Have Your Say

Clinton administration officials fretted during the run-up to the 1995 White House Conference on Small Business. "There was a fear that the NFIB [National Federation of Independent Business] would take over, and that they would use it as a forum to embarrass the administration," says Mark Schultz, the conference's executive director.

At the same time, Schultz was fielding concerns from the NFIB. The organization that represents more than 600,000 small businesses was worried that the Clinton administration was trying to influence the nonpartisan, Congressionally authorized event.

Schultz negotiated past each side's neuroses. The conference proceeded, distilling the needs of small businesses. Its findings were widely supported. Congress and regulatory agencies have acted on 90 percent of the 1995 agenda, according to an August 2000 report by the SBA. Actions have included the passage of the Small Business Regulatory Enforcement Fairness Act of 1996 and increased access to capital. Capitol Hill staffers note that the legislation usually was supported by large majorities among both Republicans and Democrats, often passing with no opposition.

Seven years later, Schultz's vignette neatly summarizes the current state of Washington's small-business lobby. The groups that support the cause of small business--including, among others, the U.S. Chamber of Commerce and National Small Business United (NSBU)-generally face a receptive audience on Capitol Hill.

"One of the first things the Senate told me [during confirmation hearings] is that small business is not a partisan issue," says Hector Barreto, the SBA's current administrator. "There's not a Republican or Democratic solution to small-business problems."

And yet, in the midst of this love fest, there is a mini-war going on. To read some of the press releases and speeches of certain Washington small-business groups (cough, NFIB, cough), the Capitol is in the grips of a life-and-death struggle. You, the small-business owner, must act now to stop them (cough, Democrats, cough).

As in 1995, Democrats still remain wary of the NFIB, the single most powerful group claiming to speak for small businesses in DC. Even Republicans, who received 96 percent of the NFIB's political contributions in 2000, acknowledge it as the 800-pound gorilla that throws its weight around and dominates the small-business debate through its aggressiveness.

Even so, other groups are frequently much more effective at initiating change in Washington and in working both sides of the aisle. Understanding why that's the case helps explain who's speaking on your behalf in the corridors of power.

But first, you need to know something about Washington.

The Sausage Factory

You remember the drill from high school civics class: The legislative branch passes the law, and the executive branch administers it. That means interest groups in Washington get two whacks at the laws impacting your business.

They can persuade a congressperson or senator to introduce a bill that changes current law. Last year, for instance, Congress eliminated the estate tax after years of small-business groups railing against it. In broad terms, badgering Congress is what the NFIB and most other small-business advocacy groups are all about.

It's a smart focus. Every member of Congress has hundreds of small businesses in his or her district or state. "They're the ones who can put signs in the window and talk to customers about you," says Phil Eskeland, Republican policy director for the House Small Business Committee. "Politicians ignore small business at their peril." That helps explain the motherhood-and-apple-pie support for most small-business legislation.

Congress, however, generally passes laws in broad outline, then asks the civil service to flesh out the details. It's a little like the marketing department sending engineering a general idea for a new product. How Washington's permanent bureaucracy-the nation's engineers-converts the idea into reality requires plenty of decisions. Each choice is open to an interpretation that small-business lobbyists try to influence. They want the regulation's impact to be as beneficial to your business as possible.

Late in 2001, for instance, the IRS raised the limit for using cash accounting to $10 million in annual revenue after persistent lobbying from numerous organizations, notably the Small Business Legislative Council (SBLC). "It's not the kind of thing that makes headlines, but it needs to get done," says John Satagaj, the SBLC's president and general counsel. (See March "Tax Talk" for more on the accounting change.)

Roughly speaking, the two approaches are revolution (legislate) or evolution (regulate). You may also recall from civics, however, that the Founding Fathers made evolution the default setting for our government-although revolution is a lot more fun.

Unfortunately, neither type of change happens overnight. "A lot of things don't get resolved quickly," says Eskeland. "We keep pushing the same rock up the hill."

Uphill Struggle

Playing the role of Sisyphus-Greek mythology's king condemned to rolling a rock uphill-is the small-business lobby. It is composed of groups claiming to speak for small businesses. In addition to the NFIB, the Chamber and NSBU, there are the National Association for the Self-Employed (NASE), the Small Business Survival Committee (SBSC) and a legion of women's and minority interest groups, such as the National Association of Women Business Owners and the U.S. Hispanic Chamber of Commerce. (Other important players in DC small-business discussions include the National Commission on Entrepreneurship and the Research Institute for Small and Emerging Business, which are technically educational groups. They publish research and white papers suggesting directions for small-business initiatives, but are barred by IRS regulations from actively lobbying Congress or the administration on behalf of their ideas.)

