Regulatory Burdens – Two Firms Try to Cope

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Political leaders in Ohio and across the country complain that government regulations are preventing many businesses from expanding. Ohio Governor John Kasich says Ohio has one of the toughest business environments.

In the worst economy since the Great Depression, 34 year old John Clancy started an auto repair business in 2009. German Autowerks on the West Side services German made vehicles. Clancy wanted to start his business in Hilliard but zoning restrictions blocked him, so he came to Columbus. Clancy says business has grown by 30%. He employs 3 full-time workers and he wants to expand to another location if he can find the money to do that.

“It seems that the restrictions that are put on available funds currently, there are so many hurdles that being a small business owner I almost wanted to give up and choose to make it in other directions,” said Clancy.

After using credit cards and other sources of money Clancy obtained a $25,000 line of credit from the Small Business Administration. It took 2 months to secure. Clancy says on a daily basis he does not feel hindered by regulations. He does have certification from the Environmental Protection Agency to handle Freon, a cooling fluid in air conditioning. In his garage three 30 gallon containers store engine oil and a separate container holds coolant fluid.

“And it’s to collect all the used engine oil which will stay in this hopper and it has an air pressure regulator ,” explained Clancy.

Clancy contracts with an outside company to haul away the waste. He also recycles metal auto parts like catalytic converters, but that’s not a government requirement. Ohio Governor John Kasich and some other political leaders contend too many government regulations stifle business growth.

“And we’re having trouble now competing, we’re losing businesses. We’ve got to become more competitive if we’re going to help the people get work,” said Kasich.

Kasich wants to see more small businesses enjoy success across the state. Internet security firm, Jacadis, based in Columbus is one small business experiencing growth. Company president, Doug Davidson started the company 11 years ago.

“We wake up in the morning and we think about how to protect data and we go to bed at night thinking about how to protect data and there’s nothing else in between,” said Davidson.

The Internet security firm will soon add its 7th full-time employee and a second part-time worker. Davidson says the business has been able to grow by double digits over the last 3 years. He explains that changing government regulations in securing private data have brought challenges.

“We provide services in the data and privacy world to help companies be compliant with government regulations, so it’s difficult to understand exactly what our customers’ need. On the same token it’s difficult as a business to work with government regulations that never seem to have a final concrete rule,” said Davidson.

President Obama has ordered government agencies to review what business regulations can be removed. He pointed out in his State of the Union Address that a major reorganization hasn’t happened since the days of black and white T.V.’s.

“There are 12 different agencies that deal with exports. There are at least 5 different agencies that deal with housing policy. Then there’s my favorite example: The Interior Department is in charge of salmon while they’re in fresh water, but the Commerce Department handles them when they’re in saltwater,” said President Obama.

Professor Scott Shane of the Weatherhead School of Management at Case Western Reserve University is skeptical an overview will lead to much change.

“The problem is not that the federal agencies are unaware of the impact that the regulations have on small business. It’s that they’re unwilling to give up the regulation even though it puts a heavy burden on small businesses,” said Shane.

Shane explains that larger businesses often have an expert who deals specifically with government compliance. Shane adds that the new health care law and the banking reform bill both will add more regulations to businesses.

“We’ve seen in the past couple of years a spike up in the cost per employee for small businesses to adhere to federal regulations,” added Shane.

Shane says those costs can lead to fewer employees hired. He says simpler, effective laws could be written to limit new regulations.