[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
INSPIRING ENTREPRENEURS: LEARNING FROM THE EXPERTS
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
MAY 11, 2016
__________
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 114-059
Available via the GPO Website: www.fdsys.gov
______
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HOUSE COMMITTEE ON SMALL BUSINESS
STEVE CHABOT, Ohio, Chairman
STEVE KING, Iowa
BLAINE LUETKEMEYER, Missouri
RICHARD HANNA, New York
TIM HUELSKAMP, Kansas
CHRIS GIBSON, New York
DAVE BRAT, Virginia
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
STEVE KNIGHT, California
CARLOS CURBELO, Florida
CRESENT HARDY, Nevada
NYDIA VELAZQUEZ, New York, Ranking Member
YVETTE CLARK, New York
JUDY CHU, California
JANICE HAHN, California
DONALD PAYNE, JR., New Jersey
GRACE MENG, New York
BRENDA LAWRENCE, Michigan
ALMA ADAMS, North Carolina
SETH MOULTON, Massachusetts
MARK TAKAI, Hawaii
Kevin Fitzpatrick, Staff Director
Jan Oliver, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Steve Chabot................................................ 1
Hon. Nydia Velazquez............................................. 2
WITNESSES
Ms. JJ Ramberg, Host, MSNBC ``Your Business'', New York City, New
York........................................................... 4
Mr. Ramon Ray, Editor, Smart Hustle Magazine, Elizabeth, New
Jersey......................................................... 6
Ms. Susan Solovic, The Small Business Expert & Advocate, St.
Louis, Missouri................................................ 8
Ms. Melinda Emerson, Founder & CEO, Quintessence Group & Melinda
F. Emerson Foundation, Drexel Hill, Pennsylvania............... 10
APPENDIX
Prepared Statements:
Ms. JJ Ramberg, Host, MSNBC ``Your Business'', New York City,
New York................................................... 32
Mr. Ramon Ray, Editor, Smart Hustle Magazine, Elizabeth, New
Jersey..................................................... 36
Ms. Susan Solovic, The Small Business Expert & Advocate, St.
Louis, Missouri............................................ 38
Ms. Melinda Emerson, Founder & CEO, Quintessence Group &
Melinda F. Emerson Foundation, Drexel Hill, Pennsylvania... 46
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
None.
INSPIRING ENTREPRENEURS: LEARNING FROM THE EXPERTS
----------
WEDNESDAY, MAY 11, 2016
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 11:00 a.m., in Room
2360, Rayburn House Office Building. Hon. Steve Chabot
[chairman of the Committee] presiding.
Present: Representatives Chabot, Hanna, Luetkemeyer,
Gibson, Brat, Hardy, Kelly, Radewagen, Velazquez, Hahn, Adams,
and Lawrence.
Chairman CHABOT. Good morning. The Committee will come to
order. I want to thank all the witnesses for being here and we
will get to you very shortly.
Last week, our country recognized National Small Business
Week, a time when small businesses and entrepreneurs are
celebrated for the tremendous impact they have on every
community all across America. Setting aside a week to highlight
the importance of small businesses services is a reminder as to
how crucial they are to our national prosperity and economic
security. Here at the Small Business Committee we are reminded
of this every day.
It is often said that when small businesses succeed,
America succeeds. At the very heart of small businesses, what
allows them to succeed, are the people, the men and women of
this country who set out with an idea and the desire to turn
that idea into a reality. It is this enduring spirit of
American innovation that continues to breathe life into our
economy and create the jobs no government program can.
Today, the Committee is excited to have before it what is
truly an expert panel. Our witnesses today are prominent and
passionate voices in the small business community all across
America. Each of our witnesses have taken the lessons learned
from building their own businesses and provide guidance to
small business owners and aspiring entrepreneurs. The
difference between a good idea and a good business is
execution, and who do America's small businesses turn to for
help developing and executing a business plan? They turn to
J.J. Ramberg, to Ramon Ray, to Susan Solovic.
Ms. SOLOVIC. Solovic.
Chairman CHABOT. I apologize. They pronounce it correctly
and they turn to her, and to Melinda Emerson, and today, so do
we.
Through their work, our witnesses have helped to inspire
and shape countless small businesses all across America. They
have their fingers on the small business pulse and can offer
unique perspectives as to the challenges small business owners
face every day. This Committee is eager to hear more about the
great work our witnesses are doing to help small businesses and
grow the conversation of small business success stories.
I would like to thank all of the witnesses for coming here
today. We will stop talking soon and turn to you all, and we
will listen, but at this point I would like to yield to our
ranking member, Ms. Velazquez, for her opening remarks.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
Our nation's culture, character, and economy have always
been defined by entrepreneurship. Today, 28 million small firms
drive growth and create opportunity in major cities, rural
areas, and every community in between. Small businesses employ
over half of all private sector employees. Their hard work,
innovation, and ingenuity to create new products and open new
markets contributes to all economic sectors.
However, forming a new business is an inherently risky
undertaking, and there are many obstacles entrepreneurs face
when getting started. From accessing capital to navigating an
uncertain tax code, to managing operations, to understanding
their regulatory landscape, it is not as simple as it once was
to start a small business. As a result, we have seen the face
of small businesses change. Small businesses have always been
dynamic, but in today's world, that rate of change is
accelerating. Many entrepreneurs no longer choose the
traditional brick-and-mortar business model. Instead, they opt
for sole proprietorship and online models that provide greater
flexibility. These structures allow many entrepreneurs to
launch a new venture while avoiding risks, like sales revenue
or cash flow, that are primary concerns for more traditional
firms.
We have also seen the face of entrepreneurship evolve to
more accurately reflect our nation's diversity. The rate of
minority- and women-owned small business growth continues
outpacing other business growth. Released last year, the 2012
Survey of Business Owners found that the percentage of
minority-owned firms increased from 22 percent to 29 percent
over a 5-year period. Meanwhile, the number of other businesses
declined by 1.1 million. Women-owned firms also experienced
higher growth rates than their male counterparts as their
market share increased by more than 2 million firms.
These are positive trends, but minority- and women-owned
firms continue facing barriers to formation and growth. They
find it harder to secure financing and often face unfair
treatment in the marketplace from potential customers and
vendors.
If the economy is to benefit from the high rates of
business formation and the job creation that follows, more must
be done to ensure hurdles like these are removed. One role for
this committee is ensuring these firms can access resources to
overcome those barriers and expand opportunities for all
Americans.
In more than two decades on this committee, I have seen
firsthand the ingenuity and resilience of small business
owners, not only in my district, but across the nation. These
firms can accomplish great things if they have the right tools.
During today's hearings, some of the country's leading
small business experts and advocates can provide us with useful
guidance on how to better accomplish that goal. In that regard,
I want to thank all the witnesses who traveled here today for
their participation and valuable perspective.
Thank you again, Mr. Chairman, and I yield back.
Chairman CHABOT. Thank you very much. The gentlelady yields
back.
Now, before I introduce the panel, no more speeches, but I
would like to just kind of inform you all about our lighting
system. You all have probably been informed that you have 5
minutes each to testify. The lights there will help you to stay
within that if at all possible. The green light will be on for
4 minutes. The yellow light comes on to let you know you have
about a minute to wrap up, and the red light comes on and we
ask that you try to stay within that if at all possible. We
will give you a little flexibility, but not a whole lot, so try
to stay within it. I do have a gavel up here.
We would now like to introduce our very distinguished
panel. We are pleased, as I said, to have a really fantastic
group of folks here. First, we have Ms. J.J. Ramberg. Ms.
Ramberg is the host of Your Business, a program on MSNBC that
is dedicated to issues affecting small business owners, as well
as the author of the best-selling book, It Is Your Business.
She is also an entrepreneur herself, cofounding Goodshop, an
online platform that has forged a connection between retail
savings and nonprofit and school fund-raising. We welcome you
here this morning.
Our second witness will be Ramon Ray. Mr. Ray is an
entrepreneur, keynote speaker, author, journalist, and
publisher of Smart Hustle Magazine. This magazine is dedicated
to telling the journey of entrepreneurs and small businesses.
Mr. Ray's specialty is in working with small businesses to help
them grow by better utilizing technology and marketing. Mr. Ray
has traveled the Nation speaking at and hosting events designed
to help small business owners and entrepreneurs grow their
business.
Our third witness today is Ms. Susan Solovic. Ms. Solovic
is an entrepreneur, best-selling author, media personality,
speaker, and she is known as ``the'' small business expert. No
offense to the other witnesses here today. Ms. Solovic has
served on the National Women's Business Council, and is a past
board member of the Women's Leadership Board at Harvard
University, the Women Presidents Organization, Women Impacting
Public Policy, and the Institute for Economic Development of
Women. We welcome you here this morning as well.
I would now like to yield to the Ranking Member for the
introduction of our fourth and final witness here today.
Ms. VELAZQUEZ. Thank you, Mr. Chairman. It is my pleasure
to introduce Ms. Melinda Emerson. Ms. Emerson, also known as
the SmallBizLady, is the leading expert in all things small
business. She is the creator and host of Small Biz Chat, the
longest-running live chat on Twitter for small business owners,
which reaches more than 3 million entrepreneurs each week. She
was named by Forbes magazine as the number one woman for
entrepreneurs to follow on Twitter. In addition to being a
regular columnist for the New York Times, Ms. Emerson is the
founder and president of the Quintessence Group, an award-
winning marketing consulting firm based in Philadelphia,
Pennsylvania, as well as the founder of the Melinda Emerson
Foundation, which provides mentoring and business training for
minority and women entrepreneurs. Welcome. Thank you.
Chairman CHABOT. Thank you very much. We are done talking,
so we will now start our panel. Ms. Ramberg, you are recognized
for 5 minutes.
STATEMENTS OF J.J. RAMBERG, HOST, MSNBC, YOUR BUSINESS; RAMON
RAY, EDITOR, SMART HUSTLE MAGAZINE; SUSAN SOLOVIC, THE SMALL
BUSINESS EXPERT AND ADVOCATE; MELINDA EMERSON, FOUNDER AND CEO,
QUINTESSENCE GROUP AND MELINDA F. EMERSON FOUNDATION
STATEMENT OF J.J. RAMBERG
Ms. RAMBERG. Thank you. Good morning, everyone. Thank you
so much, Chairman Chabot and Ranking Member Velazquez, and
everyone, for inviting me to testify today. It is a true honor
and I really appreciate having the time to speak with you all.
For the last 10 years, I have had a really unique vantage
point when it comes to small business and entrepreneurship,
because during this time I both founded and have grown my own
company called Goodshop, and I have been the host of Your
Business on MSNBC. Through that I have been able to interview
thousands of small business owners and investors and experts to
really understand best practices when it comes to small growth
survival and expansion. We were around in 2008, so we did a lot
of stories on survival in those days.
This show was originally supposed to be on air for just 6
months, but we quickly learned that there was such a strong
appetite by small business owners for advice and inspiration,
and I think most importantly, just a sense that they are not
alone on this journey. Now we are the longest-running show on
MSNBC. We have been on for 10 years.
Entrepreneurship is in my blood. I am a third generation
entrepreneur on both sides of my family. My paternal
grandfather moved here from Mexico, and his first job here was
as a peddler selling pots and pans and blankets door to door.
He then went on to open a furniture store which my dad took
over, and then my dad opened a storage business, a document
storage business, and a real estate development firm.
On my mother's side, my grandfather was sort of a typical
entrepreneur, always starting companies from a tropical fish
company to he was the first person to bring frozen pizza to
California, and he had a tire distribution company. My mom got
the bug. When she was in her late forties, she partnered with
my brother to start a company called JOBTRAK, a very
bootstrapped company. I spent many of my summer hours making
cold calls for that company when they first launched, and 12
years after they launched they sold that company to
Monster.com.
I had a really special place by the time I started my
company in 2005, because I had a front row seat to watching
things go from idea to a business multiple times. As I look at
my own experience, and I have talked to so many small business
owners around the country, I know that having that experience
and having a group of people around me who are advisors, who I
can ask questions of very informally, really provides a
shortcut to small business growth. It can be the difference
between failure and success.
I do believe nothing really prepares you, even though I
witnessed all these businesses, for doing it yourself. I
certainly went in with my eyes open and I had a good group of
people around me. My company Goodshop, which I founded with my
brother Ken, was conceived upon a foundation of socially
responsible business. We wanted to do good and do well. We have
partnered with more than 30,000 retailers, and we provide the
best coupons and deals for those retailers. If a user selects
their favorite nonprofit or school, a percentage of what they
spend goes back to that cause. Now we have saved people about
$100 million in savings when they are shopping, and we have
donated more than $12 million to organizations, large and
small, across the country.
We now have about 60 employees and we continue to grow. We
have a number of jobs that are still open right now that we are
trying to fill. The company started just like many other
bootstrapped businesses, with me working in my one-bedroom
apartment in New York City, 24 hours a day, basically making
calls in my pajamas, and my brother working at home at his
place in Los Angeles, and just working hard. It took a lot of
work to get to where we are today.
A few months after we launched Goodshop, I had the honor of
being called by MSNBC and being brought on to launch the
program, Your Business. On this show, once a week, we tackled
common small business issues through profiling small
businesses. These are issues that we hear consistently across
the country regardless of industry and regardless of geography.
To give you some examples, we profiled a beauty salon in
New Jersey, which was having trouble navigating the layers of
regulations, local regulations, that kept them away from
focusing on their growth. We told the story of a company that
turns your T-shirts into blankets, and they could not find
funding, despite very initial success that they had. We
interviewed a woman whose clothing business was having trouble
until she met an advisor from the SCORE organization. Simply
having his perspective changed everything and her company
started growing. Finally, we have done a series of stories on
Main Streets across America, from Brundidge, Alabama, to
Natchez, Mississippi, and I have seen the change that
government grants can make--how money given to pave streets,
help with signs outside of stores, get streetlights, flowers--
can transform a Main Street and transform a city. Finding
champions in those areas who are able to find those grants and
get the businesses to work together can transform everything.
Now, I believe we are at a very exciting time for small
business and entrepreneurship. I have with me, as I said, true
champions who have worked with small businesses to help them
grow and transform the economy of different cities around the
world. Technology companies, particularly in the FinTech world
and the EdTech world are just beginning to address these issues
of small business funding and getting an educated workforce. I
am excited to see what happens as these companies and these
industries grow.
