With inflation and interest rates higher than normal, small business owners watched this year’s election closely. Small business owners feel that candidates are not talking enough about small business issues, and many others feel economic pressure on their overall profitability and revenue.
No one has a crystal ball they can use to predict exactly what will happen with the small business market and the economy. But since the President-elect has already been in office, we have some insight into what impact his policies could have on small businesses and the economy in general. Let’s dive into where the market is right now and a few directions we think small businesses might be heading under the new administration!
Inflation
Inflation is “the rate of increase in prices over a given period of time.” (IMF) When products and services become more expensive to make, money becomes harder to borrow, or other factors make it more difficult for products and services to be delivered, prices go up, people pay more than what they’re used to, and people tend to buy less than they normally would.
Over the last 4 years, we’ve seen a significant increase in inflation as shown in the graph from USInflationCalculator.com. The 7 years prior to 2021 never saw a rate of inflation about 2.3, while all years 2021 and after have shown a rate greater than that. In this last administration we saw a big jump in government spending which can also be correlated to higher inflation.
So with all these stats and charts, what does that mean for the small business market? It means your Cost of Goods Sold (COGS) will be higher which directly impacts your profitability. It also means that your cost of doing business in general has gone up over the last four years. And because a lot of businesses have not been as profitable, it means it’s less likely for them to hire new employees, invest as aggressively in their business, or be as optimistic about running their business into the future.
With the newly created Department of Government Efficiency (DOGE) led by Elon Musk and Vivek Ramaswamy, the new administration is looking to cut government waste, reduce government spending, and hopefully curb inflation through this and other deregulatory measures.
Taxes
At the personal income tax level, President-elect Trump has promised to push for “No Tax on Tips” and has even gone so far as to consider a flat income tax or even a national sales tax that would replace our traditional personal income tax system. Because of his history as a businessman prior to his entry into politics, Trump’s tax policy has been very pro-business, encouraging small business investment into the free market.
With his pro-business and pro-entrepreneurship agenda, small businesses can expect potential tax breaks or at the very least deregulation that helps them keep more of their hard earned profit that they can turn into new employees, better equipment, more efficient processes or manufacturing, and more aggressive strategy. With this move towards deregulation, businesses just need to make sure that they have the right processes, paperwork, and procedure in place to cross their t’s, dot their i’s and stay compliant on their own.
With Trump’s stance on tariffs, small businesses that rely on domestic production for their manufacturing will likely see a big boom. While full details of his tariffs plan are still under wraps, the focus seems to be on helping pro-American businesses that employ and manufacture American. Companies that hire American, train American, and invest into American divisions of their business will win big in the next four years.
Access to Capital
Trump’s move towards deregulation and a decrease in overall government spending should hopefully curb inflation and make capital more accessible for small business owners. With greater chance for business profitability, banks and investment firms are more likely to approve and provide financing for small businesses. Whether it’s a loan on a new commercial space, access to additional funding to prop up a new division of your company, or money to expand an already successful product line, it’s a great time to push your business forward and put the pedal to the metal.
If you are a business owner or new entrepreneur getting into the market, use this opportunity to make smart investments into your business, find the most efficient ways to get access to capital, and use the next four years to make good on your investment!
New Business Formation
With an overall more positive expectation for the small business market, people are more likely to pursue passion projects, side hustles, and other ways to make money as an entrepreneur. If that’s you, MyCorporation is ready to help make your business a reality! Start your LLC with our team! Whether you have experience in a particular industry and want to start a coaching business, you’ve been working for a company as an employee for years and want to strike out on your own, or you just see an opportunity to solve a problem for a group of people by starting a business, our team has the support you need to form your LLC, get off the ground, and take your business to the next level!
Conclusion
Certainly no one has access to a crystal ball to see exactly what will happen on each of these issues in the next four years, but with government deregulation on the horizon, inflation should hopefully decrease, taxes on small businesses should decrease, more capital should be made available to entrepreneurs, and if you’re starting a new venture, we’re standing by to do everything we can to help you succeed!
The future is bright for all entrepreneurs, and we’re excited to help people just like you fulfill their dreams of launching their next product, starting their next business, and expanding their opportunities regardless of what industry you’re in!