Government Compliance Hurts Small Businesses and Entrepreneurs


Federal regulations are a good thing. Sort of. Some laws help prevent discrimination and worker abuse, and make work places safe for everyone. But many laws cause more pain than good, and actually hurt workers by raising the cost of doing business, which indirectly affects their wages. The chart at the left (click for the full version) shows that small businesses spend more money than other companies to comply with government regulations. Why? I don't know all the reasons but for one thing they are less efficient since they don't have HR departments.

The dirty little secret about starting a business, the one that entrepreneurs are rarely ready for, is how much money they have to give the government and how much time they have to spend complying with rules and regulations that don't add to their bottom line. Take that into consideration when you make offers to employees. Their cost is actually much much more than their wages.

  • Rob,

    Completely agree. I firmly believe that the number of municipal and federal requirements to start a company can completely cripple focus and divert a good amount of an entrepreneur’s attention from real profit driving activities.

    I think a very valuable MBA – entrepreneurship class would be “the critical [administrative] things to get a company going”.