Now, there is no doubt, as we all at this table know, that
owning a small business and entrepreneurship is no cakewalk. It
can be hard. There are many people who struggle, and even for
those who are very successful, there are a lot of pain points
along the way, which is why I really want to thank you again
for taking the time to talk about small business success
stories. Because the more attention we can pay, the more focus
we can put on both the challenges on small businesses and the
success of small business and the contributions of small
business owners, the more we can support this very incredibly
important part of our economy. Thank you.
Chairman CHABOT. Thank you very much. We appreciate it.
Mr. Ray, you are recognized for 5 minutes.
STATEMENT OF RAMON RAY
Mr. RAY. Thank you very much. I would also like to
acknowledge my wife of 22 years, who is there, and my daughter.
I am sorry. Thank you. I would like to acknowledge my wife of
22 years and my daughter Charity, who is over there to my left
as well. It is good to be amongst friends and experts who I
have learned from over the years.
Chairman Chabot, Ranking Member Velazquez, thank you for
inviting me to represent America's small business owners and
entrepreneurs at this Committee hearing.
I would also like to extend a great warm greeting to the
representatives from New Jersey, where I live near Newark
Airport, and those from New York, where I grew up in Brooklyn.
It is nice to see you all here as well.
Starting and growing a business, as we have talked, as you
all know----
Chairman CHABOT. You are making a lot of friends.
Mr. RAY. Oh, great. Starting and growing a business is
fraught with challenges as many of us know. I have started four
businesses, and I have been blessed to be able to sell one of
them and am on the way to selling the second one. I am an
entrepreneur who is currently growing two companies, and one of
those companies is Smart Hustle Magazine.
The day-to-day challenges of business ownership includes,
of course, hiring the right staff, obtaining financing, trying
to get new customers, and maybe keeping the ones we have. Also,
of course, navigating government regulations and so much more.
Business ownership, it is not, of course, just about the
challenges, but as many of us here on this panel know, it also
comes with the sweet taste of independence, the freedom to
chart our own course, the privilege of helping others with our
income and, earning profitable rewards from the risks that so
many small business owners and entrepreneurs take day to day. I
think the greatest reward is the awesome responsibility of
providing for our families and supporting our communities,
which I know all of us here do.
Chairman Chabot and fellow Committee members, more
important I think than any of us in this room, of course, are
the thousands and thousands of small business owners who I am
privileged to speak to across the country on a yearly basis,
and the millions of small business owners that I am able to
touch through events, through conferences, being on J.J.'s
show, Twitter chats, et cetera.
Based on the input from this community--and I did ask, what
should I tell the Committee?--there are three recommendations
that they would like me to express to you today. Many of them
you have heard, but I hope this helps to underline them.
I think first is definitely a continued reduction of
burdensome, and I would say unnecessary, regulation at the
Federal level, but let's also try to work and help at the local
and State level as well. We need regulation, absolutely, for
our safety. Please make sure the plane I am flying on tomorrow
is safe. But, we do not need burdensome or unnecessary
regulation. I think as an example that we have seen, in my
opinion, the treatment of Uber. It is now a very big company,
but I think that aspect at a very local level of stifling
innovation and limiting growth is an example of what I think
small businesses do not need.
Second, I would say the reduction and simplification of
taxes. I count it as a privilege that I can pay taxes which,
from my hard-earned income, helped to fund our awesome
government. However, I would dare say, is there a limit to what
taxes and tax laws are fair versus which ones are excessive and
burdensome? Every year I pay thousands of dollars. Now, not as
much as J.J. and Melinda and Susan pay, because they have a lot
more money, but every year I pay thousands and thousands of
dollars in taxes, and I would rather reduce the taxes I pay and
instead use those funds to grow my business and invest in my
community.
Thus, as we said, investing in America.
The third thing that my community has said, please tell the
House of Representatives, please tell the congressmen and
women, to foster small business education. I applaud the great
work of the Small Business Administration, of SCORE, that I
benefitted from many years ago; 26 Federal Plaza, that is where
I went to. SBDCs and other government-supported organizations,
they support and educate small business owners. I think the
more we can invest in the education of business owners, the
more we ensure that less businesses will fail and more will
succeed. In particular, I applaud the great work of the New
York City Department of Small Business Services. It happened to
be in my backyard, but a great model I think that many local
governments can follow.
Private and for-profit education efforts, such as the
Goldman Sachs 10,000, Google's Get Your Business Online,
Microsoft's Small Business Academy, Kaufman Foundation, and
many more, these are examples of not government organizations,
but still in the whole sphere of educating small business
owners.
I was recently speaking with Robert Herjavec of Shark Tank
and we discussed how all businesses hustle. They all work hard.
They grind. We all work hard. However, it is those who are
educated--and I think education is so important--who have smart
hustle, who succeed. Educating business owners is essential.
As I conclude my statement, I think of a company like
Infusionsoft, which was started by three friends in a strip
mall, or a company like SumoMe, started by someone who was
fired by Facebook. They are in Austin, Texas. These companies,
my company, and millions of other small businesses, they need
to be encouraged to start, grow, and thrive.
Let's think about the husband and wife who have just
started their business today, what can we do to help them? Or a
high school graduate who is now working on an invention right
now to put me out of business, unfortunately. Or the laid-off
50-year-old, who is forced to begin their own business. The
best thing our government can do for small business owners, as
I conclude, is to limit regulation, lower and simplify taxes,
and continue to invest in the education of small business
owners at the local, State, and Federal level.
Thank you very much for the opportunity to share about the
hustle--as I also like to say, the Smart Hustle--of
entrepreneurship in America. Thank you so much.
Chairman CHABOT. Thank you very much. It is not very often
that we get called awesome around here. But thank you.
Ms. Solovic, you are recognized for 5 minutes.
STATEMENT OF SUSAN SOLOVIC
Ms. SOLOVIC. Good morning, everyone, Chairman Chabot,
Ranking Member Velazquez, members of the Committee. I thank you
so much for giving me the opportunity to be here with you today
to share my insights and experiences as a small business owner
and as an instructor to small businesses around the country. It
is truly an honor to be here.
Let me begin by sharing a little bit about my
entrepreneurial background. You see, I had a great mother. She
became an entrepreneur right after she lost her first husband
in World War II out of necessity, but she sure learned a lot.
She had a number of businesses along the way.
When she married my father and moved to the town he lived
in, they opened up their own funeral home. A very small, rural
Missouri town, 3,000 people, now 2,999 since I have gone. I
grew up working in a family business from the time I could
barely even walk, and I started my own personal journey when I
was 15 years old. After waiting tables and getting blisters on
my feet, I realized there had to be a much better way to make a
living. I realized I could teach little girls how to twirl a
baton every Saturday morning, 75 of them in the high school
gym, for $1 each. I thought, this is pretty good, better than
working for tips. I opened up a small dance studio in my
basement and taught little girls how to do ballet, tap, and
jazz. Then, of course, college comes along and I moved on.
I followed a traditional career path for a while. I had a
lot of success there. I was one of the first female executives
in a Fortune 50 company in their financial services division. I
am also, Chairman Chabot, like you, an attorney, and I got to
work with many small business owners setting up their legal
entities and structures. I also did quite a bit of franchise
law during that time.
I have worked with small businesses in many capacities, but
my heart has always been in my own entrepreneurial endeavors. I
truly enjoy being my own boss. I like making deals happen. I
like making money, and I like seeing it all come together,
birthing those entrepreneurial activities and watching them
grow. I, too, have had the opportunity to sell a business, in
2009, right toward the end of the recession. I was very
fortunate; my business continues to prosper.
Unfortunately, as I talk to small businesses around the
country, many of them are saying they are discouraged and
disheartened. They are struggling. We know now that the number
of small business closures is exceeding small business
startups. That is a critical issue for the recovery of our
economy. The Capital One Spark Business Barometer just noted
that small business confidence is down almost 10 points from
where it was this time last year. Businesses are struggling.
They tell me their business dreams have now turned into
nightmares, and that is sad.
I have created a process I call the 1 percent edge. It is a
process to get small businesses growing again. It is to help
them become and place innovation into the DNA of their
companies because we all know now what is cool and hot today is
obsolete tomorrow. If you are doing business the same old way
you have always done it, you are falling behind when you get
started.
I got the idea when I was teaching an MBA class on
entrepreneurial growth strategies, and I had a co-professor
because I travel quite a bit. The co-professor would stand
there and talk about case studies. He would put big formulas on
the board. And then I would stand up to the class and say, now,
let me tell you how it really works. If you are studying case
studies in today's marketplace that is changing so rapidly, you
are behind the eight ball. As someone once said, if you are
just now jumping on the bandwagon, you are too late. You
already missed it.
We have to give entrepreneurs the opportunity to be
innovative, not just in their product and service delivery, but
in their internal processing systems as well. Technology is
certainly changing, leveling the playing field for small
businesses, yet we need to get them to embrace it. I love to
see small businesses using social media because it gives them
an opportunity to broadcast their brand. I had an advertising
agency at one point in time and people used to say to me, I do
not have money to market my business. Now they say to me, I do
not have time to market my business. The world is changing.
Before I run out of time, I do want to deliver another
personal story. Ramon talked about regulations. I know you hear
it all the time. In today's news we are talking about the
increase in the overtime pay. My parents, in that little
funeral home, had an ambulance service for many years. It was
not a profit center; it was a service to the community. The
Department of Labor sent an auditor in and audited my parents,
and decided whenever a hearse had a stretcher in it, it was
covered by the wage and hour law. Whenever it was a hearse, it
was not. Well, what happened is he extrapolated all the back
pay my parents owed their three or four employees, told them
they had 2 years to sue, and told them how to do it.
Unfortunately, because it was not a moneymaker for my parents,
they did not pay, no one sued, but they, like many funeral
homes, quit the ambulance service. My little small-town
community in rural Missouri had no service for many years until
the hospital decided to take it over.
While I think that policies and regulations, as Ramon said,
are good, and they are always passed with the best intentions
at heart, sometimes we do not take time to understand the
effects and the far-reaching effects that it has, not only on
small businesses and jobs, but on our communities as well. I do
believe that today we are living in a world where
entrepreneurship is still great. This country was built on the
spirit of entrepreneurship, and God love us all, it is still
the greatest country in the world. Thank you all to the
wonderful public service you do to help us and grow our
businesses.
I also want to applaud you for your bipartisan efforts, to
get some victories through in terms of legislation. You are
helping us, we appreciate what you do, and I look forward to
our discussion today.
Chairman CHABOT. Thank you very much. With the way I
mispronounced your name, you have every right to call me Cabot
or anything else you want.
Ms. SOLOVIC. I am sorry.
Chairman CHABOT. It is quite all right. Quite all right.
Ms. SOLOVIC. Why would we not be simple like Smith or
Jones, you know?
Chairman CHABOT. There you go. That is right.
Ms. Emerson, you are recognized for 5 minutes.
STATEMENT OF MELINDA EMERSON
Ms. EMERSON. Thank you Committee Chairman Chabot and
Ranking Committee Member Velazquez, and the rest of the Small
Business Committee. I truly am grateful for this opportunity to
share with you what I think is the status of small business in
the United States.
My name is Melinda Emerson, but my nickname worldwide is
SmallBizLady, and my mission is to end small business failure.
Every single thing I do, every blog post I write, every book I
have written, every interview I give, is about giving people
nuggets that they may not even know will potentially befall
them as they start a small business.
You know, the funny thing about being a small business
expert is I rarely hear bad business ideas. Unfortunately,
however, I see poor business execution everywhere. It is like
the cold and the flu, it is everywhere. I have to agree with my
colleagues that there are four major things that I think we
need to help small business with.
Number one is access to credit and capital. A lot of the
reasons why small business cannot get capital is because they
have poor credit. I also think they need training. They need
education. We need to talk about the best ways that the
government can help do that. Certainly, there is SCORE. There
is the SBA. There is the Small Business Development Centers.
There are P-TECH centers, and there are some great work going
on in these centers. However, there is some quality control
issues. Depending on what city you are in depends on how good
the services are in your city, and I think we need to do more
with that.
I also think that we need to look at how we can help
entrepreneurs get access to networks, particularly minority and
women entrepreneurs. We did not go to the business schools that
other people got to, so when the major decision on whether or
not you get private equity funding has to do with whether or
not you went to the same B school as the people doing the
funding decision, I think we need to look at different ways
that equity can be done. I am aware of programs that, you know,
sort of like how SBIR grants and things are done. There are
organizations, nonprofit organizations that have been given
funds from the government to do equity investment, so it is not
just about going in with a pitch board and having the right
deck and the right idea and the right management team. I mean,
there are other ways to get private equity capital in the hands
of businesses that so desperately need it.
I also think we need to look at mentorship. Mentorship is
essential. The work that SCORE does is God's work as far as I
am concerned. I believe that SCORE has made the difference in
so many. I am from Philadelphia, so I do have to give a shout
out to SCORE Philadelphia. They have done an amazing job, and
any time I can help them, I do. We do know that there are
differences in other markets, so I do think that mentorship,
networking, access to capital, and then just access to
opportunities. I think if we look at the work that the
government does and all the things that the government spends,
I do think we need to enforce the set-asides, and it is not
just enough for people to make a best effort; I think we need
to start holding people accountable for missing their goals for
set-asides for minorities, women, veteran-owned, as well as
8(a) set-aside contracts.
I also think that when these contracts are given or when
people are partnered with prime contractors, we need to make
sure they get paid, because one of the biggest issues that
befall small businesses of all types, creeds, and colors, is
getting paid. That is, whether they are doing business with
corporations or doing business alongside a prime for a
government contract, or, frankly, doing business directly with
the government. Getting small businesses paid net 30 or faster
through electronic funds transfer needs to become the standard
and not something that if you have the right relationship you
can make happen.
I think if we look at some of those things, I think that we
will go a long way in making sure that we grow America's small
businesses.
Now, Committee Member Velazquez, I wanted to address your
excitement about the numbers of minority- and women-owned
businesses that have been started over the last 5 years. While
those numbers have grown, the revenues of those businesses have
not. If you look at just women-owned businesses, for example,
Asian-American women businesses, on average their revenue is
$330,000. African-American women businesses on average start
revenue is $38,000. What is the poverty number? Do you know
what I mean? So when you look at what is really going on, a lot
of these people are starting businesses because they got washed
out in the recession. They still have not been able to find a
job, so they are starting what I call side hustle businesses
for cash. They are not really starting businesses that are
going to scale. They are not starting businesses that are going
to be able to hire employees if we do not give them some
infrastructure.
