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Small business on the struggle bus

We all know that the pandemic has been devastating for small businesses, but perhaps one of the more under-the-radar nuances of this devastation is its impact on the broader business environment. That is, fewer small businesses means more big business dominance.

This New York Times article touches on it:

The United States faces a wave of small-business failures this fall if the federal government does not provide a new round of financial assistance — a prospect that economists warn would prolong the recession, slow the recovery and perhaps enduringly reshape the American business landscape.

As the pandemic drags on, it is threatening even well-established businesses that were financially healthy before the crisis. If they shut down or are severely weakened, it could accelerate corporate consolidation and the dominance of the biggest companies.

Virtually all of us have seen a longstanding business in our respective orbits shut its doors for good in the past six months. And it’s still happening and will continue to happen, absent additional legislation that can extend a lifeline. As these storefronts sit empty, consumers will inevitably find themselves on Amazon or walking into a big-box store. Or, business owners who have achieved some measure of scale will sell their businesses to ensure that they get something out of it rather than take everyone down with the ship.

This Washington Post column has some bleak details:

For decades, large businesses have been taking market share from small businesses, and the corporations at the top of the pyramid have been consolidating into ever-bigger megacorporations. In the 1980s, half of retail shopping took place in independent stores; today, it is less than one-quarter. From 2002 to 2017, Home Depot and Lowes almost doubled their joint share of the home-improvement retail market, from 42 to 81 percent. Even before the coronavirus struck, in 43 metropolitan areas more than half of all groceries were bought at Walmart.

Don’t get me wrong; Amazon has its uses. But those are very specific uses. Like when you need an AC adapter that you lost three moves ago for a 10-year-old electric razor. You can actually find the right AC adapter on Amazon and literally nowhere else. That’s useful. But I don’t need to buy my books on Amazon. I don’t need to buy my compost tumbler at Home Depot. I don’t need to buy my groceries at Walmart. But in many places, those big businesses are increasingly the best option and will become even more so as the pandemic drags on.

It also means that those big businesses are the best employment opportunity for more people. Big companies can offer high wages, generous benefits, and a slew of other perks that small businesses can’t. When the supply of small business jobs shrinks, more people will naturally seek employment with larger businesses. The more dependent we all become on those large businesses—for goods and services, jobs, and financial security—the more vulnerable we all are when bad stuff inevitably happens to those businesses. Look no further than at the slew of ghost towns across the Rust Belt that have been decimated by the closing of large factories as evidence of what can happen.

As accountants who serve small businesses, you have the opportunity—dare I say, the responsibility—to ensure that we’re not all at the mercy of a dozen or so mega-companies. I realize that many of you find immense satisfaction in serving small businesses, so you don’t need the added motivation. But protecting us all from a monopolistic hellscape is an added bonus.

Offering health insurance

While I’m pinning a bunch of hopes on the accounting profession, could you all help small businesses figure out how to offer their employees health insurance? Kthxbai.

I kid, I kid. Seriously though, a big Census Bureau report on health insurance coverage came out this week, and we learned that the number of uninsured went up in 2019 by about 1 million. That’s not great news, especially when you consider the fact that: a) lots of people have gotten sick or will get sick in 2020 due to COVID-19 and b) that the pandemic caused a recession where millions more are losing their health insurance coverage, making them extra vulnerable should they get COVID-19 and require significant health care.

The Census Bureau findings report that employer-provided coverage is still how most people, 55.4% of those insured, get health insurance. So if you agree that people having health insurance coverage is better than people not having health insurance coverage, then encouraging employers that currently do not offer health insurance to start offering it seems pretty reasonable.

This is where things start to get tricky, of course. The Kaiser Family Foundation’s most recent Employer Health Benefits Survey found that 99% of employers with 200 or more employees offered health benefits; 71% of employers with 10–199 employees offered it, and 47% of firms with 3–9 employees provided them. Overall, 57% of employers offer health benefits. So, yeah, there’s room for improvement.

But moving the needle… again, tricky. Most small businesses that pass on offering health insurance do so because of the cost. And even if a small business offers it, keeping enough people enrolled may be an issue. It’s not an easy puzzle to solve, which is part of the reason we launched People Advisory this summer. Yes, a shameless plug, and also: a possible solution that accountants can and should be part of.

Housekeeping: About that payroll tax deferral

I was away in August and did my best to ignore the news. It has been brought to my attention, however, that several executive orders were signed early in August, one of which would allow workers to defer some of their payroll tax. We got a lot of questions about this and whether or not Gusto would be making changes to accommodate the deferral.

My colleagues wrote an overview of the payroll tax deferral, so that’s an excellent place to start, but the short of it is: Gusto isn’t supporting it at this time. Here’s the addendum to the post that goes into detail:

You may have noticed the Gusto platform does not accommodate employers who are honoring the payroll tax deferral for their employees. Once the deferment period ends, it is ultimately the employer who will be responsible for paying the deferred amounts back to the government, even if they haven’t collected the taxes from their employees. Because this puts employers in a difficult position, and because customer and partner requests to support this deferral program have been low, we have decided to wait before making changes to the Gusto platform.

Hopefully, that clears things up.

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Caleb Newquist Caleb is Editor-at-Large at Gusto. In 2009, he became the founding editor of Going Concern, the one-of-a-kind voice on the accounting profession, serving in the role for 9 years. Prior to Going Concern, Caleb worked as a CPA for nearly 6 years in New York and Denver. He lives in Denver with his wife, two daughters, and two cats.

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