Shocking Truth: Small Business Owners on Brink of Collapse

Rising Costs Push Small Businesses to Closure as They Demand Sweeping Reforms from Legislators

A recent study from the UMass Donahue Institute found that over 50% of small business owners are likely to close or sell their business in the next five years, citing high costs across their businesses as a driving factor. This alarming trend is not limited to a specific industry or region, but rather a statewide issue that requires immediate attention from policymakers.

According to the study, 76% of small business owners claimed that costs were rising faster than sales since 2019, while 44% of businesses said profitability had decreased since 2019. Only 24% reported an increase in profitability. These numbers are a stark reminder of the challenges small businesses face in Massachusetts, and the need for lawmakers to take action to support these vital economic drivers.

“Public policy leaders in Massachusetts have to do a better job at understanding the dilemma of small Main Street businesses,” said Jon Hurst, president at the Retailers Association of Massachusetts. “The Legislature is not doing enough to help small businesses stay afloat.”

One of the main issues facing small businesses is the increasing cost of healthcare. Massachusetts ranks 36th in the country for average employer contributions to health insurance, according to the 2024 Massachusetts Competitiveness Index Report. This puts Massachusetts in the bottom half of states for employer health insurance cost.

As a result, small businesses are being forced to seek alternative solutions to reduce costs while maintaining effectiveness. “My last renewal … was a 29% increase, and at that point, we decided we have to try something new,” said Jeanne Bell, financial controller at Westside Finishing, a family-owned business from Holyoke. “Rather than the normal Blue Cross insurance … we’re using a partially self-funded plan, and hoping that’s going to reduce our cost.”

The Aggregated Impact of Different Costs

According to Doug Howgate, president at the Massachusetts Taxpayers Foundation, the aggregated impact of different costs can generate more problems for employers if legislators do not keep track of how different costs are piled onto each other. “I think one of the challenges with a question like this, and one of the reasons why there can be a disconnect sometimes between policymakers and the reality on the ground, is there’s a lot of different costs that come from different places,” he said.

Health care costs, paid leave, energy, and workforce policy have increased in the past eight years due to legislative initiatives, making it essential for policymakers to understand the cumulative effect of these costs on small businesses.

Legislative Solutions

Two bills are currently being considered by lawmakers that aim to provide aid to small businesses when it comes to healthcare costs. Sen. Adam Gomez’s bill seeks to add small business representation to the decision-making process behind health care costs. It proposes to introduce three new seats onto the Massachusetts Development Finance Agency Board of Directors, two of which would go to microbusiness and small businesses.

This is a crucial step towards ensuring that the voices of small businesses are heard in the decision-making process. By adding small business representation, policymakers can gain a deeper understanding of the challenges faced by these businesses and develop targeted solutions to support them.

Another potential solution is the creation of new seats on the Massachusetts Development Finance Agency Board of Directors. This would provide small businesses with a greater say in the allocation of state funds and resources, allowing them to access the support they need to grow and thrive.

The Consequences of Inaction

Service Cuts and Reduced Growth

Failure to address the rising costs facing small businesses could have severe consequences for the state’s economy. According to a recent report, service cuts to programs that help keep seniors out of nursing homes are likely to occur if no action is taken. This would not only have a devastating impact on seniors but also reduce growth and services for small businesses and communities.

The consequences of inaction are far-reaching and would have a lasting impact on the state’s economy. Without targeted support for small businesses, we risk losing these vital economic drivers and compromising the state’s competitiveness.

The Future of Small Businesses

Small businesses are being forced to seek alternative solutions to reduce costs while maintaining effectiveness. This is evident in the growing trend of partially self-funded health insurance plans, which allow businesses to take control of their healthcare costs and avoid the rising costs associated with traditional insurance plans.

However, this trend is not without its challenges. Small businesses are being forced to make difficult decisions about how to allocate their resources, and the increasing cost of healthcare is making it increasingly difficult for them to maintain profitability.

The future of small businesses is uncertain, and the consequences of inaction are severe. Without targeted support, we risk losing these vital economic drivers and compromising the state’s competitiveness.

A Path Forward

The path forward is clear: policymakers must work with small business owners to develop targeted solutions to address the rising costs facing these businesses. This requires a collaborative approach, with policymakers working closely with small business owners to understand their challenges and develop effective solutions.

The implementation of sweeping reforms to aid small businesses in healthcare costs and regulations is essential to ensuring the long-term viability of these businesses. This includes the creation of new seats on the Massachusetts Development Finance Agency Board of Directors, which would provide small businesses with a greater say in the allocation of state funds and resources.

By working together, policymakers and small business owners can develop targeted solutions to address the rising costs facing these businesses and ensure their long-term viability. This requires a commitment to understanding the challenges faced by small businesses and developing effective solutions to support them.