I also think that when we look at models of things that we
want to do to help small businesses, we need to look
internationally. I have had the opportunity to travel as the
SmallBizLady around the world, and I see other countries
approach entrepreneurship as their strategic advantage in their
country. If you look at Singapore, for example, they invest $50
million a year in youth entrepreneurship. They have a mall in
the heart of their equivalent to Rodeo Drive just for youth
entrepreneurs. Young entrepreneurs as young as 10 years old can
get a stall in this mall and sell their products and services.
They consider youth entrepreneurship up to 35 years old. They
are strategically funding entrepreneurs and training
entrepreneurs that young.
If you look at China, I had the opportunity to travel in
October to Hung Jo, which is the Silicon Valley of China, they
have a place called Dream Town. If your business qualifies to
get into Dream Town, you get office space in there for 3 years.
They have a $300 million fund to put equity into these
businesses. Other countries are taking entrepreneurship very
seriously. If you look at Start-up Chile, for example, Start-up
Chile will give you $40,000 and a place to stay for a year if
you are willing to go to Chile and start your business.
Start-up America is a PR campaign that at best you might
network with some people if you go to one of their events. I
think we need to get serious about entrepreneurship and these
programs because I do believe it is a competitive advantage. I
have a 10-year-old son who tells me all the time, Mommy, I do
not need to go to fourth grade. I already know how to make
money. I am like, well, sweetheart, I need you to know how to
count money, so I need you to go to school.
My point, simply, is that I think we need to bolster
programs like Junior Achievement, like the National Foundation
of Teaching Entrepreneurship, particularly in our urban
decaying schools that are struggling anyway. When we look at
our ex-offender population coming out, we need to teach these
people how to start businesses because they are not going to be
able to get jobs anyway. I do believe that entrepreneurship is
the difference, and it is my passion. I really appreciate the
opportunity to come here today to talk to you about what we
need to do to help America's small businesses.
Chairman CHABOT. Thank you very much.
I have to say, as chair of this Committee, if this is not
the best testimony we have had from a panel, it is certainly at
or near the top. Well done. All four of you were good. I kept
thinking, that was great. That was maybe even better, and even
better. This is really, really good. Well done. Maybe we should
just not ask questions and let you all talk. We would not do
that. We are politicians after all.
I will recognize myself for 5 minutes and we will move
around here. I will begin with you, Ms. Ramberg, if I can.
What are some of the top questions that you are asked by
small business folks who ask you for advice, either on the
street or on your TV program? What do they ask you and what do
you tell them, a couple of things?
Ms. RAMBERG. We get questions. It runs the gamut. Right?
How do I find money? How much money is it going to take for me
to start my small business? How do I find good employees? We
get very granular, so it could be how do I fire my first
employee? I think, how do I get an IP lawyer, right? Where do I
find a company to develop my Web site? I get questions across
the board. What it speaks to is the fact that all of us have
mentioned, there needs to be small business education. We are
not reinventing the wheel. Any problem that you, as a small
business owner, are dealing with, someone else has.
For instance, I belong to this organization called YPO,
Young Presidents Organization, and we meet once a month where
we talk about our business issues. It is an extreme shortcut
for me to get to an answer about an issue that I am facing. So
we need to create these networks, again, as Melinda just said,
for everyone.
Chairman CHABOT. Thank you very much. Thank you.
Mr. Ray, I will go to you next. I had a prepared question
but I thought of something I thought would be more interesting,
so I am going to ask you something maybe a little off the wall.
I had the opportunity to meet not only with you in my
office before this, but also with your beautiful wife and your
daughter Charity. I do not know if Charity is interested in
going into small business someday. But, if you had to give her
advice on how to be successful down the road, how to prepare
herself and what kind of things she ought to be thinking about
if she want to be successful in life, or in small business,
what would you tell your daughter?
Mr. RAY. I do advise her quite a bit to her angst,
unsolicited. I think there are a few things. It is interesting
you asked that because that is a question that many people ask
me. You know, they see me on stage and et cetera, and it is
very simple.
I think, one, and this is not really small business advice,
but for me, I find just being nice to people and making
connections. Because there are some people who you come in
contact with--I am sure we have all met them--there are some
slimebucket nasty people out there. You cannot succeed unless
you have a smile or are nice. That is one.
Chairman CHABOT. That is kind of similar to the field that
most of us are in up here, too. We would never say which ones
are in that category.
Mr. RAY. I understand.
Chairman CHABOT. People usually figure that out on their
own.
Mr. RAY. Absolutely. The second thing I share with my
daughter, you can ask her, I share with her and my son as well,
make connections. Because the only thing different from me
being here today, and we are all on the panel, and anybody
else, is the connections I have made. Being nice, making
connections, looking for and taking advantage of opportunities.
The third thing I would say is that going back to the grit
or the hustle, the hard work, is love to be punched in the
face, get back up, ask for more, but learn. My point is being
able to innovate. You are not going to get it right the first
time. Those are the three things I would say.
Chairman CHABOT. Thank you very much.
Mr. RAY. You are welcome.
Chairman CHABOT. Ms. Solovic, I will go to you now. You
mentioned you had 75 kids that you taught years ago. I do not
know if you have kept in touch with any of those or not, but
did any of those young ladies ever become small business people
or end up in careers that might be of interest to folks?
Ms. SOLOVIC. You know, it is interesting. The little town I
grew up in is very depressed and, unfortunately, most of the
young people do not get out of that town. Very few people from
there go to college. In fact, when I was growing up there it
had the highest illiteracy rate of any area in the State of
Missouri. So it is a very depressed community.
I do keep up with some of them on Facebook. They seem like
they are doing well. They are married with children of their
own. I realize I could easily be a grandmother. Not a problem.
But they are doing well.
While we are talking about young women, though, I want to
dovetail on something Melinda said, and that is growth capital
for women-owned businesses. I know the Title III regulations go
into effect on Monday. I think that is great for the
crowdfunding source, but to really grow a large organization
and scale it, you have got to get venture capital. It is very
tough for most small businesses to get VC money. It is
particularly difficult for women-owned businesses.
I started one of the first video-based Internet sites, and
I did raise venture capital. I did not go to a pedigree school,
an Ivy League school. I was not from one of the coasts. I was
from the Midwest, and the fact that I was a woman was a big
hindrance. I will tell you, the first venture forum I ever
participated in, one of the men said, well, you are the only
woman who is presenting, who was asked to present here, but we
sure are glad you are good looking. And I wanted to say,
seriously? Who would have said that to a man? It was so
inappropriate, but there is tremendous bias and it is something
that needs to be addressed.
Chairman CHABOT. Thank you. I am almost out of time. Ms.
Emerson, very quickly, most of the folks here on the panel
mentioned SCORE and how important that has been. Would you want
to comment on SCORE and what you have seen?
Ms. EMERSON. I am a huge fan of what SCORE does, and I have
participated many times as a presenter for SCORE webinars.
Chairman CHABOT. For the people that are watching this,
would you tell those folks what SCORE is?
Ms. EMERSON. SCORE stands for the Society of--Service Corps
of Retired Executives. Thank you. It is an organization of
folks that mentor and help, and they work with businesses face-
to-face or online, and they have an amazing Web site full of
resources at score.org. It is a really treasured, valuable
resource here in the United States for small business owners.
Chairman CHABOT. Thank you. Just for the record, we have
heard the same thing from lots of folks, too, about how
important SCORE has been to them.
Ms. SOLOVIC. Can I make one comment on that?
Chairman CHABOT. Yes.
Ms. SOLOVIC. She mentioned their online training, which is
very well-developed. The feedback I have gotten from some
people, though, who have gone to SCORE is it is very diverse,
sometimes, the quality of mentoring you get.
Chairman CHABOT. You can get somebody really good.
Ms. SOLOVIC. Right, or something--yeah.
Ms. EMERSON. It depends on what city you are in. I think
there are some hits-and-misses there, and that is what I was
alluding to earlier about some quality control challenges, but
you know, SCORE Philadelphia is awesome.
Chairman CHABOT. All right. Thank you very much. Again,
great panel. My time is expired.
The Ranking Member from New York is recognized for 5
minutes.
Ms. VELAZQUEZ. Yes. I would like to add that the SCORE
reauthorization was reported out of our committee and it was
Ms. Adams who authored that legislation, so I am glad to hear
how you really cherish the contribution that they do, as they
are a resource partner with SBA, the Small Business
Administration.
I would like to hear from Ms. Ramberg and Ms. Emerson, you
mentioned that the face of small businesses is changing. We
have more women, more minorities, and younger people, right?
Not everyone experiences the same struggles when starting or
growing a business. This day, entrepreneurs are not only facing
general startup challenges, but also student debt. How can we
best help them overcome both of those challenges?
Ms. EMERSON. Well, when it comes to student debt, I think
we should make public universities free in America. I think
that that might be a very good thing to do because I do not
believe that the amount of money folks go to get higher
education could at all possibly equate with the value of that
education after they get it.
Now, in terms of how can we help more minority small
businesses, it goes back to what we talked about earlier. We
have to have different diverse pools of equity funding
available. We have to encourage public-private partnerships.
There are major corporations with foundations who have
entrepreneurship as a goal. They could partner with major
cities in America and run business plan competitions.
One of the things that I benefitted from in my business was
the third year I was in business, I won the Minority Business
Plan Competition in Philadelphia. I won $20,000 and free office
space for 1 year in a business incubator called the Enterprise
Center in Philadelphia, and that was a game-changer for me.
That allowed me to hire my very first employee, and I have been
in business for 17 years. So there are all kinds of things that
can be done to help, but everybody has got to be on the same
sheet of music to make sure that people are getting money to
seed their ideas.
Ms. VELAZQUEZ. Thank you. Ms. Ramberg, can you comment on
what are the greatest obstacles facing students and recent
graduates as they try to get their companies off the ground?
Ms. RAMBERG. Money and education. It is as simple as that,
right? You need to have an idea for a company and you need to
know how to grow it. I cannot tell you how many companies I
have gone into and I ask something about their financials--and
this is not just the youth, actually, this is everyone--and
they cannot quote them to me. They cannot cite their
financials. They do not understand. I say, what is your
revenue? They cannot give me a number. If you do not have that,
you are not going to be able to go into someone, whether that
is an angel investor, a bank, any kind of funder, and get
money. It starts with education. Once you have that--and people
understand--and also, an education around testing. To
understand that there is a true market for their business out
there. Right?
We are dreamers. We sit around and we come up with ideas
and we just believe that it is going to work. Understanding how
to test whether there is a true market, someone is going to pay
you for that, is something that every small business owner,
entrepreneur needs to understand. Once they have tested, then
you need to build out their networks and help them get face to
face with funders.
Ms. VELAZQUEZ. Thank you.
Ms. EMERSON. Congresswoman Velazquez, can I add something
to that?
Ms. VELAZQUEZ. Yes.
Ms. EMERSON. One of the other things I think would benefit,
very early on when I started my first business I got a $25,000
loan from a SBA-backed fund called the Competitive Edge Loan
Program. In addition to the $25,000 I got, I got 25 percent of
that loan in technical assistance. My first accountant and my
first marketing consultant came from those resources that were
paid for through that SBA loan fund. We need more programs like
that because it is not just the money, it is the technical
assistance folks need.
Ms. VELAZQUEZ. We do have microlending under SBA, and it is
both. It is access to capital, right, and it is technical
assistance. By the way, when we look at the default rate, it is
the lowest of any of the loan programs that we have in place.
And 62 percent of those borrowers are low-income women.
Mr. Ray, for those businesses without large operating
budgets, word-of-mouth advertising is all they have. What more
can be done to bring together small businesses and end users of
their products?
Mr. RAY. Thank you for asking the question. One of the
things I talk about a lot is personal branding. I do not have a
lot of money, did not have a lot of money. I do not know if I
have a lot of money or not. I have to ask my wife. But my point
is I did not have a lot of money.
Chairman CHABOT. Just for the record, his wife is shaking
her head no, they do not have a lot of money, or not enough.
Mr. RAY. Ranking Member Velazquez, I think the biggest
thing is building their personal brand. I think you need money.
That is actually helpful. But those who do not, if you network
like heck, if you build your personal brand, leverage the power
of social content, video, you can rock it and do quite a bit. I
have built my brand quite a bit with just a video camera, a
smartphone, and just Tweeting.
Ms. VELAZQUEZ. Ms. Solovic, would you like to comment?
Ms. SOLOVIC. I totally agree with what Ramona is saying. As
I said, people say to me, I do not have time to do it. You do
not have time not to do it. It is a great way to build your
brand. I was an early adopter of social media, and I remember
after I sold my business and I was starting out again all over
and I would sit there and Tweet things out and post things on
Facebook, and my husband would say to me, you are wasting your
time doing that. That is just silly. You should be making sales
calls. Well, today, I do not have to do any outbound marketing.
Everything comes to me and walks in the door simply because, as
Ramona is saying, I have built my personality brand. I have a
huge following. I am always listed in the top five of small
business experts to follow on Twitter.
It takes some time. It takes authenticity. You cannot job
it out to anybody else. They want to know it is you. They want
to talk to you. It is a great advantage for small business
because large companies who are out there, it is great. They
are building their brand, too, but they are not humanized. They
need people like us to talk to the small business market, and
that is what we do best.
Chairman CHABOT. Thank you very much. The gentlelady's time
is expired.
The gentleman from Missouri, Mr. Luetkemeyer, who is the
Vice Chairman of this Committee, is recognized for 5 minutes.
Mr. LUETKEMEYER. Thank you, Mr. Chairman.
Ms. Ramberg, I was interested in your comments a minute
ago. Somebody who sits across the table from a lot of people
who are aspiring entrepreneurs and trying to find ways to help
them, what you said is really quite accurate from the
standpoint that entrepreneurs quite oftentimes are people with
big ideas or the folks who can dream and think outside the box,
can see a niche, can see an opportunity, or sometimes they may
be left-brained, but their right brain part of it, they do not
understand the business part of this, how to set up a financial
plan. You just said a minute ago that they could not give you
the statistics off their P&L. That is where it is important for
them to have access to that education to be able to understand
there is a flip side of this, or be able to go find people who
can help them do that. Your comments are very apropos here from
the standpoint that in order for entrepreneurs to grow, they
have got to have the ability of people to help them through the
myriad of rules, regulations, access to capital. A number of
you have talked about that this morning, and I think you
mentioned it a minute ago.
What do you propose to people who have access to capital
problems? What is your advice to those people on how they can
go find money or present themselves in a way to be able to
access themselves to the kind of money it takes to be able to
get a business started?
Ms. RAMBERG. I do work with a number of people who are
going to talk to angel investors. We have a number of angel
investors who come on the program, and so help them in sort of
organizing their thoughts down so that they can present their
elevator pitch in a way that will at least pique somebody's
interest. We also talk a lot about just alternative financing.
