The Private Equity for Families Blog

Bring Common Sense Back To Business Regulation

We had lunch with the Chairman of one of our portfolio companies last week. He is a successful entrepreneur who owns and operates several businesses. By his own admission he loves business. However all the capitalists at the table agreed that the slow death by a thousand cuts of governmental regulation and red tape is making the experience less joyful every day.

He had two great ideas. The first was to tie minimum wage increases to age of employee. Entry level workers get a smaller paycheck because they are younger and less experienced. You get young people in the game and they then begin to understand payroll taxes and the cost of being governed. You also take them off the street and put them in the path of business opportunity. We agreed that some of the smartest and most successful people we know never went to college, or if they did, went to a college we never heard of.

His second idea was even better. Why not suspend all regulation of a new business for the first 12 months of a startup. The statistics shows that a large percentage of these businesses fail so why tie them up them with the regulatory straight jacket? Give them the chance to make it without the cost and aggravation of filings, formation fees and expenses, insurance, regulatory compliance and all taxes other than payroll. If they fail, at least they did not have to spend time and money on infrastructure they then no longer need? If they succeed for 12 months, they graduate to the real business world. Let business people devise the program so cheaters, opportunists and lobbyists cannot game the system.

Both of these ideas came from the trenches. You have to have business experience to understand how to balance regulation with prosperity and few of our elected officials have any business experience. As a consequence you get well-intentioned, but poorly devised, programs like the proposed minimum wage changes, classification of employees, making stockbrokers fiduciaries and universal healthcare.

We all agreed that getting young people to test drive capitalism is important. You can’t expect them to enjoy the ride if first you bury them with a 200 page driver’s manual and a series of driver tests. Take the regulations off. Stop protecting votes rather than voters. Have common sense business leaders teach capitalism before we capitulate to the dark forces of collectivism.

Fear the Bern!

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Rob McCreary

Rob McCreary has more than 40 years of transactional experience as an attorney, investment banker and private equity fund manager, and has spent his career in building entrepreneurial organizations with successful track records Founder and chairman of CapitalWorks, he is responsible for developing and maintaining senior relationships with investors and portfolio governance.

This blog represents the views of Rob McCreary and do not reflect those of CapitalWorks or its employees. This blog is not intended as investment advice. Any discussion of a specific security is for illustrative purposes only and should not be relied upon as indicative of such security’s current or future value. Readers should consult with their own financial advisors before making an investment decision.

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