Inc 5.2.17

After 100 days of the new administration, small business owners view Donald Trump as a man walking true north through quicksand. He may not get anywhere. But at least he’s headed in the right direction.

Surveys by several different organizations find that, at the 100-day mark, roughly 60 percent of small business owners approved of Trump’s performance or believed his presidency would be good for their companies. They broadly applaud his minimalist approach to taxes and regulations and his maximalist approach to infrastructure spending.

But questions on specific issues, as well as concerns about the president’s personal deficiencies, suggest that while small business owners are supportive they are not sanguine. “My interpretation is that there is still an openness to him,” says Jacqueline Breslin, director of human capital services at TriNet, an HR outsourcing firm that conducted one of the surveys. “They are saying we have not been impressed so far. But we are going to be optimistic that it will be beneficial for our business.”

For many entrepreneurs, though, it seems that optimism is a choice rather than a conclusion. In recent conversations, small business owners worried about Trump’s ability to accomplish much. “Does the administration have the ability to get things done from a legislative perspective?” asks Brian Gordon, CEO of Engine Shop, a $13 million marketing firm in New York City. “Can they build consensus? Can they compromise? I think the first 100 days tell us that that might be a challenge.”

The phrase “wait-and-see” and “still early” resurfaced repeatedly during interviews with the owners of small companies. “I am willing to watch it play out for a while,” says Bill Brown, CEO of Entrada, a $10 million health-care technology company, in Brentwood, Tennessee. “We have got a president who has not spent a lot of time in politics or Washington. It is not surprising he has been a little clumsy coming out of the gate.”

Inc. spoke about a variety of issues with small business experts and more than a dozen entrepreneurs to gauge how they feel 100 days into the Trump administration’s rolling boil. Here’s what we found.

The state of small business

Entrepreneurs have the advantage of watching events unfold from a position of relative health. Small-company performance is strong so far in 2017, with increases in the first three months of 10.4 percent in net profit margin (compared with 8.5 percent for this period in 2016); 11.9 percent in sales (compared with 7.1 percent in 2016); and 15.6 percent in the EBITDA margin (compared with 14.3 percent in 2016). Both experts and entrepreneurs agreed it’s too early for Trump to claim credit for those numbers.

“Private companies continue to hum along in an expansionary economy that Trump inherited,” says Brian Hamilton, co-founder of Sageworks, the financial analysis firm that supplied the performance data. “The status of private enterprises is boringly static and positive over the past seven years.”

Hiring, too, is up over the second half of 2016, but almost identical to the first half, according to Paychex, which manages HR and payroll for small companies. However in that regard Trump’s presence in the White House may be something of a stimulant. In a survey by Paychex, 44 percent of small business owners said the new administration has made them more likely to hire new employees; and just 12 percent said it has made them less likely to do so. “There are definitely people for whom the animal spirits have kicked in,” says Frank Fiorille, vice president of risk, compliance, and data analytics at Paychex,

No entrepreneurs interviewed credited Trump’s actions or policies with any material improvements to their businesses, although several praised his salubrious effect on consumer confidence and the stock market (and consequent willingness by large clients to spend). Interviews were conducted before the announcement on April 28 that weak consumer spending had slowed economic growth to a three-year low.

“People seem to have a more stable view of economic conditions, which is causing an influx of work coming our way,” says Eric Weishaar, president of The Breckinridge Landscape Group, a company in New Berlin, Wisconsin with revenues between $5 and $6 million. “We are seeing a lot of commercial projects that were in limbo for a while start to gain momentum. Homeowners are moving forward with projects they may have been holding off on for a few years.”

He gets it

Donald Trump is a businessman. That’s enough to earn the trust of many entrepreneurs. “He is results-oriented, not election-cycle-oriented,” says Weishaar. “The mindset for his whole life has been look, we need to get this done.”

“Trump ran far to the right–certainly during the primary–and he is governing on business issues to the middle-right,” says Sageworks’s Hamilton. “He is more George W. Bush or Ronald Reagan and less Huey Long or Adolf Hitler, for example, in this particular regard. It certainly seems that he and his administration like businesspeople.”

Asked by TriNet which of the last five presidents best understood (or understands) the small business environment, more respondents (34 percent) chose Trump than any of his predecessors. “I think he’s going to give small business a fair shake,” says Entrada’s Brown. “He seems to focus on clarity in the lending standards and getting a lower tax rate for everyone.”

Trump may get small business, but entrepreneurs fret that he loves their jumbo-sized counterparts more. The President prioritizes the interests of large companies over those of small ones, said 75 percent of respondents to the TriNet survey. And 92 percent agreed that Trump needs to do more to help small businesses succeed.