Right? So all these FinTech companies, OnDeck Capital, the
Lending Club, and thinking about factoring. Think beyond a
traditional bank loan, if you are not in a position to get one,
and look into some of these other ways to get money.
I also talk a lot to people about bootstrapping. My company
was bootstrapped. My mom's company was bootstrapped. The
company that I mentioned, which turns T-shirts into blankets,
was also bootstrapped. If you can get yourself to a certain
position where you have a little bit of success, it will be
much easier to get money on down the road.
Mr. LUETKEMEYER. Ms. Solovic, where in Missouri are you
from? I am a Missourian.
Ms. SOLOVIC. Fredericktown, Missouri.
Mr. LUETKEMEYER. Oh, yes. Very good. I was guessing
southeast Missouri from the comments you made, but okay, very
good. Nice little town, been there many times. Not in my
district, but it is still a good place.
Ms. SOLOVIC. Thank you. It is a good place to be from.
Mr. LUETKEMEYER. Good place to be from. Well, that is okay.
It is nice to go back home there, too.
You talked quite a bit about some of the--again, going on
some of the comments I addressed to Ms. Ramberg here, what do
you see with the folks that you talk to with regards--to me,
access to capital is really key to being an entrepreneur off
the ground. You have to be able to get the money to make it
work. It is what greases the skids and what makes it all--what
is your advice to people to be able to get them to be able to
take that idea to the next step?
Ms. SOLOVIC. I am going to respectfully disagree with you
on your comment because I think that when people come to me and
they want to know where is the money, show me the money or I am
just going to go out and get a SBA loan, and I am like, well,
good luck with that, because most of us bootstrap. We use our
own personal assets, credit cards, and go to family and friends
for loans. So when people tell me, well, I have this idea and I
would be able to make this business really go if I could just
get some money. I want to say to them, you know what? You do
not want to do it very badly. Because if you really have a
passion, as my mama used to say, where there is a will, there
is a way. If you really want to make it happen, you can start
and make it happen. With technology today, the barrier to entry
is so minimized, and you have got information and resources
right at your fingertips.
The one thing that I get a little alarmed about is the
professional advice from attorneys. I have seen a lot of
mistakes that come offline from going to those kinds of
resources. But, it is there, it is available. You might not be
able to start as big as you want. You may have to shrink your
plan a little bit, but by golly, if you are willing to have
that passion and put forth that sweat equity, you can make it
happen.
Mr. LUETKEMEYER. Okay. Mr. Ray.
Mr. RAY. Yes, sir.
Mr. LUETKEMEYER. One of the things that you were talking
about here is reduction and simplification of taxes. Can you
give me an example of where you would like to see some
reduction and simplification? How it would work and what the
advantage would be to small businesses?
Mr. RAY. Sure. Having said that, I am not a tax expert by
far. I am a personal branding expert.
Mr. LUETKEMEYER. Again, we want your ideas. You are the
entrepreneur here.
Mr. RAY. Yes.
Mr. LUETKEMEYER. We are the guys who are supposed to make
this all happen.
Mr. RAY. I went through a tax audit a few years ago. When
the IRS called me, she had a southern accent so I assumed that
she was my friend and she was the best person in the world. She
said, Mr. Ray, we would like to come to your home and all this.
The IRS is great, they do great work, we need to pay our taxes.
But my point is that I wish half the problem was my own. I wish
that I had better advice and taken better advice as many of us
said. So that is one.
But point two, just going through that process, the arduous
process of the letters and the writing and the audit, it was
exhausting. Thankfully, I had my tax attorney. We had to go
through it. What I mean is that my industry is just content,
but imagine the industries that deal with other things,
manufacturing, et cetera. There are a lot of things they have
to go through just to pay taxes. If they do not do it right,
then there are things they have to go through to get it right.
That is an example of what I mean by making it a bit easier for
small businesses to pay taxes and to rectify if something goes
wrong.
Chairman CHABOT. The gentleman's time is expired.
Mr. LUETKEMEYER. Thank you, Mr. Chairman.
Chairman CHABOT. Thank you.
The gentlelady from California, Ms. Hahn, is recognized for
5 minutes.
Ms. HAHN. Thank you, Chairman Chabot and Ranking Member
Velazquez, for holding this hearing.
Small businesses truly are the backbone of this nation. I
represent a district in Los Angeles County, and I see firsthand
the hard work of thousands of small businesses take to achieve
that American dream that so many of you are speaking about
today. I think this Committee is really one of the most
important committees in Congress because 99 percent of all
businesses in the United States are small business. During my
time on this Committee, one of the things I focused on is
women- and minority-owned businesses, because that is the
makeup of my district back in Los Angeles. We brought many
women and minority small business owners together for
roundtables and SBA workshops, and we have in my hometown a
number of successful women-owned businesses. Some of the San
Pedro favorites are the Omelet and Waffle Shop, a new coffee
shop called Sirens, and a clothing store called Dramatique.
While these businesses have been flourishing in my district, I
was a little bit disheartened to learn that the percentage of
women starting small businesses has been declining over the
past 20 years. A recent study by the Kaufman Foundation found
that the share of women startups fell from 43 percent in 2010
to 36 percent in 2015, which is close to a two-decade low. The
decline is even more evident among younger women where the
average number of businesses started by young women has
decreased by 27 percent since 1996.
I think there is a variety of reasons for the decreasing
number of women starting businesses. According to one Wall
Street Journal, women have less access to capital, are
erroneously perceived as less competent than men, and have less
confidence when it comes to their success and potential
failure.
I was going to ask those of you who are here today, how can
we get more women to start businesses? What should this
Committee and SBA do to address a problem that you might see
happening out there? I would be interested in hearing all of
your responses to this.
Ms. EMERSON. Well, I would say that if you want to target
more women business owners, particularly younger women business
owners, we have to start talking about entrepreneurship much
earlier in their educational cycle. I believe that elementary
school is not too early to start teaching principles of
entrepreneurship, and thus, we make it so that they understand
that it is a potential idea as a career option, and it is not
just about going to college and getting some good job. That
does not exist anymore. So I think it is about helping people
learn skills that are valuable much earlier.
I also think it is about more targeted programs. We need an
incubator for women entrepreneurs. We need funding specifically
targeting minority and women entrepreneurs, and we also need to
make sure they are not fronts for their husbands. There is a
lot of stuff going on around folks self-certifying that they
are women-owned, and we need to make sure that it is actually;
for a woman-owned business, it is actually run by a woman.
But, if we start doing targeted programs, targeted business
plan competitions, that kind of stuff will help get the numbers
up and really give them a boost because it needs to have money
attached to it. Five thousand dollars is enough money to get in
trouble. That is not enough money to run a business. We need to
make sure that when we do business plan competitions and stuff
like that, the prize money is $20,000, $25,000, $50,000, that
it is real money that is going to make a difference in these
people's businesses.
Ms. HAHN. Thank you.
Ms. SOLOVIC. I would like to note that I think it is
education, because I think a lot of women start businesses
because they are good at what they do. It is a little craft. It
is a little something, but they are really not educated on how
to build a scalable and sustainable enterprise.
Also I mentioned I raise venture capital. After I did that
in 2006, I wrote a book called The Girls' Guide to Building a
Million-Dollar Business, because I figured if I could do it,
anybody ought to be able to do it. It is not brain surgery. At
that time, only 3 percent of women-owned businesses were
grossing over a million dollars a year. According to a recent
Forbes Magazine article, only 2 percent of women-owned business
gross over a million dollars a year. A million dollars is not
very much when you are talking about revenue.
In working with some women's organizations, too, when I
talked about making money and business, if you are not going to
make money, go volunteer. They say to me, well, I do not want
to make a million dollars. I do not need that much money. And
they do not want to talk about the money part. You know what?
You have got to talk about the money part, that is what it is
about.
I think there are stereotypes that still say to women in
this country that making money, being aggressive, being
successful is not feminine. We should not worry our pretty
little heads about money, honey, and we have go to change that
psychology. It is an undercurrent that still ripples through
this country.
Mr. RAY. I would add two things being the minority on the
panel here of women, no pun intended. I would say two things. I
would say, one, the focus could be not only on starting
businesses, but I would encourage my women friends, also those
who have already started, how can we encourage them to grow?
You know, the number of who is starting, but let's say starting
or not, those who are in it, what can we do to succeed?
Two, I would say working with small business owners in
large, many of them women entrepreneurs, there has to be some
element of, without putting my foot in my mouth, getting out of
the bubble of just being for women, if that makes sense.
Meaning, I talk to many women entrepreneurs. I am a women-owned
business. It is four women. Four women. Where this world is
beyond just women. Do you know what I mean? So it is kind of
reverse. It is in a bubble.
Ms. HAHN. It is? Are you sure about that?
Mr. RAY. Does that make sense what I am trying to express?
Chairman CHABOT. I am not going to touch this debate here.
Ms. RAMBERG. Can I just add one thing?
Chairman CHABOT. Ms. Ramberg, go ahead.
Ms. RAMBERG. It is examples. Right? When you see a
successful woman, you see that you can do it. And so the more,
I mean, it is amazing that there are three women on this panel,
but the more we can show that women are successful. I am in New
York, and in New York City there is a burgeoning and very
exciting community around female entrepreneurship and there are
lots of conferences and lots of mentorship. I think that is
what it takes. Again, it is about a community.
Chairman CHABOT. Thank you.
Ms. SOLOVIC. Could I add one more comment?
Chairman CHABOT. Go ahead.
Ms. SOLOVIC. All right. So----
Chairman CHABOT. I have lost complete control. Go ahead.
Ms. SOLOVIC. So I have to share this story.
Chairman CHABOT. As long as you pronounce my name right.
Ms. SOLOVIC. What was that again? Cabot?
I did some consulting for a very, very large financial
services firm--and I will not mention their name here--on how
to reach the women business owner market. They sent me all
around the country to talk to their regional sales forces, and
I was giving the statistics that we just discussed here and
women growing businesses and all of that. I happened to have
been south, and I will not say what state it was either, but we
broke for lunch, and one of the investment counselors came over
and he said, oh, there, pretty lady. You know, you did a nice
job, but I just do not believe those numbers. And I said,
really? He said, well, I know the only reason a woman goes into
business for herself is because her husband wants to give her
something to do or he needs a tax write-off.
Well, thank you, Mr. Chairman. I know my time is expired. I
appreciate the indulgence on this question.
Chairman CHABOT. Long ago. But that is okay. This was
great.
The gentleman from New York, Mr. Gibson, is recognized for
5 minutes.
Mr. GIBSON. Thanks, Mr. Chairman. I must say this is an
awesome hearing. I am learning a lot and I am really inspired.
I appreciate that very much. I know our middle daughter, who is
interested in going into business, she is going to find this
link very informative and inspiring, and I think she will
probably be looking up some of your shows and everything like
that going forward.
Mr. Ray, I was very interested to hear your comment. You
were using Uber as an example, really as sort of a counter
example. What I would like to hear is your thoughts on if we
had a do-over, how might federal and state, perhaps even local,
governments approach that issue in a manner that would
certainly make sure that justice, safety, and public health is
preserved, but at the same time, facilitates a good idea that
is something that is really being demanded in the market.
Mr. RAY. Being the travel expert that I am not, from my
observation, as one who has used Uber before, and taking them
as an example and then I will move quickly to another point,
but as one who has used Uber and as one who has used taxis.
There are two sides of this equation. We know it is a public
debate, good and bad and et cetera.
Regulation, obviously, is important. But, what I found, at
least in New York, being a few minutes from Newark Airport, is
that you have the taxi industry that was one bemoaning and
complaining about it, which has a valid point. New York City
has a lot of big taxi industry. But, I saw that with Uber, this
is a small innovative company. This is a car-sharing service.
Small business owners, when I go to Newark Airport from my
home, there are guys who say I am using Uber to make more
money. From my simple observation, clearly it is a company that
is helping in some way. And we could do more. Mayor Baraka, I
think in Newark, he made a deal with them, so I think we can do
more to ensure citizens are protected, but while having
innovation go as much as it can until it becomes a danger, like
the airlines or something that has to have some, if that makes
sense.
Mr. GIBSON. Yes, that is helpful. Do any other panelists
want to make any comment on that before I go on to the next?
Ms. EMERSON. I think whenever we get in the business of
trying to protect one industry to prevent another one from
growing, that is a slippery slope for us to get on. In
Philadelphia, there was also a nightmare fight with the taxi
authority and the city with Uber, and I felt like if the taxi
drivers had done a better job, Uber would not have a chance.
They should be like any other business, and they should face
competition like anybody else.
Mr. GIBSON. I really appreciate those remarks. The last
question I have has to do with access to credit and capital,
which you all hit on in one form or another. Ms. Solovic's
comments about being self-starters and finding ways and working
with family, agreeing with all of that, I am also interested in
hearing your assessments as to Dodd-Frank, as to how well it is
going or challenges that have emerged as it relates to access
to capital and credit.
Ms. SOLOVIC. What we have seen as a result is that the
level of lending, traditional lending, has really decreased to
small business owners. There was a time, I think, during the
recession that we heard a lot, or at least I did, from small
business owners that they were not even applying for the loans
because they did not want the debt. But also, there was that
fear factor that their financial statements were not as strong
as they had been and that they would not qualify, so what did
it matter to try? But here we are, now, with some recovery
going on in the economy, and you would think we would see a
change in that, but we have not. As we said earlier, the
crowdfunding platforms, the Title III regs, I think all of that
is a positive step for small businesses. I do think that having
more education, so that people understand, and more examples of
how you can get a business off the ground without going out and
putting yourself into debt with a bank or a lending program.
Personally, when I started my Internet company, I took out
a big credit line on my house, and we were totally self-funded
originally. I remember going to the venture capitalist. We were
in front of Sequoia and they looked at my numbers and they
said, well, you need more eyeballs on your Web site. And I
said, but we are profitable. Look at my financial statements.
They said, we do not care about that. I said, if you were
funding it out of your own pocket you would, by gosh. I think
education is important.
Ms. EMERSON. If I could add, when it comes to access to
credit and capital, the first indication, small businesses knew
the recession was coming before the recession hit everyone else
because banks started rescinding people's lines of credit and
they started turning them into term loans. People have not
recovered from that. The people that were able to hang on and
stay in business, they are not creditworthy. What has happened
is now we have these cash loan lenders that have popped up and
who are preying on businesses who cannot get capital anyplace
else. They are happy to fund you if you have got a 600 or a 620
credit score at 24 or 25 percent interest. If there is any
place where you guys do need to start regulating is those
people. These cash flow lenders out there, to me, are snake oil
salesmen, preying on people who need cash. They are only
willing to do loans for ecommerce businesses that are doing 10
grand or more a month.
