nothing close to the possibility of one day “going public.” It’s more about doing what you love. Having the opportunity to call the shots. Take time off when it suits you. And perhaps, reap some nice profits.

I’ve gone down the bigger road a bit—where I hoped my business dream would become a franchise and yield big investments and profits. But I also helped my wife start a small business in Pittsburgh several years ago where our world headquarters was in our living room. Trust me…that second one was much easier to manage.

Speaking of Pittsburgh, Zachary Slayback is a talented young man and a founding team member of a group called Praxis, apparently based out of the Steel City. He wrote a superb reality piece for Linked In recently detailing the challenges faced by today’s millennial dream seekers. It’s titled, “Where Are All the Young Entrepreneurs?” (

I liked his detailed account of what it takes to get “out on your own” for a couple of reasons. First, he examines the very small percentage of young Americans willing to step out on the entrepreneurial ledge. He also offers clear examples of how government regulation and taxes can quickly de-motivate someone from leaping to start up a business. I must say, it’s a little depressing!

Zak documents the first point with a Wall Street Journal statistic telling us that less than 4% of young Americans are currently entrepreneurs. This should cause consternation when we see the difference in just a couple of decades. In 1989, the share of American households headed by someone under 30 who had a stake in or owned a privately held business was nearly 10.6 per cent. Today, that number is at 3.6 per cent.

The Journal suggests reasons of stiffer competition with the Internet. Also fewer risk takers, and changes in bank lending policies.

Mr. Slayback tends to think otherwise. And I would agree with him. Consider the dreaded tax burden. As he states, “Americans today are the most regulated and taxed in the country’s history. While some tax rates have dropped in recent years, they’ve been offset by increases elsewhere and the unprecedented and massive growth in the bureaucracy. It’s harder today to simply start a business because of the number of regulations with which one must comply.”

To illustrate his point, he introduces the hypothetical Tina—a hairdresser. Not too long ago, she could have started a business in her basement cutting the hair of friends, family, and referrals. Today, as Zak writes, “she’d have to pass a number of boards and certifying examinations saying that she is qualified to provide this service…get a commercial license from her local government, incorporate as a business, get a federal EIN for tax purposes, buy a regulation-friendly sign, and hire staff at a much higher price than her (family member) was willing to do the work. And that’s just to get off the ground and get started.”

Let’s suppose you can survive those initial shocks and somehow manage to be profitable. Then you might well come to fear the capital gains tax! It’s bandied around political discussions as if only the most wealthy are affected. Not so.

Zak shared about a friend who, at 16 years old, invested with a few other friends in an old house. They put up all their savings and received a bank loan. Then, they did some serious renovation on the place. The house sold for three times their return on investment. But after state and federal taxes were taken out, each of these “investors” netted only a few thousand dollars. As Zak laments, “it would have been wiser to go work at McDonald’s for a year rather than work on the house.”

Mr. Slayback offers a few other reasons why the decline in young entrepreneurs has become so steep. It’s what he calls the “over-schooled and over-coddled risk.” Zak is young enough to have seen this played out. Educators’ reinforcement of being rewarded for simply trying and never dealing with the pain of failure likely makes many more risk-averse. He says, “Being told that you deserve a reward just for participating creates an odd sense of resentment to even trying in most children.”

His final reason for less than enthusiastic venture starters also has to do with schooling. Education systems often reward conformity in thought and problem-solving, and in tastes and desires. Students who stray from the path don’t fare so well. Zak recommends that “deschooling”—unlearning bad habits—will help a young entrepreneur become more successful.

In this political season, we should carefully consider candidates’ views on the role and size of government. Many times bureaucratic tendencies make life difficult for those struggling to build a business. I’m for limited government—best administered locally—where you and I have a voice in what happens.

The Bible doesn’t really address the size of government. But many well versed Christians have. In his writing, “Delinquents in the Snow,” published in 1957, C.S. Lewis complained, “At present the very uncomfortable position is this: the State protects us less because it is unwilling to protect us against criminals at home and manifestly grows less and less able to protect us against foreign enemies. At the same time it demands from us more and more. We seldom had fewer rights and liberties nor more burdens: and we get less security in return. While our obligations increase their moral ground is taken away.”

Raising a risk-averse generation is bad for us all. In part, because it teaches us a diminished faith. The “sure thing” is never sure. Except…for the object of our faith: Jesus Christ is the same yesterday. Today. And forever. (Hebrews 13:8, NLT)


That’s The Way WE Work. Click on the link to the right to connect via Facebook.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.