Taxes – Tom Talks

Don’t Judge Entrepreneurship by # of Small Companies

A recent article in The Economist had some interesting information on entrepreneurs based on a paper Small Business Activity Does Not Measure Entreprenurship by Magnus Henrekson and Tino Sanandaji:

“… the number of self-made billionaires a country produces provides a much better measure of its entrepreneurial vigour than the number of small businesses.”
There’s a negative correlation between the density of billionaires who’ve built innovative business per capita and the rates of small-business owners, self-employment and startups (i.e. measuring a country’s entrepreneurship by the # of small companies is way off)
3/4 of all folks who start companies want to keep them small enough to manage themselves
A high tax environment encourages “copycat” entrepreneurs vs. entrepreneurs that truly innovate

Effective Public Engagement – Look for Convergence, Create Awareness

This is the last post in my series on Fighting a Government Threat. My 8^th lesson, Don’t assume that your counterpart thinks the way you do or is influenced by the same consideration, is underscored in the Harvard Business Review case study on this topic. Author Michael Hartman notes, “Especially when dealing with government entities, it’s important to carefully evaluate what factors are likely to affect their decision making. Will an article in the newspaper sway the governor? Or is he more apt to be persuaded by constituents, such as the company’s employees?”

While you most likely will think about an issue differently, it still is possible to (lesson #9) find points of convergence and show empathy for the goals of the Governor or legislators with whom you have a disagreement.

In the recent B2B tax proposal, the Governor’s good intentions and desire to generate more money to fund them offered little in the way of a solid, viable plan. I was careful to explain that I share the Governor’s love of our state and the many benefits it offers. I hoped that by noting our shared commitment to the state, he would be more open to hearing my thoughts on why I disagreed with his B2B proposal.

Finally, lesson #10: Build a positive relationship with the news media over time. I have spent the better part of the past two decades building relationships with the local business news community. Working with a publicist has helped, but at the end of the day I have agreed to participate in almost every request for an interview that has come my way.

Building relationships with the press takes time, but this credibility pays huge dividends when you want to speak out on an important issue. If reporters and editors already know you are a credible businessperson from past interactions, they are more likely to seek you out for quotes and consider your OpEd submissions for publication.

Effective Public Engagement – Engage, Speak, and Be Practical

When a political proposal threatens your business, it is in the best interests of you and your employees to speak up in a public way. Hence, lesson #4: Engage your employees in the public debate as much as possible. We found this to be an effective technique when the Governor was pushing a proposal to tax business-to-business services recently.

Intertech employees were provided with factual information about the issue and a tool for identifying their local representatives in the State Legislature. I also gave them a copy of my Star Tribune OpEd and encouraged them to send it to their local representatives with a personal note.

Many employees chose to engage on this issue, which resulted in an invitation to join a group of business leaders to meet with the Governor and selected state reps about the issue. We would not have been at the table without our proactive work with employees around this issue.

Thus, lesson #5: Don’t be afraid to take a position and speak out about it.

For some business people, it feels uncomfortable to get involved in a political discussion or debate. After all, we’re used to running our businesses not making governmental decisions. But the business community is a major stakeholder and decisions that impact our livelihood and the livelihoods of our employees deserve our time and attention.

But don’t go ballistic and (lesson #6), Don’t make idle threats. In the B2B debate, I was careful not to threaten relocating Intertech to another state. I did, however, describe the lobbying efforts of other states to lure businesses such as mine to their lower-tax jurisdictions. In the HBR case study, the lesson is stated as “Never, ever make a threat you’re not willing to follow through on.” Why? “Hollow threats undermine a company’s credibility, and that’s hard to recover from.”

I also believe that making threats create an environment that is hostile and nonproductive. Much better to (lesson #7) offer reasonable ideas and counter proposals that both parties can live with. I genuinely believe the Governor when he says he loves Minnesota and wants to build a strong future by beefing up education at all levels. and early learning opportunities for young children.

However, offering a paltry tax rebate to property owners seemed like a strange way to achieve that objective. I was not shy about pointing this out in my OpEd. I also acknowledged that while I’m not a fan of higher personal income taxes, I understand that more revenue is needed and that probably has to happen in some capacity to keep our state on a positive future course.

By meeting the Governor half-way on this issue, I hoped to show that I am a reasonable business person and a sincere Minnesota resident who deserves to have my thoughts about the B2B proposal seriously considered. The HBR case study summarizes this lesson this way: “Always look for a solution both parties can live with, even if it is not optimal for either one.”

My next post, and the last in this series, will look closer at lessons #8-10 on Fighting a Government Threat.

It’s Back… Minnesota Reconsiders a B2B Tax on Consulting

According to yesterday’s Star Tribune, the Minnesota Legislature is reconsidering a tax on B2B custom computer software services… here’s an excerpt from the Star Tribune article:

“To make up for the lost revenue, those who buy… custom software… would pay … sales taxes”

I wrote an article when this was first being considered by the Governor entitled Taxing business services is bad for Minnesota. The principles in my OpEd are still accurate. If you live in Minnesota and agree this is a bad idea, let your legislators know by using this simple automated site to voice your concern (it takes less than a minute).

Effective Public Engagement – 3rd in a series of 5 posts

Fighting a government threat is a lot like any important undertaking involving any constituent group. To be effective, you must first seek to understand before you work to be understood (this is a key takeaway in my book, Building a Winning Business). That’s why my first lesson is (1) Pay close attention to the issues and government proposals before they become laws!

It takes time to read newspapers and to follow the many proposals that are described, particularly at the beginning of the legislative season. If you don’t have time to personally monitor the political landscape, engage a professional to do this on your behalf (larger companies have public affairs teams in house who routinely do this important work). Don’t take a blasé approach to a potential threat in the early stages because the best time to influence a legislative outcome is before a proposal becomes a law.

Part of understanding proposed legislation should include an appreciation for what a politician is seeking to accomplish. Thus, my lesson #2: Seek to understand both sides of the issue so you can provide a reasonable, balanced perspective.

In the recent B2B debate, the Governor was clearly concerned about the long-term viability of our state. He repeatedly stated the need to make sure every single Minnesotan is prepared for the future with a solid education. Those are goals I, and many in the business community share.

This also explains why lesson #3, “Work to document your company’s contribution to the local community,” is so important. We need to prove that we have “skin in the game” when discussing what is best for our businesses, employees and the communities where we operate. During the B2B debate, we gathered information about where our employees live, how much we contribute in taxes and charitable contributions and other key data. This was woven into my articles and into direct conversations with members of the Minnesota State Legislature.

Next time: lessons 4-7