Also, too, one thing about crowdfunding. Crowdfunding is
great if you have got a great product business and some sharp
marketing. But the average crowdfunding campaign makes $10,000.
That is a hard way to make $10,000. I do think Title III is
going to help more people be able to get into that business,
but I also think that is a little bit of a panacea. Right? The
deal is, if you want to start a small business in America, your
money is going to come from your right or your left pocket, so
you better have taken care of your savings, protected your
credit. Hopefully, you own property that you can take out a
home equity loan against because that is really what it is
going to take because banks do not loan money to startup
businesses until you can prove you do not need it. So that is
it.
Ms. SOLOVIC. I am also very concerned about the new
calculations, and I am not an expert on this, but where someone
leaves a company, they take a 401(k) plan, and then they flip
it and make it a 401(k) in their company, and then they deplete
those funds to start their business. We have got more baby
boomers. I am a baby boomer, and we have retirement issues in
this company. I am so fearful that people go out and bet the
family farm and then what happens? Because you know what? Your
challenges of starting a business, your likelihood of success,
you might as well go throw the dice out in Las Vegas. It is
just about as good an odds.
Mr. GIBSON. Well, unfortunately, my time is expired. I want
to congratulate each and every one of you on your personal
successes and also thank you for sharing those stories for
inspiring so many others.
Chairman, I thank you for your indulgence.
Chairman CHABOT. Thank you very much. The gentleman's time
is expired.
The gentleman from Mississippi, Mr. Kelly, is recognized
for 5 minutes.
Mr. KELLY. You know, I am starstruck with this panel. Thank
you guys for being here. Mr. Chairman, thank you for bringing
such a distinguished panel, and it is great to hear from--first
of all, you are all excited about what you do, and I think
enthusiasm is one of those things that any business, or
whatever you are doing, that you have to have enthusiasm. To
see people like you, you are all role models for people out
there. So, thank you for being here, and for what you have done
for small businesses in our industry.
Mr. Ray, I want to briefly touch with you, and I had not
intended to ask you a question, but I am so appreciative that
you brought your family, because it is much like serving in the
military or anything else. Whether you are a small business or
anything else, it is a family deal. You are all involved and
engaged. Not using someone else's name, like other people have
mentioned, but to have people who are involved and are part of
that, and you gave your daughter some great advice. I found in
life, relationships and leveraging those, and understanding
those is one of the greatest things you can ever have is the
capital in people. So do you want to comment any more on that,
Mr. Ray?
Mr. RAY. No, just to thank you for having us and I think
that, yes, family is important. I think the two things
education, as we have said, education solves many problems, but
definitely family. And I thank God for my wife. Not that she is
always right, but she----
Ms. SOLOVIC. Well, it is going to be a long ride home.
Mr. RAY. However, however, she is right most of the time,
and I am very happy that she is giving me advice in business,
but also the things around business that make it successful. So
I am very thankful for her.
Mr. KELLY. And then Ms. Ramberg, although not in my
district, Natchez, Mississippi, is in Greg Harper from my
state's district. You noted in your testimony several
consistent themes that you found in various cities that were
part of the Main Street series. First, for those who may not be
familiar with the series, will you briefly share about the
series and particularly about the Natchez visit?
Ms. RAMBERG. Absolutely. We have gone around the country
and visited Main Streets across the country--Natchez,
Mississippi; Galena, Illinois. We were just in Daytona;
Brundidge, Alabama, to just try and get kind of a temperature
check on what is going on on Main Street. What we found
consistently at the Main Streets that were revived, over and
over we heard the story of big box stores moved in, our
factories closed, Main Street shut down. It became lots of
shutdown businesses, crime. The Main Streets that were able to
revive almost to a Main Street was because of one person or one
organization that organized everyone. Because the fact is,
running a business is hard and it takes all of your time. So
you have to concentrate on running your business and also
reviving Main Street. These Main Streets have had a person or
an organization who did that for them. It was pretty
interesting.
Another interesting and important thing to note, about what
we learned on Main Street, I have done a very informal poll of
companies that I interview and just say, do you feel like
anyone is looking out for you? We almost always hear no. I know
this Committee does a lot, I know the SBA does a lot. I know
there are a lot of organizations that are out there trying to
help small business. But somehow it is not trickling down, so
small businesses across this country often feel very alone and
unsupported. I think there needs to be some education and some
public relations around the resources that are available to
them. We all know SCORE here. A lot of people do not.
Mr. RAY. May I make a comment?
Mr. KELLY. Be quick because I have one more question I want
to get to.
Ms. Solovic, and I hope I pronounced that right, in the
South, we do not do over one syllable usually. But first of
all, I want to thank you for your mother, and again, it goes
back to family, and your father's service to this great nation.
That is very important to me, and I think that our veteran-
owned businesses, which we have not talked about a lot, I would
like to give these guys and girls opportunities to proceed
forward because they paid their debt to this nation, and
anytime we can forward their agenda and help them to be
successful in life after the military, that is great.
But can you elaborate a little bit on the Department of
Labor's overtime rule and how that has impacted your business
and other businesses, please?
Ms. SOLOVIC. Certainly. I get a lot of concern from small
businesses, especially with the increase to the threshold of
$50,000. It will cost jobs in many, many small businesses. And
not just the level of increase which is huge, but the fact that
the complexity of the guidelines is very, very difficult for
small businesses to follow. To know who is exempt and who is
nonexempt, and how it applies. When I mentioned my father's
ambulance service, how do you say today it was an ambulance,
tomorrow it was a hearse, and who worked when? The complexity
of it was overwhelming to him.
My other concern is, and I hear this from many small
businesses in smaller parts of the country, particularly the
Midwest and the area of the country I grew up in, $50,000 in
Manhattan is nothing; $50,000 in Fredericktown, Missouri, is a
heck of a lot of money.
I just sold my family's home. My father is now in assisted
living. It was a big house, 5,000 square feet, 4 bedrooms, 3
full baths, 2 half-baths, a finished basement, and an extra lot
for $116,000. It is a different world, we cannot make arbitrary
decisions like that.
We need to give small business owners the flexibility to
manage their business in the way they deem appropriate. We are
not slave drivers and greed mongers like we saw in the
Industrial era. We want to care for our employees, we want to
care for our families. We want to give back to our communities,
and the statistics on how much more a small business gives back
to their community as opposed to a large chain company is
significant. So we are trying to be good. We are trying to do
the right things. We just need government out of our business.
Ms. RAMBERG. If I could add one thing to that. I cannot
stress enough the problem with complexity. People are happy to
follow the rules, but sometimes it is hard to know what the
rules are. You spend money on lawyers, money on accountants,
and time that you could be spending marketing or talking to
your customers to just figure out if, in fact, you are
following the rules correctly.
Ms. EMERSON. And if you make a mistake, it is costly.
Chairman CHABOT. Thank you. Thank you. The gentleman's time
is expired.
Mr. KELLY. I yield back, Mr. Chairman.
Chairman CHABOT. Thank you.
The gentlelady from Michigan, Ms. Lawrence, is recognized
for 5 minutes.
Ms. LAWRENCE. Thank you, Mr. Chair.
I would like to ask this question of Ms. Emerson. Hearing
the discussion on the challenges, there has been a shift in the
development of small businesses to the use of incubators. What
does it mean to startups to have that kind of business when you
are saying you need support? What is the role, and how can we
support the incubators if that is the way to provide you with
the support that you need?
Ms. EMERSON. Well, I am glad you asked me that question
because I won a business plan competition that put me in a
business incubator and I actually ended up staying in there for
5 years. So I can talk a lot about the value of incubators.
I think the number one thing you fight when you start a
business is loneliness and feeling like you are by yourself. So
the fact that you can walk down the hall and commiserate with
someone else that is trying to figure out how to get paid by a
vendor, I think that is very important to have a sense of
community. What I also found valuable in an incubator is that
education can be done right in the same building. Networks can
be set up. Potential funders that are interested in the
businesses in the building can come in and see a cadre of
businesses, not just one type.
The Enterprise Center in Philadelphia is where I was
located, and that turned out to be such an incredible proving
ground for me in my business. It made all the difference in the
world because when I started my business, back in 1999, being a
homebased business was not cool. If you were working out of
your basement, people did not take you seriously like you were
in business. When I won my business plan competition, I was
like, I am out of here. I am going to work every day. I got a
parking space. It makes you feel--nowadays everybody is
telecommuting and everybody is working from home, but it was
not like that almost 20 years ago. So I think it is a great
thing to do.
Ms. LAWRENCE. I appreciate that. I think we, as the Small
Business Committee, should really spend some time supporting
that.
I want to ask Ms. Ramberg, one of the greatest areas of
success in my home state in Metro Detroit has been the rise of
women-owned small businesses. According to the U.S. Census and
the Small Business Administration, Michigan ranks among the top
10 states in the number of new small businesses operated or
open by men and women who are self-employed. How can we sustain
the growth rates among women in small business? As a small
business owner yourself, you already outlined some of those,
but what would you advise us on this Committee on how we can do
a better job with women?
Ms. RAMBERG. Again, I think it is truly about mentorship.
We do have issues. There are still many women out there who say
that they go to find funding and they are discriminated
against. I am quite sure that is true, but I think that if you
are a woman who is going for venture funding and you talk to
another woman who has been to that same person and asked for
money, you will know what to look for. Again, I believe the
answer is quite simple, which is just get people together, the
experienced with the inexperienced. Get networks of women.
There is an organization called the WE Festival in New York
City. It just happened, and it was for women entrepreneurs, and
the excitement around it and the sharing of knowledge was huge;
10,000 women from Goldman Sachs, again, another organization.
If you just get people together.
I went to a dinner. It was 20 women brought together from
different industries by somebody, and by the end of the dinner,
we went around and every single person had to ask something
they needed help with. Three women at that table said I need
help raising money for my company. And guess what? The next day
they were contacted by people. Now, I do not know if they will
get the money or not. It will depend if the businesses are
good, but I am fortunate that I have this network in New York
City. If we can create those same networks for people so that
you feel comfortable saying I need this, and someone out there
says, okay, let me help you.
Ms. LAWRENCE. Mr. Ray, and this is the last question, what
are some of the challenges that you face in the competition
with the corporates? I hear that often. I am a small business
and I keep jumping up raising my hand. Look at me. Look at me.
I can do it. What are some of the challenges there?
Mr. RAY. It is very competitive. For example, I produce
events and I have a magazine. There are a lot of bigger
companies than mine. Sometimes it is the wherewithal to keep
pushing through. I think that is one.
I think, two, it is the business owner not having the
education to talk the language of the large business person.
That is what I have learned, what has helped me. I am talking
to a big company, I will not mention them here, but a big
courier or a big financial services company, a big bank. There
are ways I have to talk. There are documents I have to have.
They are risk averse. They do not know who I am from Adam, or
Eve, for that matter.
Those are two things that I have found that will be
helpful. The small business owner must learn to talk the
language of big business and not think small, as you have
alluded to. That is the way to succeed. Thank you.
Ms. LAWRENCE. I hear clearly the need for information and
training, and I love the analysis of not being alone and having
access to those. So thank you, I yield back.
Chairman CHABOT. Thank you very much. The gentlelady's time
is expired.
The gentleman from Nevada, Mr. Hardy, who is the
Subcommittee chairman of Investigations, Oversight, and
Regulations, is recognized for 5 minutes.
Mr. HARDY. Thank you, Mr. Chairman.
Thank you for being here. I must say that I believe, Mr.
Ray, your father and mine must have hung out together because
my dad used to tell me, son, you can do it and like it or you
can do it and hate it, but either way you are going to do it.
Your attitude determines your altitude.
Mr. RAY. I think they did hang out together, I think so.
Mr. HARDY. All of you seem to have a great attitude. I
think that is part of the success.
Myself, being a small business person in the past, I had
some successes, had some challenges. One of the challenges that
you brought up, Mr. Ray, and also Ms. Ramberg, the federal
government and duplicative regulations coming from not just
from the federal government, from the state governments, the
county governments, the city governments. Can you elaborate on
that a little bit, Mr. Ray, what is your conversation there?
Mr. RAY. Absolutely. Sure. What I think, as you said, is
that there is a labyrinth of different things. If I do it right
this way, it is wrong this way. Right this way, wrong this way.
The best example I can give, again, with New York City in my
backyard, I know the New York City Department of Small Business
Services, I think it is called Fast Track. I do not recall the
exact name. They have a system where they set up where you go
to one place and the organizations, the entities are all in
kind of one place. That is an example of something that can
help. You go there, fill out a form. Other people and the civil
servants are trained to help you navigate through that. Because
if you are not trained or educated--and all of us are just
experts in what we are doing--it is tough. It was tough to get
in this building, much less being a small business owner.
Ms. RAMBERG. I think it is clarity and knowing where the
information lies. In San Francisco, for instance, right now you
need to put a new employee poster up right now. My company
works with a PEO who tells us, hey, here is the poster, go put
it up. If we did not work with them, we would not know it
existed. That is a tiny example of things that happen all the
time.
The amount of time and energy trying to understand what the
regulations are, trying to work with the government to get
around them, if there is a way to do it if it does not work
with your company, and then comply with them. Again, the exempt
rules, they are very complicated. It seems like they are easy,
but it is not. There are people who do not exactly fit into one
side or the other, and there is no place to go ask. If you go
ask someone they say, oh, you have got to go figure it out
yourselves. Having that answer as a small business owner, when
this is not your core business, is incredibly frustrating and
time-consuming.
Mr. HARDY. Thank you.
Ms. Solovic, you mentioned in your testimony about the
overtime rule being a backbreaker. Mr. Knight and myself
brought over 100 congressional members together to sign this
letter to try to rethink how we are doing this. Can you
elaborate a little bit on some of the challenges, this being
backbreaking also and one size fits all does not necessarily
fit?
Ms. SOLOVIC. Right. I think that is pretty simple right now
just the way you said it. It is not the $50,000 necessarily. It
is the nonexempt versus the exempt, the paperwork, the
tracking. I said, in parts of the country, $50,000 is a lot of
money to make. You are not victimizing a low-wage earner. Take
the time to look at regulations such as that and look at the
true impact on a small business and the community. If a small
business has to cut jobs and they are on Main Street, it hurts
that community. Where else do people go to get jobs? You do not
have big industry or big companies coming in there, so it costs
the entire community once those few jobs are gone.
