Where Does Entrepreneurship Fit into Obama's Health Care Plan?

Posted by: Nick Leiber on September 10, 2009

This is a post by guest blogger Jeff Bussgang.

jeff_bussgang.jpgPresident Obama’s compelling health care speech last night made the case for acting now. In a follow-up email that he sent to millions, he urged action to finally address this pressing issue, positing that we are “closer now than we have been in 60 years.”

Here’s my question - where can I find an analysis of the impact of the plan on entrepreneurship? Why has this major engine of job growth been silent or ignored in the debate - or have I just missed it?

Anything that creates friction in entrepreneurship is a bad thing for our innovation economy. I have seen aspiring entrepreneurs hold back in pursuing their start-up dreams because of fear of losing health coverage. Lowering the barriers to allow the flow of great talent to seek great opportunity needs to be a fundamental tenant of the new plan and I’m concerned that our leadership isn’t focused enough on this lens.

Has anyone seen any good data or dialog on this topic? Led by former venture capitalist Karen Mills, shouldn’t the SBA be a strong, relevant voice here?

Serial entrepreneur Jeff Bussgang is a partner at venture capital firm Flybridge Capital in Boston.

Reader Comments

Domenick Celentano

September 10, 2009 12:13 PM

Hi Jeff,

Interesting and timely post. I teach Entrepreneurship at Fairleigh Dickinson University and consult to small and middle market companies and have not seen anything on the topic you discuss in your post.

The SBA model is supposed to facilitate bank loans through guarantees. But the criteria for small business loans is Collateral and Future Cash Flows.

Collateral has deteriorated… and find me someone who can accurately predict future cash flows for business over the next 18 months.

Jay Goltz, an entrepreneur in Chicago posted an interesting comment on bank financing for small businesses. They are not your partner. Why? Banks have no upside in the deal; only downside if the don’t get paid back. Neutrality is getting paid back. If a small business does phenomenally well, the business pays back the loan at agreed upon terms.

Venture capitalist have downside and tremendous upside in deals. So Karen Mills background as a VC won't help unless SBA decides to be a VC. And given all of the bailout money spent on large inefficient companies (and their business models and management) or the financial sector, the SBA as a VC would probably be a more efficient use of taxpayer dollars.

Big business has the ear of their senator... the pick up the phone and a dialogue occurs. Small business has no ear of the Senate or Congress.

Additionally most of our representatives have never run a business or worked in the private sector and for sure don't understand business well, let alone small business.

Jeff, I agree that something must be done for Small Businesses and would look forward to ideas from others here regarding your post.

Domenick Celentano
Silberman College of Business
Fairleigh Dickinson University

Carol Cross

September 10, 2009 12:53 PM

I think "small business" is often really "big business" in this country as demonstrated by the big Franchisors who are favored by legislation passed under the guise of helping the "small business person."

The lumping together of independent small business and franchised small business establishments has resulted in a government subsidy for the Big Corporations, the franchisors!

The International Franchise Association said in one of their publications that most of the Congress doesn't know the difference between a franchisor and a franchisee!

As Domenic Celentano says "Big business has the ear of their senator" --No doubt! and big business has their way with our Congress.

Kristie Arlsan

September 10, 2009 2:39 PM

Dear Jeff-
Many small business organizations like the National Association for the Self-Employed have weighed in on the health reform proposals and been out there educating our members, policymakers and the media on the affect these recommendations have on entrepreneurs.

I encourage you to visit our website for more info: http://www.nase.org/Advocacy.aspx

Fixing the health care system will be a great help for entrepreneurs. Once of the biggest barriers to entrepreneurship is the concern of how to access and afford health coverage. Additionally, many current business owners are unable to grow their business due to high health costs and even more are forced to leave self-employment for a job in the traditional workforce just to obtain health benefits.

While there are some helpful items in the current reform proposals for entrepreneurs, much more needs to be done to help the self-employed and ensure entrepreneurship is not impacted negatively. Unfortunately, the reform recommendations are expansive and so complicated that even some Members of Congress are unsure of their long-term impact.

Entrepreneurs need to do their homework on this issue to see how they might fare under reform. Professional organizations and trade associations are excellent resources to find this important information.

Thank you,
Kristie Arslan
National Association for the Self-Employed
www.NASE.org

Greg

September 10, 2009 3:26 PM

Well said, Domenick. The SBA in its current guise is virtually useless. If we follow the "public insurance option" analogy it might be interesting if the SBA became a VC with less arduous terms.

Greg

Jeff Bussgang

September 10, 2009 8:51 PM

Thanks for the feedback, all. Kristie: can you post any data on the drag on entrepreneurship that our current, flawed system is having? I think getting that word out is critical.

Jeff Flint

September 11, 2009 2:07 AM

Brad Sugars

September 11, 2009 2:27 PM

Jeff,

I'm equally concerned about the entrepreneurial sector in this and other recent policy making.

The latest SBA figures show more than 99% of all businesses are considered "small" businesses, and there is little talk in Washington about how to unleash this great engine of recovery.

Interestingly, other parts of the world have moved off the "recession" talk and onto more business, but many of their medical systems are already entrenched in the type system the President wants to create.

The costs of any new policy will take some time to be absorbed ... and many owners seems stuck in trying to figure out exactly what those costs will be. That seems to be part of an uncertainty that is hurting the pace of any entrepreneurial recovery.

After all, if an owner doesn't know the true costs of a new "investment" before he or she sees a return, there is a decreased likelihood those owners will embrace that investment wholeheartedly.

All the best.
Brad Sugars
CEO ActionCOACH

http://www.actioncoach.com/bradsugars/

Carol Cross

September 11, 2009 3:42 PM

Brad Sugars is a Franchisor? If he is, I'm sure he already provides some health care insurance for some of his employees but what about his franchisees who are merely resources for his growth in the economy under current regulatory policy.

It would seem that someone with expertise in franchising would get out here and define the difference between a franchisor and a franchisee and, and how will these health care initiatives like a Public Plan affect both the franchisor and the franchisee.

Jeff Bussgang

September 13, 2009 10:07 PM

An interesting Council of Economic Advisors analysis was sent to me by a reader. http://www.whitehouse.gov/administration/eop/cea/Health-Care-Reform-and-Small-Businesses/

Keep the data flowing, people!

Carol Cross

September 14, 2009 10:35 AM

Interesting that the Council of Economic Advisors doesn't deal with the retail sector of the economy where franchising is said to dominate in terms of small retail businesses in our economy, and actually separate out franchisees from traditional independent small businesses.

How will all of this impact multiple unit franchisees and the single-unit Mom and Pop franchisees? What about the franchisor, himself, who may be a large or a medium or a small business, under the law governing health insurance?

What is the position of the IFA? Do you know, Jeff? It is because the franchisor entrepreneurs have been able to avoid any of the obligations of employers in their relationship to their franchisees (who produce the gross sales upon which they profit) that franchising has been so successful

Obviously the SBA has been lumping the two segments together and their software wasn't separating out franchisees. (Even though the SBA Advocacy Committee indicates that franchisees aren't really small businessmen in the traditional sense.) This is why they were very surprised to find out that great numbers of franchisees failed at a greater rate and lost more money than independent small business persons, and they were warning the banks and the lenders.

This study still doesn't separate out franchised small businesses from independent small businesses and, again, what is the position of The International Franchise Association lobby?

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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