All these groups are different from trade associations such as the Independent Electrical Contractors or the Society of American Florists, which speak for the specific needs of individual industries. That's where Satagaj's SBLC, a large umbrella group that represents 80 such trade associations, comes in.

Trade associations often tend to focus on their members' specific problems. Satagaj regularly pursues 40 to 50 of these micro-issues in any given Congress. Working the regulatory agencies and asking Congress for technical amendments that tweak existing laws, the SBLC has quietly become the king of small-business evolutionists.

Most of the general small-business lobbying groups, however, pursue broader goals. Their memberships usually cross multiple industries, making consensus more difficult and dictating a big-picture agenda. Groups such as the NFIB and NSBU tend to focus on five to 10 items in each Congress, choosing policies as broad as their memberships.

It's one reason that, despite representing everything from the sole practitioner to the 500-employee manufacturer, the agendas of so many organizations overlap. Almost every group, for example, is trying to take credit for last year's repeals of the OSHA ergonomics standard and the estate tax.

The common program makes the small-business lobby a chummy group. They frequently form coalitions to fight against the positions of the environmentalist, labor, trial lawyer and even corporate lobbies. "When it comes to making life better for small business, we're all on the same team," says Dan Danner, NFIB's senior vice president for public policy.

But because these initiatives cover such a broad swath of business, they tend to be expensive, especially when focused on tax issues. Take, for instance, repeal of the estate tax. Repealing the estate tax reduces federal income. To mitigate the budgetary impact, negotiators agreed to implement the repeal over 10 years. In contrast, the SBLC's more finely honed items cost a pittance and can be included in last-minute negotiations for other bills with little hassle or notice.

As an entrepreneur, you might unveil a new product or service within weeks of thinking about it. However, the drawn-out timeline of the small-business lobby's Washington agenda is practically incomprehensible. This is a problem. How can they keep you interested in these issues year after year?

Not Playing the Game

If you've signed up with any of these groups, you know how it's done. They send out newsletters, monthly magazines, e-mails and faxes. Most are content to report on the steady accumulation of successes. They work with Democrats and Republicans to push forward legislation-after all, if both sides are willing to help, why not stay in touch with both? But two groups don't play that game: the SBSC and the NFIB.

The SBSC is as refreshing as it is unique and is an ideological organization viewing everything from a free-market philosophy. Where most membership organizations reflect their members' needs, SBSC's members reflect its beliefs. "Instead of starting to find out where people want us to be, we start with principles, and then we attract people," says president Darrell McKigney.

Unlike other groups, SBSC does not worry about the pedestrian day-to-day work of pruning legislation to better meet the needs of small businesses. "If the bill is a forest, we'll comment on the forest, but they'll trim the trees," says McKigney. He sounds like a dotcom-era CEO who talks about a business model instead of worrying about how to make a profit.

That remove, however, has helped the SBSC play a significant role in killing the health-care legislation of the first Clinton administration. It recognized what it saw as bad legislation and screamed from the rooftop. It took a while for other groups to catch on and stop merely trying to mitigate its ill effects-primarily, crafting different ways to lessen the impact of mandating that employers provide insurance for their employees.

"The [SBSC] makes the NFIB look middle-of-the-road," says Frank S. Swain, who served as the SBA's chief counsel for advocacy in the Reagan and Bush Sr. administrations. But such ideological purity comes with a price, including being written off by "the opposition"--i.e., Democrats. That's why the SBSC earns intellectual kudos but little real power. It is also hurt by the group's preference to comment on the issues of the day rather than establish an agenda.

The NFIB's power, by contrast, comes from its agenda-and how it is pursued. The organization surveys its members three to four times per year by providing them a ballot listing pros and cons of several questions. NFIB's Washington staff writes up the descriptions, choosing the questions to ask based on the rankings members give to 70 issues every three years. "We use that as a constant background on what they think are important issues," says Danner.

The U.S. Chamber of Commerce conducts a similar annual membership review of its members, but the NFIB's frequency makes it one of the most up-to-date barometers of small-business opinion in Washington. Unlike the SBSC, it doesn't claim to start from ideological principles. It uses the data as a foundation for its views.

The group breaks down the results by congressional district for each member of Congress. It's hard to ignore the NFIB's position knowing that 300 or so of your constituents took time away from their busy day to fill out the questionnaire. No wonder the research wins praise from congressional staff and other small-business groups.