Mr. HARDY. I would like to touch on a little different
subject somebody brought up, and I think this might have been
you, Ms. Solovic, but it had to do with the length of pay,
especially on federal government jobs. The challenge is, I have
seen myself, it jeopardizes small businesses. I was usually the
larger business. I would have to wait for 90 to 120 days for
the federal government to get paid, which meant in turn it
makes it tougher for me to get the finance to be able to pay my
vendors and that trickle down. Any suggestions on how we fix
that here federally?
Ms. EMERSON. Well, I think you just have to make it a law.
Folks have to get paid net 30. I mean, honestly, it is such a
challenge because cash flow is king in a small business. If you
have employees, you have to make payroll, regardless of when
you get paid. Because it is so difficult for small business
owners to get lines of credit, I mean, even if you qualify for
a line of credit, the most you are going to get is 10 percent
of your gross revenue. So for a business doing half a million
dollars, that a $50,000 line. Well, if the government owes you
$180,000, do you know what I mean? It strangles small
businesses if they cannot get paid on time.
Mr. HARDY. Then that 10 percent retention on top of that
ends up strangling somebody when you do not even have that kind
of----
Ms. EMERSON. Then by the time you get the money, it is not
even the same value if you had to go out and factor the invoice
or had to go to one of these payday lenders for small business,
which is what I call these cash flow lenders. It is strangling
people's margins, and people are not able to make money because
they cannot get paid on time. It is a huge issue, but it is not
just a huge issue in the federal government. I think that there
should be some MOUs that go out with corporations because I
have found that the larger the corporation is, the harder it is
to get paid, too. So it is not just a federal government
problem; it is a problem all over the place. Everyone thinks
they can pay a small business last or late.
Mr. RAY. May I underline something?
Chairman CHABOT. Yes, go ahead.
Mr. RAY. I wanted to underline that. Thank you for asking
the question. It is a double problem because, again, your money
comes in late and you have big checks, $20,000, $30,000, or
Melinda has $100,000 checks, and you have to pay out. I just
got an email last night from one of my vendors who I work with.
Ramon, I sent you an invoice for $1,000. I need that money. Can
you get it to me? I am going to forward that money to him
tonight. But the money that is coming in for me is going to
take 45, 30, 90 days. I just wanted to underline it, is jamming
me up.
Ms. SOLOVIC. I would say when it comes to the corporations,
even in the agreements that I sign with them now, they will
just put 90 days. You have to float that money, and it is tough
on us.
Chairman CHABOT. The gentleman's time is expired.
The gentlelady from American Samoa, Amata Radewagen, is
recognized for 5 minutes, and she is the Subcommittee chairman
on Health and Technology.
Mrs. RADEWAGEN. Thank you, Mr. Chairman.
This has been really fascinating. I have learned so much
today.
I have a question for all of you, is the same question.
Maybe we can start with Ms. Ramberg. What are some of the
things that can be done to inspire the next generation of
entrepreneurs?
Ms. RAMBERG. I think we are inspiring them. I think if you
talk to millennials, if you have been into a WeWork office
recently, it is filled with people who are inspired to start
businesses. What we need to do is we need to keep them inspired
and we need to keep them realistic. We need to talk about the
challenges around small business, and we need to give
education. It is the same as we have been talking about here.
When I started my show 10 years ago, there were organizations
focused on small business and entrepreneurship that were
shutting down. Now there is a cult of entrepreneurship, and I
think people are very excited to start their own small
businesses, we just need to provide them the resources to do
it. I think they want to.
Mr. RAY. Thank you for the question, my answer to that
would be, just keep doing more of what we are doing here and
keep providing platforms. I mean, the four of us, we have
reached a level of success, but I think there is that cult of
entrepreneurship. What can we do to go to the inner cities,
those who are not yet inspired who think they cannot do it? I
would just add that. How can we go maybe to small islands, et
cetera, and help inspire them more and more and more. Thank you
for the question.
Ms. SOLOVIC. I agree. I also believe, I have always told
people children emulate their parents, so they behave and do
things, what they see growing up. I think the same is true for
young people today. You know, let's lead by example. Let's give
them opportunities, even in grade school, to understand what
entrepreneurship is and how fun it is to run your own business
and be your own boss and make money. There are options other
than traditional work paths for them to be successful in this
country.
Ms. EMERSON. I would like to echo the same. I think it is
about highlighting success stories, big and small. Highlighting
youth entrepreneurs, women entrepreneurs, veteran-owned
entrepreneurs, and making sure that National Small Business
Week is not just PR. It is really about highlighting the
successes and honoring people who are doing this work so that
people can say, you know, I want to get that award one day.
I think also looking at MED Week and putting some real
teeth and resources around MED Week and highlighting minority
women entrepreneurs during those times is really important
because people look at that and see that as something of value.
Everyone likes to hear their name called and get a little
plaque with their name on it. So I think that more of that
really will go a long way of making people feel appreciated and
acknowledged and other people inspiring to feel the same way.
Mr. RAY. May I add one more? May I answer one more?
Mrs. RADEWAGEN. Yes.
Mr. RAY. I wanted to add, ma'am, and say that, not to be
the contrarian, but small business ownership, entrepreneurship
ownership is difficult. I think it could be interesting to
highlight it so people can see, you know what? This is not for
me. Let me go, I do not know, go work in Congress or something
like that.
Mrs. RADEWAGEN. Thank you, Mr. Chairman.
Mr. RAY. I am just teasing.
Mrs. RADEWAGEN. Thank you, Mr. Chairman. I yield back.
Chairman CHABOT. We hope you are.
The gentlelady yields back.
I think all the questions have been asked and answered. As
chair of the Committee, I want to thank you all for your
testimony here today. It has been very inspiring. I know that
we have all learned a lot. In fact, we have decided to have you
all come back every week from now on. We really do appreciate
it.
I think Chris Gibson, the gentleman from New York who has
left at this point, he mentioned he was going to have his
daughter, who is an aspiring entrepreneur, watch this maybe
down the road. I would recommend that our staff tries to get
this out because I think a lot of small businesses all over
America, whether they are thinking about starting a small
business or whether they already have one and they are looking
for ways to improve it, I think there are just pearls of wisdom
here that we do not want to just go off into the ether. You
have all really done a great job, and thank you so much. I
think you have done your country a great service, you really
have, so thank you very much for this morning.
I would ask unanimous consent that members have 5
legislative days to submit statements and supporting materials
for the record.
Without objection, so ordered.
If there is no further business to come before the hearing,
we are adjourned. Thank you very much.
[Whereupon, at 12:33 p.m., the Committee was adjourned.]
A P P E N D I X
JJ Ramberg Testimony
U.S. House of Representatives Small Business Committee
May 11, 2016
Good morning. Thank you Chairman Chabot, Ranking Member
Velazquez and the Committee for the invitation to provide
testimony today.
My name is JJ Ramberg and I am the founder of Goodshop.com
and the host of the program Your Business on MSNBC which is the
longest running television show aimed at inspiring and helping
small business owners.
For the past ten years I have both grown my own company and
interviewed thousands of small business owners, investors and
experts to learn best practices for small business growth and
survival.
I am a third generation entrepreneur. My paternal
grandfather moved to Los Angeles from Mexico with his young
family and his first job in this country was a peddler selling
pots, pans, and blankets door to door. He eventually opened up
a furniture store in Downtown Los Angles catering to the
Hispanic community which turned into a small chain of stores.
My father took over that business and then subsequently
branched out to establish one of the first document storage
companies in the country which was ultimately acquired by
Bekins and then Iron Mountain. He then went on to create a real
estate development firm.
My maternal grandfather opened a series of small businesses
from a frozen pizza manufacturer to a tire distribution
business and tropical fish store. In 1988 my mother, who was in
her late-40's and had been a stay at home mom for the majority
of her children's school years, partnered with my brother Ken,
a recent Stanford graduate, to start a company called JOBTRAK.
JOBTRAK was a pioneer in the online career space, partnering
with college and university career centers across the US and
Canada and, after 12 years, was acquired by Monster.com.
I began my company with my brother Ken in 2005. Goodshop
was conceived upon a foundation of social responsibility.
Goodshop provides the best coupons and deals for more than
30,000 retailers and service providers and, if you select your
favorite cause, a percentage of what you spend at thousands of
those stores is donated to that organization. Today, we have
saved shoppers more than $100 million and donated more than $12
million to organizations ranging from the American Cancer
Society and the Humane Society of the United States to local
schools, homeless shelters and parks.
The proudest moment of my entire career was the November
after our launch when we sent our first checks out to the
causes. We were still very much in start-up ode and my brother
and I recruited some friends, his in-laws, his kids and our
siblings to create an assembly line in his living room where we
printed the donation checks, put them into envelopes, added
stamps and sent them out. That day proved that the idea Ken and
I came up with was actually viable.
Goodshop began, as many small businesses, with me working
from my small apartment in New York City and Ken working from
his home in Los Angeles. We contracted with a designer and
developer whom we knew from Ken's previous business. Our first
true employee, Kari McMinn, worked with me at my home, much to
her mother's chagrin who hoped she would take the job she was
offered from a more seemingly stable consulting firm.
Today, Goodshop is based in San Francisco, has 56 employees
and is rapidly expanding into new verticals. We also have a
number of open jobs which we are trying to fill.
I have been in a unique position during the expansion of my
company. As the host of MSNBC's Your Business, I have also had
the honor of interviewing so many small business owners around
the country in whose companies have been in differing stages of
growth.
Each week on the program, through profiles of small
businesses, we tackle common business issues. For example, we
explored how to handle pricing through the story of a hot air
balloon company in Napa Valley; we covered expansion by telling
the story of a children's playspace company which started with
one location and now has stores around the world; we explored
creating a good company culture by spending time with a
plumbing business in New Jersey; and we discussed open book
management by profiling a design/build firm in Maryland. Our
stories have addressed issues ranging from how to find funding
to how to recruit the best employees and how to market your
product or service. In addition, since our show was on the air
during the recession, there was a time when we did many stories
on how to survive when the economy is heading south.
The program also incorporates segments around the best
technology to use in your companies, elevator pitches--where
someone pitches their company to a panel of experts in our
studio--and ``how to'' segments such as how to look for new
office space and how to determine whether to use a Professional
Employer Organization or not. As you can see, we get quite
granular in our segments.
Over the last ten years, since starting my company and
launching our program, I have seen a great change in attitude
towards small business. There is a much more public focus on
entrepreneurship and a celebration and appreciation for small
business in general. When we launched Your Business,
publications which focused on this population were shutting
down. Today, there are many resources available for small
business owners.
And, when it comes specifically to women owned small
businesses, while there were pioneering organizations like the
National Association of Women Business Owners supporting them,
there was not nearly the support there is today. While we are
not where we want to be on that front, we have made progress.
I thank you for holding this hearing focused on inspiring
entrepreneurs and learning from the experts because I believe
the best education you can get when it comes to starting your
own company is from people who have been in the trenches
themselves. I was extremely fortunate to have had a front row
seat in watching both my father and my mother--in partnership
with my brother--start their companies. Because of those
experiences, by the time I launched my own business, I had a
real sense of both the excitement and the challenges I would
face. Of course nothing really prepares you for doing it
yourself, but I was able to go in with my eyes open.
When I'm asked about the most important things to consider
when founding a company, I provide people with this initial
checklist:
1. Gather a good group of advisors. By this, I do not mean
a list of big names or famous people. Rather I mean make sure
you have people around you who can advise you on the issues
with which you are not familiar. These can be paid advisors or
those who are doing it for free. It can be structured or more
casual. You are providing yourself with a critical shortcut if
you have people to turn to for advice. I personally belong to
an organization called the Young Presidents Organization which
meets once a month to discuss issues we are dealing with in our
companies. I find the advice I receive from these CEO's
invaluable as inevitably some subset of us has gone through the
problem one of the other members is facing.
2. Before you launch your business, ensure that there is
actually a market for it. Entrepreneurs too often fall in love
with their ideas and do not get a true sense of whether or not
customers will be willing to pay for their product or service
before spending a lot of time and money on developing their
company. While I believe surveys and focus groups are helpful,
in my own experience, I have found that they can be misleading
and so the more experiential you can make your test, the
better. Whether you are starting a technology company or not, I
believe it's important to familiarize yourself with the idea of
a Minimum Viable Product, a concept made popular by Eric Reis's
book The Lean Start Up.
3. Access to and preservation of capital is one of the
biggest issues that small business owners face today. There are
a number of ways to fund your business beyond traditional bank
loans and equity investors such as online lending, grants,
crowdfunding, and factoring to name a few. But, I also
encourage people to read the stories of companies who did a lot
with very little. We recently profiled a company called Project
Repat which turns your old t-shirts into blankets. After being
turned down by multiple lenders and investors, they were forced
to bootstrap their business. Today, they are grateful for what
seemed a hardship at the time. Because they had limited funds,
they had to become incredibly creative with their marketing and
it worked. Now, not only is the company successful, but they
own most of it themselves and do not have any debt. If and when
they do go out to raise money, they will be able to do it at a
much higher valuation.
We are at an exciting time for small businesses. Yet it is
still a struggle for many. Over the past few years, we have
done a series on Your Business on Main Streets across the
country where we have profiled cities including Natchez,
Mississippi; Brundidge, Alabama; Golden, Colorado; Daytona
Florida; Galena, IL; Woodstock, NY and many others. Through
these stories, I have found a few consistent themes:
1. Many of the Main Streets which were thriving were doing
so because one individual or one organization led the
revitalization. This included discovering and applying for
grants to pay for improvements (like street lights and repaving
sidewalks,) organizing local businesses to work together to
plan events, and working with the local government to help
boost excitement amongst consumers. To have more success on
Main Street, it's important to identify and support these
champions.
2. In spite of the work of this committee and the Small
Business Administration, many business owners on Main Street do
not feel like anyone in government is watching out for them.
While they hear elected officials and members of the government
in Washington speak of supporting small business, many business
owners do not feel like they are seeing much action around that
support. There is an issue around communication of
improvements. More business owners need to know of the work you
are doing here and learn how to take advantage of the resources
provided by the federal government to help them grow their
companies.
3. While a lot of attention is paid to federal regulations,
there is less focus on local and state regulations. Many small
business owners--both on and off Main Street--cite these as
challenging because it is difficult to keep track of
everything.
