Small businesses in Massachusetts are experiencing financial challenges due to rising costs and regulatory burdens.
A study from the UMass Donahue Institute reveals that over half of small business owners in Massachusetts may close or sell their businesses within five years. Factors like rising healthcare costs, decreasing profitability, and high unemployment insurance taxes contribute to their challenges. Legislative bills have been introduced to help alleviate these burdens and support small businesses in the state. The findings underscore the urgent need for policy changes to ensure the sustainability of this critical sector in Massachusetts.
Boston, Massachusetts – A recent study from the UMass Donahue Institute has revealed alarming trends among small business owners in Massachusetts, with over half indicating they may close or sell their businesses within the next five years. The survey, which collected responses from 584 small businesses across the state, highlighted the growing financial struggles that many entrepreneurs face.
According to the findings, a significant 76% of respondents reported that their costs have increased at a faster rate than sales since 2019. Compounding this issue, 44% of businesses indicated a decrease in profitability during that same period, while only 24% reported an increase. These figures paint a stark picture of the pressures that small businesses are currently experiencing.
Small business owners are advocating for a reduction in taxes and regulatory burdens as potential solutions to alleviating their financial challenges. Many believe that these changes could help boost sales and improve profitability.
Industry experts have pointed to several specific cost factors impacting small businesses in the state. Rising costs for healthcare, paid leave, energy, and workforce policies have all been cited as contributing to the financial strains faced by entrepreneurs. Massachusetts ranks 36th in the nation regarding average employer contributions to health insurance, placing it in the lower half of all states for this expensive necessity.
In particular, Jeanne Bell, financial controller at Westside Finishing, has experienced a 29% increase in health insurance premiums, leading her company to transition to a partially self-funded insurance plan in an effort to manage costs. Similarly, Lisa Gozashti, co-owner of Brookline Booksmith, noted that increasing health insurance expenses are seriously impacting their bottom line. For businesses like the Electric Time Company, family health insurance plans can cost between $20,000 and $30,000 annually, affecting hiring capabilities significantly.
In light of the difficulties faced by small business owners, two legislative bills have been introduced aimed at providing assistance with healthcare costs and ensuring representation in decision-making processes related to these expenses. Additionally, unemployment insurance (UI) taxes have surfaced as another significant burden, with Massachusetts’s rates considerably higher than those in states such as Florida and California. Reports suggest that the Massachusetts unemployment insurance trust fund may become insolvent by 2028, further alarming small business owners.
Energy prices are another critical concern, as Massachusetts has the third-highest electricity prices in the U.S. State officials, including Governor Maura Healey, are currently examining the unemployment insurance system in response to the ongoing financial stress on small businesses.
The survey findings also highlight challenges stemming from tariffs on imported goods, which particularly affect businesses like Snowy Owl Coffee Roaster and 1854 Cycling. To combat these hurdles, U.S. Senator Edward Markey has introduced the Small Business Liberation Act, which seeks to exempt small businesses from such tariffs.
The small business sector in Massachusetts comprises around 700,000 entities, making up 97% of all importers and exporters in the state. The National Federation of Independent Business (NFIB) has stressed the necessity for public hearings to discuss substantial policy changes that could affect the viability of small businesses.
The findings from the UMass study are a wake-up call for policymakers and stakeholders regarding the challenges facing small business owners in Massachusetts. As these entrepreneurs grapple with rising costs and decreasing profits, the call for legislative support becomes increasingly urgent to ensure their sustainability and contribution to the state’s economy.
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