“When you see who he has met with the last few months, not many small companies have been going through. There is not as much public attention on small companies as I expected there to be,” says Todd McCracken, president of the National Small Business Association. “Maybe this tax plan is a pivot to small business. I hope it’s true.”

While most entrepreneurs both faulted Trump and forgave him for political ham-handedness, a few criticized him, ironically, for lacking business leadership skills. “He is business-friendly, and that is an overall positive,” says Justin Bellante, CEO of BioIQ, an 85-employee health-measurement company, based in Santa Barbara, California. “But he is not successfully communicating. He is not executing on the plan he set before the election. He is not being a successful executive.”

An unpopular choice for a target

Trump’s early decision to tackle immigration did not serve small companies’ interests or priorities. “It was probably an odd choice from the perspective of the small-business owner,” says TriNet’s Breslin. For small companies, “other issues like tax reform are a far greater priority.”

After the travel ban was announced in January, Breslin says, TriNet fielded many calls from clients concerned, for example, about the fates of foreign-born employees temporarily outside the country. Even before the April “Buy American, Hire American” executive order, the company had been doling out copious guidance on H-1B visas. Other employers worried “about raids into their business, to have to demonstrate that their workers are documented,” says Breslin. “They were not saying, ‘We have undocumented workers.’ They were saying, ‘Help me get prepared.”

In interviews, several company owners criticized Trump’s hard-line approach for spooking their employees, some of whom are children of undocumented immigrants. The more pervasive complaint, though, is the potential decline in H-1B visas. In a separate TriNet survey, 76 percent of respondents said proposed changes to that program would have a negative impact on their companies. The same number believed the administration does not understand how immigration reform will affect businesses like theirs.

The competition for technical talent already is fierce, and with fewer visas, “it would be a bloodbath,” says Tony Mirchandani, CEO of RTM Engineering Consultants, an $11 million business, in South Barrington, Illinois. “The local talent pool would get reduced so significantly that it is going to cause a significant increase in rates.”

Doug Pelletier worries that less access to H-1Bs means raising prices at Trifecta Technologies, his custom software business, in Allentown, Pennsylvania, with revenues between $6 million and $7 million. But he sees a potential bright spot as well. “We have lost some large accounts to global consulting firms like Accenture that just fill all our roles with H-1B visa employees,” says Pelletier. “So if that is limited it could be good for us.”

The winners and losers on trade

Another of Trump’s early decisions–to withdraw from the Trans-Pacific Partnership–kicked off a wavering war against trade agreements that has left small business owners either buoyed or blasted, depending on their business models.

Protectionist policies menace Feel Good Foods, a $3 million maker of snacks and appetizers, based in Brooklyn, New York. Four core products, including gluten-free dumplings and egg rolls, make up 80 percent of Feel Good’s sales; they are made from rice flour imported from Thailand and Vietnam. Co-founder and COO Tryg Siverson has tried to source the flour domestically but says only southeast Asian companies use the type of rice and milling process his products require. “The discussion of America First and we’re going to shut down NAFTA and the Trans-Pacific trade agreement is very nerve-racking for us,” he says.

“There is very significant concern that this will increase our costs,” adds Siverson, who is trying to reformulate his lines with domestic ingredients. “We are already a premium product, so people will be even less willing to pay more at the register.”

By contrast, Keith Schroeder, CEO of High Road Ice Cream & Sorbet, a $3 million business in Marietta, Georgia, is hopeful that Trump’s recent “stirring the pot” about Canada’s protection of its dairy industry could benefit his business. “Currently we are not allowed to export our product to Canada. We can’t even bring samples into the country,” says Schroeder. “Those are the rules according to NAFTA, and it’s something we had resigned ourselves to. So anything he says relative to changing that could be helpful.”

Alisha Navarro is torn. As president of 2 Hounds Design, a $3 million manufacturer of fashionable products for dogs, based in Monroe, North Carolina, she expects to benefit from any made-in-the-USA policies Trump implements. “It would be really nice for us because then we could compete pricewise with companies that make things overseas,” says Navarro, whose products cost 25 percent to 35 percent more than those of outsourced manufacturers. But she worries that, more broadly, consumers will be socked by higher prices on goods that can’t be affordably produced in the United States. “It is one of those catch-22 situations,” she says.

Health care’s uncertain prognosis

In surveys, small businesses have pegged health care’s uncertain future as their first- or second-greatest barrier to growth. So it’s no surprise that some entrepreneurs called failure to pass the American Health Care Act a low point of the first 100 days. But not everyone holds the administration culpable. More respondents to the Paychex survey (45 percent) blamed Republican lawmakers than either Trump or Democratic lawmakers, who tied at 39 percent.

