Entrepreneurs

Small-business owners pay over $83,000 in regulatory costs in the first year, new survey shows

Small business owner
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Small-business owners are generally optimistic about Donald Trump.

That's in part because they believe that, as president, he will make good on his pledges to combat regulation, which is an expensive irritant for many new business owners.

On average, they currently spend more than $83,000 staying compliant in the first year of operation.

That's according to new survey data released today from the National Small Business Association, a Washington-based industry organization. When asked to estimate how much money they would spend on regulatory compliance efforts if they were going to start the exact same business today, the 1,000 survey respondents' average answer was $83,019.

"The impact of regulatory burden cannot be overstated." -Pedro Alfonso and Todd McCracken, National Small Business Association chair and president

The same survey found that small-business owners spend an average of $12,000 a year on direct and indirect regulatory costs. Those include workplace upgrades, daily work routine changes and attorney fees, as well as time taken away from other business tasks to understand regulations and meet with specialists.

Most small businesses manage to stay compliant, or they don't get caught slipping.

But for the 10 percent of small-business owners who do get caught, a mistake can be expensive. Over the course of five years, the average cost of regulatory citation fines was $30,651, the survey found.

"The impact of regulatory burden cannot be overstated: more than one-third have held off on business investment due to uncertainty on a pending regulation, and more than half have held off on hiring a new employee due to regulatory burdens," say NSBA Chair Pedro Alfonso and President and CEO Todd McCracken, in a preface to the survey results.

Managing regulatory compliance isn't just a financial burden. It's a time suck, too. One in three small-business owners report spending more than 80 hours a year meeting requirements, the survey says.

The businesses surveyed have as many as 100 employees, but more than half have fewer than five employees. And 82 percent of survey respondents make less than $5 million in sales.

The survey was conducted online between Nov. 28, 2016, and Jan. 10, 2017.