The War Against Small Business

It’s been a while since I’ve written about business issues, but now that I have the perspective of a post-recession year behind us, I’m compelled to say a few things about our economy. Horst Engineering is doing fine. We took our lumps in 2010 and 2011, but so did a lot of other companies. We have 85 employees at our plant in East Hartford, Connecticut and 30 at our operation in Guaymas, Sonora, Mexico. So, we aren’t a tiny business, but our annual sales would be a rounding error on many big business’ income statements. We will thrive again, but headwinds remain strong and we are part of a sector known as small business, that isn’t getting much love.

The political outlook is clearer now that the presidential election is in the past, but the ongoing rift at the federal level is not good for the United States’ outlook. It is bad enough that we face fierce domestic and foreign competition, challenging markets, budget cuts, skyrocketing health care costs, and a general economic malaise. But, now, our political leaders don’t even have the foresight to forestall more damage before it is done. Special interests make it almost impossible to strike compromise and build consensus for the greater good. I would just ignore this worrisome pattern of partisan bickering if it didn’t have such a profound affect on small business and the economy. However, it does, so it is worth noting that waste in government is rampant.

In a manufacturing business, we are relentless in our  pursuit of continuous improvement. Governmental weakness is even worse at the state and local level. There is even more waste. In Connecticut, we had a commissioner of education charge the state exorbitant travel expenses while pulling a massive salary, and working from home. He doled out massive raises to most of his staff when private sector businesses were hunkering down and delivering bad news to their employees. This episode was a sign that there is even more waste in state subsidized higher education than even anticipated. Example after example of this sort of trouble could be cited.

I’m careful to criticize the behemoths of industry because many of them are our customers, so I’ll be generic. In addition to large private sector companies, we do a lot of work directly and directly for the Department of Defense. Once gain, corporate America has proven how different they are from family businesses and small privately held businesses. The Wall Street Journal even published a story today about how big business has “sold out” small business. Sold out is a strong term, but the reality is that Horst Engineering has little in common with the Fortune 500. In addition to being the customers of small business, most people with a 401(k) plan and mutual fund investments are reliant on the success of large capitalization businesses. They may even be employed by them. It’s messy and hypocrisy abounds if you criticize.

Another story from last week covers the impact of higher taxes on small businesses, particularly those that pay their taxes via the shareholder. We face challenges at the local, state, and federal level. All three are starving for revenue to fund government, programs, and budgets. Every time I read a story about waste in government, it fires me up. Jeffrey Immelt, General Electric’s CEO has taken shots for his leadership of the Obama administration’s business task force. Are these corporate titans in touch with the needs of small business? David Cote, Honeywell’s CEO, is taking flak for his support of higher taxes on higher income earners. This story summarizes his position.

There is a big difference between taxing the income of a big business CEO, rock star, actor, or athlete; and taxing the income of a small business owner who has company profits on paper (not cash) flow through his/her tax return because of an S corporation or partnership. Higher tax rates on small and mid-sized business owners will have a major impact on those businesses ability to reinvest. That means less capital equipment, less expansion, and less hiring.

I could continue to build a case for this war on small business, but in the end, I focus on what I can control and what our family’s business can control. We work with our people, the key to our success, and eliminate our own waste while attempting to build better products and deliver more value to our customers. I won’t hold my breath and hope for a political compromise. Things may not get better for some time. After all, someone has to fund this waste in government. Some small business leaders are far more vocal. They scream about the impact of taxes on their hard-earned profits. I understand why they are so mad.

I remain optimistic that small business will once again lead the way and that are economy will find more stable footing. We need the entire global economy to get to a better place because all countries are linked. I just wish that our society put a less emphasis on the big businesses, struck a balance, and truly respected the virtue of small and mid-sized businesses, and what the stand for.

1 Response to “The War Against Small Business”


  1. 1 Ryan Davenport 2 February 2013 at 10:02 am

    I came across your blog while searching for info about an ultra race. As a fellow “small” business owner in CT, I thought your blog about the war on small business was well written, timely, and accurate. We will have to meet up at a race some time. Cheers.


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Horst Engineering

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Cleaning a batch of #titanium tie rods in the @horsteng aqueous ultrasonic parts washer. These #aerospace components went through #precisionmachining #centerlessgrinding and #threadrolling #manufacturing #machining #cncmachining #cnc #instamachinist #madeinconnecticut #madeinnewengland #madeintheusa #horstengineering I had some time to walk through the @horsteng Cedar Street plants this morning. I never tire of seeing the cool things we do. Our customers are "king," our parts are what it's about, our equipment is critical, but our people are the real difference makers. Go to the #gemba #manufacturing  #precisionmachining #aerospace #machining #instamachinist #cncmachining #cnc #threadrolling #horstengineering #sterlingmachine #madeinconnecticut #madeinnewengland #madeintheusa #madeinusa #eatmydust was the mantra at the CompEdge #Cyclocross in #springfield First #CX race of the year and first time in 125+ races that I've done cross in August. Ran my new Sidi's with Medium @horsteng #HorstSpikes on the fast track. Rough start to the day with burnt pancakes but $30 for 4th Masters 35+ nearly covered the $35 fee. If I pre-registered I would have turned a profit. Of course the depreciation expense for my @seven_cycles #sevencycles Mudhoney and other gear wipes out any long term gains! Bring on cross season and the mud! #teamhorstsports #precisionmachining a stainless steel #aerospace fitting from solid round bar stock on our Citizen M32 #swissscrewmachine complete with threads, hex, and wire holes. #machining #instamachinist #cncmachining #cnc @horsteng #horstengineering #madeinconnecticut #madeinnewengland #madeinusa This is a stout rod end body made from #Inconel 718. We did the #centerlessgrinding and #threadrolling on our big machine. #manufacturing #instamachinist #machining #cncmachining #machining #aerospace #madeinusa #madeintheusa #madeinconnecticut #madeinnewengland #horstengineering @horsteng #centerlessgrinding a #titanium tie rod to prepare it for #threadrolling #aerospace #manufacturing #precisionmachining #machining #instamachinist #horstengineering #madeintheusa #madeinusa #madeinnewengland #madeinconnecticut @horsteng After work at #sterlingmachine today, I took a spin up to #Marblehead and went out on the Neck for the first time in 15 years. I raced the spring classic circuit race out there in 2000, 1996, and 1993. The race was a favorite. All I remember from those days was rain, wind, and sand in my teeth. Cool neighborhood. #sevencycles @trailrunningmom took the stage three win and overall title at the #EmeraldNecklace 3-Day Stage Race. 6:29:38 for the 32 mile course. Overall was 17:44:23 for the 80 +/- mike event. Great day! @ultraspire #ultraspire #pursuitstrong #teamhorstsports Thanks to Coach Al and Terry for coming! This will be a fun race report and blog post....later. The race is on between the #kayak and the #SUP Thanks to Marjorie for taking our kids on #LittleSunapee while I chased @trailrunningmom Now, we all head for the finish at Potter Place. #newhampshire

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