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Regulations Hold Back Small Businesses

Source: U.S. Chamber of Commerce

Author: Thaddeus Swanek, Senior Writer and Editor, Strategic Communications, U.S. Chamber of Commerce

Time to read: 8 minutes

Small businesses—and all Americans—benefit from strong economic growth. However, new data in the MetLife & U.S. Chamber of Commerce Small Business Index for Q4 2024 gives further evidence that burdensome regulations hinder growth.

By the numbers: The latest Small Business Index survey finds that 51% of small businesses say navigating regulatory compliance requirements is negatively impacting their growth.

  • Almost as many (47%) say their business spends too much time fulfilling regulatory compliance requirements.

What the U.S. Chamber is saying: “Too many regulations cause big headaches for small businesses, even if they feel confident in their ability to comply or have the means to outsource compliance tasks,” says Tom Sullivan, the U.S. Chamber’s Vice President of Small Business Policy.

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Small Businesses Are Spending More Time on Compliance Tasks  

Small businesses are more likely than last quarter (as well as Q4 last year) to say the time or resources spent on fulfilling regulatory compliance requirements has increased in the past six months (39% vs. 33% and 34%, respectively).

This increase in time spent on compliance issues caused the overall Small Business Index score, which measures small business owner confidence, to dip to 69.1 in Q4 from 71.2 in Q3.

  • Otherwise, small business confidence in revenue, investment, and hiring plans was strong across the board.
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Regulatory compliance can have an impact on real-world jobs and projects.

Small business owner Philip Freeman, Founder and CEO of Murphy’s Naturals, Inc. in Raleigh, North Carolina, says lead times for building permits have increased so much that they decided to cancel an extensive office expansion.

  • “The delays make the expansion no longer a good return on investment. While we saved money by canceling the construction, some contractors missed out on the construction project that would have been good for our local economy,” Freeman says.

Taxes Among Most Time Consuming Regulatory Burdens    

Complying with federal, state, and local taxes are no minor issue for small businesses: Taxes (along with record-keeping) are the top regulatory compliance issues small businesses report spending their time on.

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Small businesses also report feeling the regulatory burden more heavily compared to some of their competitors. 69% of small businesses say they spend more per employee to comply with regulations than larger competitors.

Inflation concern persists: Hindering growth for small business are lingering concerns about inflation.

  • Consistent for the past two years, more than half (55%) of small businesses say inflation is their biggest challenge.
  •  Q4 2024 marks the 12th consecutive quarter that small businesses have cited inflation as their biggest challenge.

A Growth and Opportunity Imperative

The U.S. Chamber supports policies aimed at achieving at least 3% annual economic growth. Some of the tools for promoting economic growth are:

Taken together, these tools can increase prosperity for every American, while ensuring government gets out of the way and allows small businesses to do what they do best: innovate, grow, and create jobs.

“Our ability to substantially improve our lives depends on how quickly the overall economy is growing,” wrote U.S. Chamber President and CEO Suzanne Clark in a USA Today op ed.

“Unfortunately, in many cases, that is not the reality today, and many Americans do not feel like this economy is working for them. To create the future we want and the next generation deserves, we need to get back to growth.”

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Despite headwinds from inflation and concerns over compliance demands, small businesses remain optimistic about future revenue, investment, and hiring.

  • Almost half (46%) of small businesses say they plan to increase investment and 41% say they anticipate increasing staff in the next year.
  • Both measures have increased significantly from the start of 2024.

 For more findings from this quarter, and to explore and browse years of small business data, visit the Small Business Index.

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The Columbia Montour Chamber of Commerce (CMCC) represents local employers in supporting vibrant, sustainable communities in Columbia and Montour Counties.  The CMCC is a proud member of the U.S. Chamber of Commerce and its federation of local, regional, and state chambers, which together serve as powerful business advocates with state and federal level policymakers.  

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