Why My Business Has Ceased Investing
This post at Dr. Helen's site is dead on. She posts a number of comments from Don Surber's site, starting with this one:
Commenter Sean says:
Businesses aren't hiring because no one knows what in the hell our economic system is going to look like 5 years, or even 5 months, from now.
Will "Cap and Trade" get implemented as the Democrats hope?
How much of an upheaval will "Healthcare Reform" end up being?
Is the administration and Congress done overhauling regulation of the Financial Industry?
No prudent investor is going to bet their money (i.e., invest in growth) when it is conceivable that the government is going to radically alter how 50% of this nation's economy functions.
This is exactly where I am right now. The business I own has been growing at about 10% a year for the last five years. In each of the last 3 years, we have invested an average of a half million dollars in new facilities. In the past five years I have added over a hundred new positions in the company.
This year we will add ZERO.
It is not for lack of opportunity. Because we are on the low-cost end of recreation, we have had a record year. And because I am in the business of privatizing public recreation, my phone has been ringing off the hook. All over the country, desperate public recreation authorities are calling me to say that they are out of money, their parks are about to shut down, and can I do something to keep them open.
To the extent we find opportunities to grow with limited investment, we are pursuing those. But I just cannot put up any more capital in this environment. If I make an investment, how much will the government let me keep? How much are taxes going up (because they certainly are going up)? Inflation simply must be around the corner given the monetary policy this country is pursuing -- so will my business be able to raise prices fast enough to keep up with inflation in my inputs?
The legislative risks we face are tremendous. My two highest costs are labor (50% of revenues) and fuel and electricity (about 10% of revenues). Thus, nearly 2/3 of my costs are going to be increased by the current health care bill and cap-and-trade bill. The only question is how much. If forced to guess, I would estimate that my labor costs are going up 8% and my fuel costs by 20%,which when you compute these by their percentage shares, says that my costs will likely increase by at least 6% of revenues. My current profit margin before tax is between 6 and 8 percent of revenues. I may be able to raise prices fast enough to cover this, or I may not. In a business with thin profit margins, there just isn't much, uh, margin for uncertainty.
And none of this takes into account the proposed new paperwork load that will likely make my business less enjoyable to run (example of current mess). From having to track and report our company's greenhouse gas emissions to keep track of the health insurance choices made by every employee, it is sure to be ridiculously burdensome.
So I am going to wait it out for a while.