In addition, both on and off Main Street, we have heard a
common refrain: difficulty finding affordable funding to
expand, a challenge around recruiting top notch employees and a
sense of loneliness and lack of community to help with business
issues.
That said, I believe we are in the beginning of a sweeping
change when it comes to small business. Companies in the
fintech and edtech space are working to address the issues of
financing business and educating our workforce. With
millennials now making up the largest share of the American
workforce and primed to take over an increasing share of small
business ownership, much will continue to change when it comes
to entrepreneurship.
Thank you again for taking the time today to celebrate
small business owners and all they do. The more attention we
can collectively bring to both the challenges of small business
owners and their contributions, the more we can support this
incredibly important segment of our economy.
Ramon Ray, Editor, Smart Hustle Magazine
Statement to U.S. House of Representatives Small Business
Committee - 11 May 2016
Chairman Chabot, Representative Velazquez thank you for
inviting me to represent America's small business owners and
entrepreneurs at this Committee hearing.
I would also like to extend a special greeting to the
Representatives from New Jersey, where I live and New York,
where I grew up.
Starting and growing a business is fraught with challenges.
I've started four business and sold one of them. I'm an
entrepreneur who is currently growing two companies--one of
those companies is Smart Hustle Magazine.
The day to day challenges of business ownership include
hiring the right staff, obtaining financing, trying to get new
customers and keep the ones you have, navigating various
government regulations and more.
Business ownership is not just about challenges, but it
also comes with the sweet taste of independence, the freedom to
chart our own course, the privilege of helping others with our
income, and earning the profitable rewards from our risks and
hard work.
The greatest reward is the awesome responsibility of
providing for our families and supporting our communities.
Chairman Chabot, fellow Committee members, more important
than any of use in the room here are the thousands and
thousands of business owners I speak to, in person, across the
country every year and the millions of small business owners
and entrepreneurs I reach through my writing, speaking and
media appearances.
Based on input from the small business community I
represent, there are three things our government, this
Committee, can do for small business owners.
First, continued reduction of burdensome and unnecessary
regulation--at the Federal, State and Local Level. We NEED
regulation for our safety, but we do not need burdensome or
unnecessary regulation. The horrendous treatment of Uber (now a
large company) is the most public example of regulation gone
wrong--stifling innovation and limiting growth.
Second, reduction and simplification of taxes--I count it a
privilege that I can pay taxes, from my hard earned income, to
fund our government operations. However, is there not a LIMIT
to what tax rates and tax laws are fair versus which ones are
excessive and burdensome? Every year I pay thousands of dollars
in taxes, I would rather reduce the taxes I pay and instead use
those funds to grow my business, invest in my community and
thus invest in the growth of America.
Third, foster small business eduction--``smart hustle''--I
applaud the great work of the Small Business Administration,
SCORE, SBDC's and other government supported organizations who
support and educate small business owners. The more we invest
in the education of small business owners the more we ensure
businesses succeed and not failure.
In particular, I applaud the work of the New York City
Department of Small Business Services.
Private and for profit education efforts such ass the
Goldman Sachs 10,000, Goggle's Get Your Business Online,
Microsoft Small Business Academy, Kaufman Foundation and so
many other initiatives are an important part of the small
business education ecosystem as well.
I was recently speaking with Robert Herjavec of Shark Tank
and we discussed that all small businesses hustle--they work
hard. However, it's 'those who are educated, who have SMART
HUSTLE, who succeed. Educating business owners is essential.
As I conclude my statement I think of a company like
infusionsoft started by 3 friends in a strip mall in Arizona.
Or a company like SumoMe started by a fired Facebook employee
in Austin. These companies, my company and the millions of
other small and medium sized businesses need to be encouraged
to start, grow and thrive.
Let's think about the husband and wife who start a business
together, or a high school graduate working on an invention, or
that laid off 50 year-old forced to begin their own business.
The best thing our government can do for small business
owners, is to have limited regulation, lower and simplify taxes
and continue to invest in the education of small business
owners at the local, state and Federal level.
Thank you for the opportunity to share about the hustle,
the smart hustle of small businesses in America.
Testimony of
Susan Solovic
THE Small Business Expert
On
``Inspiring Entrepreneurs and Learning from the
Experts''
Before the
Small Business Committee
United States House of Representatives
May 11, 2016
The Honorable Steve Chabot, Chairman
The Honorable Nydia Velazquez, Ranking Member
Good morning Chairman Chabot, Ranking member Velazquez and
members of the committee. Thank you for the invitation and
opportunity to provide testimony and to share my experiences
working with small business owners and entrepreneurs. It is an
honor to be with you today.
Let me share with you a little bit about my entrepreneurial
background. My mother was a pioneering entrepreneur. She opened
her first business after her husband died in World War II and
it was one of several she launched throughout the years. By the
way, she also got her pilot's license in 1944. I still have her
log book, which shows when she took her first solo flight.
After she married my father, they opened a funeral home in
a small, rural Missouri town and I grew up working in the
family-owned business. Personally, I started my first business
when I was 15 years old. I taught 75 little girls how to twirl
a baton for $1.00 each on Saturday mornings in the high-school
gym. Soon, I expanded to teaching dance classes in my basement.
When I left for college, one of my star students took over and
paid me 10 percent of the revenue for the first year. I guess
you could say entrepreneurship is in my genes.
I've also worked successfully in the corporate world
becoming the first female executive in the financial services
division of a Fortune 50 company. Additionally, I'm a licensed
attorney, but my heart has always been in entrepreneurship and
at this point in my life, I guess you could say I'm totally
unemployable. I like calling the shots, making deals happen,
running my own show, and bringing in money. I'm fortunate
because my business is prospering, but the picture is not the
same for millions of other small business owners in this
country.
Small businesses are struggling in the U.S.--as I'm sure
you're aware. The number of small business closures is out-
pacing startups for the first time in 30 years. According to
the Capital One Spark Business Barometer, small business
confidence has dropped nearly 10 points since the same time
last year.
However, there are bright spots for small businesses.
Thanks to technology, the barrier to entry is greatly reduced
compared to when I started my first business decades ago.
Resources rest at your fingertips to help you do everything
from establishing your legal entity to learning how to manage
and grow your business. Additionally, cloud-based solutions
give small firms the ability to access sophisticated software
solutions affordably, allowing them to compete more effectively
with bigger companies. And, technology allows small businesses
to do business around the globe from their garage or spare
bedroom.
Yet even with these developments, startup founders who
begin with passion and a sparkle in their eye now tell me their
business dream has turned into a nightmare. However, we know
many great companies have launched in the midst of difficult
economic eras and have risen to the top echelons of business,
so I encourage small businesses to focus on what they can
control, rather than external pressures they can't control. In
other words, don't point fingers and place blame. Focus on
building a great company that brings true value to the market.
As such, I've created a methodology called The One Percent
Edge: The Critical Difference That Will Make or Break Your
Business. The business world is changing rapidly today. What's
new and cool today is obsolete tomorrow. Therefore, businesses
that survive and thrive are the ones that have innovation in
their DNA. They are constantly looking for enhancements and
opportunities to bring something unique to the marketplace.
In my own experience, I launched one of the first video-
based Internet companies that provided news and information to
the small business market. While there were other companies
that provided similar content in a text format, we delivered
the information via streaming video. We recognized small
business owners are time and resource constrained. Statistics
show that while it takes several minutes to read a 2,000-word
document, it can be delivered in a much shorter amount of time
via video and/or audio. Plus, while watching content on our
site, owners could multi-task. And, unlike our larger
competitors that had made huge capital investments in print
publications, equipment and personnel, we were completely
digital with a small staff. So when the recession hit, we were
able to remain profitable while many of our competitors closed
their doors.
A number of years ago I taught an MBA class on growth
strategies for entrepreneurs. Because of my travel schedule the
university provided me with a co-teacher who was finishing his
PhD in entrepreneurship. During our class time, my co-professor
would discuss case studies and write formulas on the board.
Once he finished, I'd stand up and tell the class how things
work in the real world. The bottom line is that if you're
following case studies or textbook formulas you are already
behind in the game. There is no blueprint for success in
today's dynamic business world. My motto is if you're jumping
on the bandwagon now, you're too late. The window of
opportunity has passed.
Small business owners, not only need to make product and
service enhancements, but they also need to embrace technology
for greater productivity and profitability. Companies with the
1 percent edge, constantly re-evaluate their operations, plan
accordingly and adjust in a timely fashion. They are proactive,
not reactive. Small businesses have a tremendous advantage when
it comes to this process because they are agile. Large
businesses often fail in adjusting to market needs because they
are too large to make timely adjustments to their business
models. That's why only 71 of the original Fortune 500
companies remain today. The others have gone to the grave,
often simply because they failed to recognize market trends.
One positive note, I've seen is an increased use of social
media by small businesses. More and more small companies are
using social media to broadcast their brands, engage with
customers and increase their sales. Many years ago, I owned a
boutique PR and advertising agency. Our clients complained
about not having enough money to market their businesses.
Today, the major complaint I hear from small business owners is
that they don't have the time to market. The myriad social
platforms often confuse them and they don't understand how to
take advantage of this game-changing technology.
Similarly, when I had my agency, we worked hard to get our
clients booked on traditional radio and TV shows or mentioned
in a newspaper or magazine. The value of the new coverage was a
huge boost for small companies. Today, small businesses can
become their own media company by creating video content,
podcasts, hosting a radio program and blog posts. One financial
services advisor I know has become a well-loved and respected
resources in this community because of a weekly radio show and
a self-produced cable television show. The bottom line: Small
business owners can create a celebrity brand position with the
simple tools available today giving them a significant
advantage.
I was an early adopter of social media. After I sold my
Internet business, I began working independently building my
own brand. My husband would question why I was wasting time on
social media instead of getting on the phone making sales
calls. Today, he has to eat those words as I am consistently
ranked in the top five of small business experts to follow on
Twitter. I do zero out-bound marketing as business
opportunities come to me. It's an excellent position to be in
and one I primarily attribute to my social media presence.
Small business owners still need assistance and mentoring.
I get hundreds of emails every week from business owners
seeking advice on every aspect of their business development.
This tells me that even with all the great resources on the
Internet, business owners still like the one-to-one, personal
touch.
I'd be remiss if I didn't mention small business capital
needs. Traditional lending is down, and most startups use
personal assets, credit cards and loans from family or friends.
Crowdfunding is helping some small companies get off the ground
and I am optimistic that the equity crowdfunding, including the
new Title III regulations to the JOBS Act that will go into
effect of May 16, will open up a new source of funds for small
firms. Will it be enough? The jury is still out.
Growth organizations need access to venture capital, and
that is an area of concern for me in terms of being a woman in
business. I wrote a book called ``The Girls' Guide to Power and
Success'' in 2001. Sadly, in the 15 years since its publication
the statistics have barely changed--particularly when it comes
to VC funding of women-owned businesses. That is partly the
reason fewer than 2 percent of women-owned firms ever gross
over $1 million in revenue.
Having gone through the VC process myself, I can verify
that the bias against women-owned businesses is real. There are
myriad research studies that will also confirm it, but I
experienced it firsthand. Being the only women-owned CEO
selected to present at a venture forum, one of the organizers
said he was glad I was attractive. I ask you, do you think he
said that to any of the men?
Training programs that focus on helping women understand
how to pitch to the VC community and the addition of more
female VCs is beginning to make small improvements in this
area. But it's only the tip of the iceberg; we have a long way
to go to level the playing field.
While there are many positive developments for small
business, there are a significant number of obstacles resulting
in a stifling affect. I'd be remiss if I didn't touch on some
of those. Politicians praise the importance of small business
in producing jobs and innovation on one hand, yet continue to
impose regulations and laws that create an environment that
makes it nearly impossible for them to thrive.
The regulatory burden in this country is in the trillions
of dollars and small businesses pay 36 percent more than larger
enterprises.
Could small businesses in the U.S. eventually become
extinct? In my opinion, if we continue down this path of hyper-
regulation, they will certainly become an endangered species.
How can we protect this important market sector? As one long-
time entrepreneur said to me when I asked what needs to be
done: Get out of our business.
I truly believe that most governmental policies are passed
with the best intentions in mind, and of course some
regulations are necessary to protect our citizenry.
Unfortunately. the consequences are not always understood and
the results wreak havoc on small business owners. As former
Senator George McGovern said after his business venture in
Stratford, Connecticut failed, ``I ... wish that during the
years I was in public office I had had this firsthand
experience about the difficulties business people face very
day. That knowledge would have made me a better U.S. senator
and a more understanding presidential contender.''
In my role as a small business expert, I speak to thousands
of small business owners from around the country. They are
discouraged and disheartened. So I'm asking you to walk a mile
in our shoes today so you can better understand what is
happening to small businesses and why they are slowly dying
off.
The average sole-proprietor in the U.S. grosses annual
revenues of $44,000 and works 52 hours a week. She is he most
likely has put their personal finances at risk to start and run
his business. He or she sacrifice family time, holidays,
weekends and vacations. There is no family medical leave for
the entrepreneur. If they don't work, they don't get paid.
There is no overtime, and if their businesses don't make it, no
one is there to help bail them out or offer him an unemployment
check.
Small business owners are not the captains of industry from
the industrial age. They aren't slave drivers requiring their
employees to work long hours with little pay in poor working
conditions. They are individuals who are trying to provide a
living for their families, to give back to the community, and
to treat their employees with respect--often going without a
salary themselves in order to pay their employees during tight
times. We aren't money-hungry greed mongers, and those who make
a profit put a larger share of that back into the business. But
I ask: When did it become a crime to want to better yourself
and build wealth in this country? After sacrificing so much to
build our businesses without governmental assistance, should we
be penalized for this effort? Should the government tell us how
to run our companies?
Allow me to share a personal story. My parents grew up in
the depression. My father served in the Navy in World War II.
Neither one had any education to speak of, but they knew how to
work hard. In 1963, they launched a funeral home in the small
town in southern Missouri where I grew up. At that time, our
business, like most funeral homes offered ambulance service to
aid the community. In the '70s, the DOL audited my parents for
wage and hour violations. The auditor spent two days examining
their books and talking with employees. His conclusion: When
our vehicles were used as hearses overtime did not apply, but
if the vehicle was used as an ambulance, then overtime did
apply. The auditor extrapolated over a two-year period how much
back pay my parents owed. When my parents refused to pay it
because they thought the decision was unfair and arbitrary, the
auditor met with our three or four employees and explained to
them they had a right to sue and how to do it. Thankfully none
of them did. But my parents quit the ambulance business, which
was never a profit center, because trying to comply with the
regulations was too costly and complex. As a result, our small
community was left with no ambulance service until much later
when the hospital began to provide it.
