How Obama Can Win Back Small Business

Less regulation, more outreach and bipartisanship could mend a lot of fences.

By + More
Barack Obama greets a girl eating ice cream at a local restaurant in Durham, New Hampshire.

President Obama and the small business community are barely on speaking terms.

Obama's landmark healthcare law, now upheld by the Supreme Court, is supposed to help small businesses pay for health insurance for their employees. And it was deliberately designed to exempt firms with fewer than 50 workers from fines levied against employers that don't offer coverage.

[CARTOONS: See the funnier side of the healthcare debate]

Yet millions of small-business owners are hostile toward the Patient Protection and Affordable Care Act, and convinced it will make their lives harder, not easier.

One of the lead plaintiffs in the legal challenge against the law was the National Federation of Independent Business, a lobbying group that styles itself "the voice of small business." After the Supreme Court ruling, NFIB CEO Dan Danner remained defiant. "We will continue to push to repeal the health care bill and push for what we think are better reforms," he said. Meanwhile, polls show that small-business support for Obama fell this year in the lead-up to the Supreme Court ruling, with Obama's Republican opponent Mitt Romney enjoying far stronger support.

Every politician talks up small business, since it's part of the obligatory flag-waving they must do. In addition, Obama has signed at least two pieces of major legislation meant to directly help small businesses. Yet his reputation among small business has only seemed to sour. Here's how Obama might regain some credibility with business owners, especially if he wins a second term.

Communicate better. One problem Obama has is that the 2,700-page healthcare law is insanely complex and poorly understood. Tax credits contained in the law, for example, could help millions of small businesses obtain healthcare coverage for their workers, if they don't already offer it, or lower the cost of coverage if they do. Yet a recent Wall Street Journal/Vistage International poll shows that 66 percent of small-business CEOs don't even know about the credits, and another 24 percent think their business doesn't qualify.

[RELATED: See why the fight over Obamacare will continue.]

"Clearly there is a lack of communication from the administration to small-business owners with respect to this law," says Rafael Pastor, CEO of Vistage, a peer advisory group for business executives. "The first thing they should do is show that they care enough to get through to small businesses in a positive way. Sometimes they talk down to them, but they don't get through to them."

If reelected, Obama still has time. Most provisions of the healthcare law don't go into effect until 2014, leaving another 18 months to hobnob with business groups and develop some effective explanatory tools.

Regulate less. Excessive regulation has become the biggest concern of business owners in NFIB polls, trumping weak sales, high taxes, competition from big business and several other factors. The expansive and perplexing new healthcare law is one reason, but many CEOs also complain about a layer cake of local, state and federal regulations that choke their businesses.

The president can't do anything about state and local rules, but he could lead an aggressive effort to prune all federal rules deemed duplicative, and even establish a task force meant to improve coordination among regulatory agencies at all levels. It might seem like a fair trade if Obama offered to dial back other rules in exchange for the new paperwork that will be required under the Affordable Care Act.

[RELATED: See the health reforms we still desperately need.]

Show leadership on reducing the national debt. In Vistage surveys, business owners say government deficits and the humongous national debt are their top economic concern. While the debt doesn't directly affect most businesses, it does convey the impression that the government is poorly run, with none of the discipline it takes to run a company.

"It creates an element of uncertainty," says Pastor. "It's not a good landscape for business."

Obama obviously can't pay down the debt without Congress's cooperation. And any meaningful action on the debt will have to entail controversial reforms to rein in mushrooming entitlement programs such as Medicare. But Obama has barely touched the issue up until now, and he could make it a much higher priority.

Move to the middle. "Business owners are sick of partisan politics," says Gene Marks, president of The Marks Group, a 10-person technology consulting firm. "Obama should split his cabinet and his advisors between Democrats and Republicans and prove that he will lead a committed effort to reigning in the national debt. This would restore a lot of confidence."

Again, Obama can't be bipartisan without some compromise by Republicans, but he can certainly stake out turf in the middle and invite his political foes to meet him there.

Go smaller. Many small-business owners complain that all the bailouts, stimulus plans and monetary easing of the last few years has mostly benefited big businesses or well-funded tech startups, while traditional small businesses have struggled to get bank credit or any kind of government relief.

"The Obama administration has continued the tradition of a Small Business Administration that believes a 500-employee company is a small business," says Mitch Jacobs, founder of On Deck Capital, which uses technology to help small businesses find funding. "There are more than 20 million businesses in the United States with fewer than 25 employees. Obama could gain a lot of ground by creating a system that serves them."

Specific moves might include increasing the portfolio of SBA-guaranteed loans and extending some recent stimulus measures for tech start-ups to all sorts of businesses. If Obama went smaller, he might find a lot of new friends on Main Street.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.