Note, however, who chooses the questions. The NFIB's Washington representatives (and those of the Chamber, for that matter) set the direction of the questionnaire-thus limiting the scope of the survey. In contrast, the NSBU establishes its agenda through individual issues brought forward by committees made up of approximately 300 activist small-business owners. It's not a perfect representation of NSBU's 65,000 members, but at least business owners are controlling the terms of debate.

Of course, both methods end up identifying the same issues. But when the NFIB frames the problem, it does so with a flourish that puts Democrats on the defensive.

"Instead of putting the needs of small business first, there might be some political impetus behind [NFIB's efforts]," says Wendy Belzer, a spokesperson for the Democratic staff of the House Committee on Small Business.

One former Clinton administration official, who spoke only on the condition of anonymity, also feels that NFIB stacks the deck. "They self-select their membership," he says. "The majority of their membership is conservative, but there's about 30 percent Democrats in the small-business community, 40 percent Republicans, and 30 percent that's absolutely independent."

The Democrats' edginess is heightened by NFIB press releases. In January, NFIB faxes heralded Danner's comments about speeches by two Democratic senators. In one, Danner decried majority leader Tom Daschle "unveiling this seven-point plan to cover his backside in Washington." In the other, he railed that "While I realize that Sen. Kennedy has a blind and undying devotion to higher taxes . . ." They're great zingers (revolution is fun, after all), but hardly intended to make Democrats want to work with the NFIB.

"Your goal is to advocate for the small-business owner, not a political party, despite the makeup of your members," says Kristie Darien, director of government affairs at the NASE. "Even if your members are 90 percent Republican, you should be advocating for small business."

Beyond Fear and Loathing

Partisan or not, the NFIB has more members than all the other dedicated small-business groups combined. It is about 10 times the size of NSBU (which Democrats cite as a bipartisan lobbyist for small business). The Chamber is much larger, with 3 million members, but it's not solely dedicated to small businesses; it represents both corporate behemoths and small businesses.

The NFIB's gaudy numbers are its main source of power. But keeping all those members fired up-and renewing their memberships-requires stoking the flames with incendiary press releases and action bulletins. "There's a certain kind of Main Street small-business owner who's only going to respond if they think they're the outsider," says Swain.

Fear, uncertainty and doubt sells. To generate fear in others, you need something to be afraid of--hence the Democrats' turn as the Devil.

People in Washington often tend to do silly things. That's why the grown-ups need to remind the children to play nice every so often. With government officials, elections do the job. For the small-business lobby, however, it's the White House Conference on Small Business.

Despite the name, the White House itself has very little to do with the sporadic event besides hosting it. Congress is responsible for authorizing and funding the conference. Each member of Congress selects a delegate among his or her constituents, a process which ensures that Republicans and Democrats keep each other in check, and secures representation by a broad, nonpartisan cross-section of the American small-business community.

No wonder, then, that in its three incarnations-1980, 1986 and 1995-the White House Conference has been seen as accurately portraying small businesses' needs. In a series of meetings, 20,000 small-business owners hashed out a list of priorities that was submitted to the president. The 1980 conference established small businesses' power and led to the creation of the Regulatory Flexibility Act. In 1986, the event saved the SBA from certain extinction during the Reagan administration. And the 1995 version led to the full deductibility of health insurance for the self-employed in 2003.

"Most of the seminal legislation involving small business since 1980 is a direct outgrowth of the White House Conferences," says Schultz, executive director of the 1995 conclave.

That's why Sens. Kit Bond (R-MO) and John Kerry (D-MA)-the ranking member and the chairman of the Senate's Committee on Small Business and Entrepreneurship, respectively-want to make the White House Conference a regular event. Kerry wants it held every four years; House Small Business Committee chairman Donald Manzullo (R-IL), however, would prefer a 10-year cycle.

Whether or not the conference institutionalized, Eskeland says the next conference won't take place until 2005 at the earliest-10 years after the previous one. There's no telling what the conference might recommend. But if past conferences are any indication, a bipartisan Congress will quickly follow up on the agenda. And maybe, just maybe, the various groups in Washington will stop squabbling long enough to help see it through.

Business writer Chris Sandlund is Entrepreneur's "Management Buzz" columnist. He works out of Cold Spring, New York.

Contact Sources

• Baker & Daniels
  (202) 312-7440, www.bakerdaniels.com

  Small Business Committee
  (202) 225-5821, www.house.gov/smbiz

This story appears in the June 2002 issue of Entrepreneur. Subscribe »