Unfair and misguided regulations such as these, not only
affect the operations of a small business, but also hurt
communities and jobs.
Speaking of overtime regulations, the increase in the
overtime threshold to nearly $50,000 is one such back-breaking
regulation. First, it is extremely complicated for small
business owners to determine precisely which employees are
exempt and which are not. Culling through the guidelines, which
are almost as thick as the tax code, is just an added headache
for an owner who is already stressed by simply trying to keep
up with daily business operations. Therefore, the risk of
misclassifying an employee is significant. Small business
owners don't have the funds to hire labor lawyers to help them
navigate the complexity of the system. This puts them at risk
for audits and even worse, lawsuits, which could be more costly
than the overtime itself.
Additionally, an arbitrary amount doesn't take in account
the differences in geographic economies. For example, $50,000
in the little town I grew up in is a big amount of money. I
recently sold my family home, which was over 5,000 square feet,
4 bedrooms, 3 full-baths and two half-baths, finished basement
and an extra-large lot for $116,000. On the other hand, $50,000
in Manhattan wouldn't allow me to come close to affording my
apartment there.
Increasing the overtime regulations means small business
owners will have to reduce the number of employees, convert
full-time to part-time positions, or increase the price of
their products. Most small businesses find themselves competing
on price with larger providers or big-box stores, therefore,
price increases are not truly an option. Because profits
margins have already been whittled away during the last
recession, cutting operational costs--employees--is the logical
answer.
The same result occurs with the increase in the minimum
wage. Small businesses simply can't absorb the increase so they
will cut the number of employees. One businessman from Ohio
told me how he has been squeezed so much that more costs are
something he can't absorb. He plans to raise his prices, which
he says the consumer doesn't want to hear but the money has to
come from somewhere. It doesn't grow on trees. Another
restaurant owner from the East Coast said he simply plans to
close some of this locations because it is impossible to
operate them profitability.
The Affordable Care Act has also had a dampening effect on
job creation. Many small business owners have held their
employee count down to avoid the employer mandate.
Mandatory family leave sounds good in theory, but let's
apply it to a typical small business. What do you do when a
team member takes leave for 12 weeks? You still have to pay at
least part of his or her salary so you can't afford to bring on
someone else. Even if you could afford it, how do you train
replacements quickly, invest money in them, and then let them
go when your original employee comes back? The only other
option is to ask your remaining staff to pick up the slack.
Employee morale and productivity is sure to wane impacting your
bottom line. You may lose existing customers and business
opportunities. Most small businesses have family-friendly work
environments to accommodate personal needs. Isn't it better to
allow the business owner to manage in way that is appropriate
for his business?
What about the business owner himself who has a medical
issue? For example, my mother had Alzheimer's. My father became
her primary caregiver, which left no one to manage our family
business other than me--an only child. I had to juggle
commuting back and forth to my hometown to keep the business
running while still trying to manage the demands of my own
company until I was able to sell our family business.
The same is true for equal pay. I have been the victim of
pay disparity when I was an executive with a Fortune 50
company. When I was elevated to the executive level, I was paid
about $20,000 less than my male predecessor. I understand how
unfair it is and it is an issue that should be addressed, but
not legislated. I understand how unfair it is and it is an
issue that should be addressed, but not legislated. Business
owners need the flexibility to establish wages based on
experience and skills, not mandated by law. A man and woman who
come to a job with the very same credentials should be paid
equally, but if one has less experience and fewer skills then a
business owner should have the flexibility to establish wages
accordingly.
The tax code is also problematic for small businesses.
While I think it is important to lower corporate tax rates to
stay competitive internationally, most of us are pass-through
entities, therefore, we are just as interested in a less
complicated and lower personal tax rate. Because of the
complexity of the tax code, many small businesses don't take
advantage of available tax credits and deductions. The cost of
complying with the tax code is 206 percent higher than a larger
company.
While we're on the subject of taxes, let's discuss the
death tax. For many small business owners, their business is
their greatest asset and they want to pass it on to their
heirs. Yet having paid taxes on it for years, when the owner
passes away it becomes part of an estate that may be taxed at a
rate as high as 55 percent by the government. Unfortunately,
most small business owners don't have the money in their
estates to pay the taxes so the business must be sold or
liquidated to pay the tax. There goes the business and there
goes the jobs.
There are still many bright spots for small business
owners. America remains a great country with opportunity, which
is why so many want to leave their homelands to come here. Our
country was built on the spirit of entrepreneurship. Let's not
extinguish this important characteristic of our culture. Let's
create a pro-business environment that gives entrepreneurs the
ability to start, grow, and build great companies that provide
jobs and continue to drive our economy.
Thank you again for the opportunity to testify. I am
grateful the great bipartisan work of this committee, which has
led to important legislative victories and progress for
America's small business owners and entrepreneurs. I look
forward to our discussion today.
Testimony of
Melinda Emerson
``SmallBizLady''
America's #1 Small Business Expert
``Inspiring Entrepreneurs and Learning From Experts''
The Small Business Committee
United States House of Representatives
May 11, 2016
The Honorable Steve Chabot, Chairman
The Honorable Nydia Velazquez, Ranking Member
Good morning, thank you Committee Chairman Chabot and
Ranking committee member Velazquez and the rest of the Small
Business Committee for the opportunity to testify on the status
of small businesses in the U.S.
My name is Melinda Emerson, but I'm known worldwide as
SmallBizLady, America's #1 Small Business Expert. My
SmallBizLady brand reaches 3 million readers each week online.
I've been an entrepreneur for 17 years as President and CEO of
the Quintessence Group, a marketing and management consulting
firm based in Philadelphia, Pennsylvania. We specialize in
working with Fortune 500 companies who target small business
customers.
For the last 8 years, I have also run SmallBizLady
Enterprises, which is our training and development company for
small business owners, Our mission at SmallBizLady Enterprises
is to End Small Business Failure. We work directly with women
and minority entrepreneurs who want to start and grow
successful small businesses. We publish a resource blog at
succeedasyourownboss.com, which is syndicated through The
Huffington Post. We reach millions of entrepreneurs a week and
22% of my audience is international. I get letters and emails
each week from around the world asking for tools, advice, and
funding.
I am also the bestselling author of the book, Become Your
Own Boss in 12 Months, which is in its second edition and the
ebook. How to Become a Social Media Ninja. In addition to these
for profit pursuits, I also run the Melinda F. Emerson
Foundation for small business success, which hosts a flagship
conference every fall called Reinvention Weekend. I am also a
former columnist for the New York Times, Inc. and
Entrepreneur.com.
Technology really makes a difference for small business to
get information to help them grow their businesses. For the
last 7 years, I have also hosted a live tweetchat weekly on
Twitter called #Smallbizchat to answer small business
questions. Our audience ranges from start-ups to more
established businesses depending on the topic of each show. We
are the largest live small business audience on Twitter.
One of the things I am known for is the Emerson Planning
System, which I highlight in my book Become Your Own Boss in 12
months. It's my six-step system to transition from employee to
entrepreneur:
Step 1: Develop a Life Plan Before You Ever Write a
Business Plan
Step 2: Develop a Financial Plan, as the money to start
your business will most like come from you right or left pocket
and banks do not loan money to start-up, you must be in
business at least two years with position cash flow.
Step 3: Validate Your Business Idea, based on what skills
you have and need to run that business
Step 4: Know Your Paying Customer, don't fall in love with
your Idea, make sure there's a demand for It and a customer
willing to pay.
Step 5: Write a Business Plan, you must plan for success it
will not just happen to you
Step 6: Launch While Working, It takes 12-18 Months for a
Small business to break even let alone replace your corporate
salary.
As I thought about my opportunity to shed light on the
state of small business in the U.S., I first looked back over
my nearly two decades in business for ideas. And Chairman
Chabot, I heard you were looking for some bold ideas to shape
the future, so here goes a few.
There are three critical things that really propelled my
business success. The first was the initial business loan I
secured. It was a $25,000 loan from Ben Franklin Technology
Partners in 2000. It was a SBA backed loan fund, called the
Competitive Edge Loan Program. What was unique about this
program was that in addition to the funds, I also received 25%
of the loan's value in technical assistance for my business. My
first accountant and marketing consultant were hired with these
funds, and I must say they saved me. I was a former television
producer, and I knew how to tell great stores on video, which
is what my firm do, but I didn't know a lot about running a
business. I have a journalism degree from Virginia Tech, in
fact the reason I started my business was because Oprah Winfrey
inspired me, she was the first journalist I ever saw start a
business. This made me think I could do it too.
But there was a lot to learn, I second thing that made the
biggest difference for me was that I recognized early on that I
had to grow myself to grow my business. Every year I've been in
business I've invested in some course, coaching or leadership
development program.
I have participated in executive training program at
Dartmouth College, and the University of Virginia, I did the
E200 training program sponsored by the SBA, the 8a Academy,
Fast Track, I also went through Leadership Inc. Philadelphia,
and the Urban League Leadership institute, but the first class
I ever took was the SEA Program, which was a FREE state run
program for people who were unemployed called the Self-
Employment Assistance Program, which was run by the Women's
Opportunity Resource Center in Philadelphia. It provided 8-week
business plan course, allowing me to collect unemployment while
I built my business. I think a National program like this could
help a lot of unemployed people reinvent themselves as small
business owners.
The third thing that was a pivotal moment in my business
was when I won the minority business plan competition which was
sponsored by The Enterprise Center and the City of
Philadelphia. In 2001, I won $20,000 and free office space in a
business incubator for one year. This enabled me to hire my
first employee, and that's when my business took off. We need
more public/private partnerships America that seed and launch
small businesses with grant dollars and incubation spaces, but
we need some that intentionally support minority and women
owned business that are main street businesses.
In Hungzhou, China's Silicon Valley, start-ups are given
three years of space in business incubators and they have a
$300-million dollar fund to seed new businesses. In Singapore,
there is a mall in the heart of the financial district
dedicated to youth entrepreneurs. Young entrepreneurs, as young
as 10 years old, once accepted into the government training
program can get discounted space, training and mentorship to
sell their products, and when their business get big enough
they can get retail space. They define youth entrepreneurs up
to age 35.
In Chile, Start-up Chile, provides $40,000 and place to
live for one year if entrepreneurs are willing to come and
start their business in that country. In this country, Start-up
America, is largely public relations initiative with very few
resources to provide anyone other than networking events.
Because we have some of the greatest businesses in the
world in America, we think that we have cornered the market on
innovation. But I have traveled internationally as the
SmallBizLady, through the World Entrepreneurship Forum, and we
are losing our edge. We need to start teaching entrepreneurship
education starting in kindergarten. We need to support and fund
Junior Achievement and NFTE's, especially in urban communities
with decaying school districts to make sure that the next
generation are ready with skills to launch and lead businesses.
My biggest concern about what efforts the government, SBA,
and MBDA are doing is only focusing all the efforts is on
finding the next Facebook or tech start-up and that is a
dangerous precedent. 95% of all small business in the world
will never gross of one million in revenue. We need programs
that bolster main street businesses.
There are four things businesses need: Access to Capital,
Mentorship, Training, and Networking. This is especially true
for women and minorities. We need access to networks, industry
decision makers and market leaders. Especially those in non-
tech industries, that are not expected to leaders outside of
their typically networks and this limits their ability to
scale. We just don't have the mentorship or sponsorship
relationships rather to build traction in our businesses and
meet equity investors. They need that patient money that an
equity investor could provide.
Since the great recession of 2008, small businesses owners
that were able to hang in there are hurting. They can't get
credit or capital. Although, if they are ecommerce business and
have cash flow of at least $10,000 a month or more they can get
high interest loans from cash flow lenders like Kabbage,
Merchant Cash, On Deck or one of 50+ others. This industry
needs some regulations and close scrutiny. Many of these
lenders will fund a business with a 620 credit score at a 24-
26% interest rate with immediate payment terms. This industry
is preying on desperate small business owners, who can't
qualify for lending from traditional banks.
And when business owners do apply for an SBA loan the
delays and paperwork burden, make that a loan of last resort.
Because when business owners need money, they need it in a
hurry. One of the other main drawbacks from using SBA
guarantees for loans, is that the government demands a UCCI
lean on all current and future assets. That means for a $25,000
loan, a start-up business would never be able to use business
assets as collateral for a future loan, once the business
starts to scale.
Now there is a lot of talk these days about crowdfunding,
which has created some opportunities for product based business
with sharp marketing, but the average crowdfunding campaign
generates $10,000, and it a lot of work for so little money.
Now I am slightly optimistic with the pending approval of Title
III from the JOBS Act, but I am concerned that too many small
businesses who are not properly networked or prepared will
pursue this option with poor results.
Technology is tough for some business owners. While cloud
based computing has made enterprise level software available
and affordable, there are too many options with no time to
learn new software. This keeps many businesses paralyzed doing
things the same old way. Too many business owners still do not
have websites, which is their #1 sales tool. They are also
overwhelmed with social media marketing. Everyone is out here
trying to use them all Facebook, Twitter, Instagram, Goggle+,
Snapchat, Pinterest, etc., but they must be strategic online. I
advise small business owners to focus on one or two social
media platforms, and they should be the ones where their best
target customer is hanging out online.
There are other regulatory challenges that small businesses
face that should be reviewed.....the expanded categorization of
who can and cannot be considered a 1099 independent contractor
is a challenge for small businesses that cost of full-time
employees is prohibitive to cash-strapped start-ups. The tax
code needs to be simplified to help more small business owners,
it costs a lot to be in business in the U.S. And 12 weeks of
mandatory family leave for a team of four in typical small
business in a real hardship for a struggling business with
ongoing cash flow issues.
When I think about things your committee could do to help
on the enforcement of set aside goals and plans. This is
critical for minority and women owned business success. The old
``good faith effort'' excuse should come with some financial
penalty for agencies and prime contractors who do not meet
goals. Create incentives for larger government contractors to
identify and team with certified minority and woman owned
firms. Also disadvantaged firms who are able to scale through
8(a), women-owned and veteran owned firms program should be
encourage or maybe even required to help smaller firms grow
once they are over $30 million in gross revenue.
Despite all of the challenges, being a small business owner
is still the greatest reward in business. We live how most
people won't so that we can live how most people can't. Now is
still an amazing time to launch a business, and no matter who
you are, the world is still waiting on a better mousetrap. My
favorite advice to give small businesses is, ``You never lose
in business either you win or you learn.''
Thank you very much for inviting me to testify. I feel
honored to be here.
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