Furthermore, entrepreneurs remain divided on what and how much should be done to improve the Affordable Care Act. In the TriNet survey 58 percent of respondents agreed with Trump’s approach to health care while 42 percent did not. On the Paychex survey 49 percent said they would be happy to leave the ACA in place for the foreseeable future, while just 38 percent want it gone. “I wish they would just leave it alone for a few years,” says RTM’s Mirchandani. “Whatever they do, it is just going to cost us so much more time and effort. It already cost us a lot of money to make adjustments to accommodate Obamacare.”

The NSBA’s McCracken calls the failure to pass health care reform “concerning” for small businesses. But the greater failure, he says, was the proposed law’s inadequate approach to his constituents’ overwhelming concern: the high cost of health care. “There is an opportunity here to get a handle on this, but we have not seen much,” says McCracken. “Most of the changes have been about redistributing who pays how much and what benefits get paid for, rather than driving down overall health care costs.”

McCracken says the health care failure “did bring people a little more back to reality” about how much and how quickly the administration could enact significant change. Some entrepreneurs reacted more strongly. “The health-care bill was such an eye-opener. Because it just shows how dysfunctional government is in general,” says Siverson of Feel Good Foods. “I anticipate that relatively little is going to get done in the next four years.”

Others viewed the bill’s collapse more charitably: as a teaching opportunity. “I’m glad ACA went down the way it did,” says High Road’s Schroeder. “I think it was a wake-up call for the administration that it can’t just jam stuff down people’s throats in terms of my business.”

Bold words on big problems

High taxes and excessive regulations are the Joker and Riddler terrorizing entrepreneurial Gotham. On those subjects Trump has made many of his broadest, boldest proposals. And while nothing much has budged, small business owners have rallied around the intent.

On the subject of regulation, 68 percent of respondents to the TriNet survey said Trump’s proposals for relief would make it easier for their companies to do business. The president’s executive order that agencies eliminate two regulations for every one introduced “sends a powerful message to businesspeople,” says Sagework’s Hamilton. “The indirect costs of regulation are very high in America, and his moves could only be a positive for business.”

However the only change to the status of a regulation broadly affecting small business that experts or entrepreneurs could name involves the overtime rule, which was suspended by a Texas judge on the eve of implementation last year. Many entrepreneurs now expect it to die on the vine. “For those who had not already made the changes that has been a relief, although I don’t know how many small business owners are still thinking about it,” says TriNet’s Breslin. (The fiduciary rule, which small company owners believe hinders their ability to offer retirement plans, is also in the administration’s sights.).

Most entrepreneurs recognize that unraveling regulations takes time, and they are patient. The NSBA’s McCracken observes, however, that the administration’s slowness staffing up agencies charged with implementing two-for-one “gets in the way of that happening in a timely fashion.”

Some small business owners worry about the lifting or loosening of regulations that protect employees or the environment. Others say a freewheeling approach to rules may make U.S. companies less competitive. Chris Byers, CEO of Formstack, a $7 million Indianapolis company that helps customers simplify data collection, criticized Trump’s repeal last month of Obama-era online privacy protections. “Most other countries think about privacy in a much more restrictive way than the U.S.,” says Byers, who expects he may need to open offshore data centers. “At some point they are going to say there is a smaller set of countries where we will let our data go, and the United States won’t be one of them.”

Last week few entrepreneurs had yet digested Trump’s tax proposal, but the early response was warm verging on rapturous. More than 80 percent of small companies are pass-through businesses whose federal tax rate would plummet to 15 percent. “His proposed tax changes can be fantastic for privately owned businesses like mine,” says Trifecta’s Pelletier. “We would reinvest that in the company through growth, through hiring, through passing on more to employees. I don’t think all [entrepreneurs] are looking to become billionaires.”

Sixty-nine percent of respondents to the TriNet survey said Trump’s tax policies would make it easier for them to do business, and the Paychex survey also showed support, particularly for reducing tax rates. “We were not surprised that it was so popular,” says Thad Inge, manager of government relations at Paychex. “But it gets a lot messier when you get into how are you paying for this. Some people said does that mean that the employer exclusion for health care goes away? The devil would be in any future details.”

Business owners hope there may be angels in the details too. “I was not a fan of Trump from the start,” says Breckinridge Landscape’s Weishaar. “I was pretty apprehensive about, is this guy going to make us look stupid? Now, seeing the actual results for three months, paying attention to what he’s doing as opposed to how he’s doing it, I have to say he is surprising me.”

Source: Inc.