GUEST POST from DON: The Effect of Crime On Small Business

The Effect of Crime on Small Business

My Point-of-View:  Our economy is on the brink of disaster.  When small businesses fail at a greater than ordinary rate we are in serious trouble nationally as well as locally.

There is only one reason to go into business.  That reason is never “to provide jobs.”  That reason is never “to sell products or services.”  The ONLY reason to go into business is “to make money.”  This is not greed, as some would have you believe.  This is normal and right.  If you start a business and you cannot make enough money to pay the bills your business will fail.  The ultimate goal when starting a small business is to make a higher wage than you would working for someone else.  A few do much better than that.  However, it comes at great personal cost and risk.  Often 80 hour weeks.  Often no vacations for years.  Often failure and loss.

Ordinarily businesses fail at a rate of (??%).*  It is tough to get a business going, get noticed, attract customers, hire employees, and pay the rent, utilities, taxes and insurance.  The owner usually invests a significant amount of time and money to start the operation.  Just filing the proper paperwork to state, federal and local governments can take months.  In my wife’s case, she had to be state licensed before she could open her doors to her first customer.  That took almost 6 months.  You would think the state would want those tax dollars, yet they consistently slow-walked the process.  

*Enterprise Magazine reported in 2021 “According to data from the Bureau of Labor Statistics, … approximately 20 percent of small businesses fail within the first year. By the end of the second year, 30 percent of businesses will have failed. By the end of the fifth year, about half will have failed. And by the end of the decade, only 30 percent of businesses will remain — a 70 percent failure rate.“  This is not fully accurate because some businesses close due to death or retirement of owner.  You and I would not call this a “business failure.”  It is also true that some businesses are sold, or are re-organized and re-started under a different name.  Again, these aren’t really failures.   A better estimate is about 50% of small businesses will fail due to economics.  Half!!

I reported the failure rate because it is ORDINARY to take a huge risk when starting a business.  What is NOT ORDINARY is the level of crime now present.  The increase in crime hits our softest points as a society.  One of those is the struggling small business owner.  Realize that small business hires over 40% of all employees.  (According to data from the U.S. Census Bureau: Employer firms with fewer than 500 workers employed 46.4% of private sector payrolls in 2018.)  This makes it powerfully significant to US.  So, if more small businesses are forced to struggle to make a profit, then many employees will lose jobs, or become underemployed.  Thus, there is a cascading failure rate for local small businesses.  Fewer employed customers = fewer dollars in the till.  Fewer dollars = fewer employees.  Fewer employees = fewer employed customers.  The circle continues.  One clear possible result is an economic slide into a depression.  This depression will not be caused by economic factors, though.  It will be caused by rampant crime.

To prove that point, The Journal of Urban Economics published a report (May, 2022) on the effects of crime to a local business and found that a single violent crime near a business had the effect of reducing customers to said business by 12% in the next week.  That is not even when the event happened inside the store.  However, what we are now seeing is the ramping up of bad behavior inside restaurants, coffee houses, and retail stores.  Nordstroms was mass-robbed recently with the criminals carrying bear repellent in case someone tried to stop them.  Many small businesses in California cities are closing and their owners are moving to other states.  The number of available jobs in those areas is beginning to dwindle.

So, what effect does open drug use and crime have on a popular business?  Fox News (August 16, 2023) reporters Megan Myers and Jon Michael Raasch tell us about Philadelphia:  “The owners of Cantina La Martina, a James Beard Award-nominated Mexican spot in Kensington, recently highlighted obstacles their restaurant has faced because of the public drug consumption and large encampments. Co-owner Mariangeli Saez said nightly servings have dropped at least 60% and safety concerns has caused their food supply vendors to refuse to make deliveries…”  

One more?  OK.  Rep. Kevin Kiley, R-Calif recently went to social media “In recent months, San Francisco’s decline has reached a point of total collapse. Whole Foods, Nordstrom, T-Mobile, Saks, and Anthropologie all announced their departure because of crime.”

So, what are these politically liberal leaders thinking?  Killing off small business is not a good return on the investment of going soft on crime.  I do not care if those leaders are politically liberal.  Who cares, really?  But we all should care about the strength of small businesses.  Of the two, small business owners VS criminals …  I would much rather invest in the small business owner.  

What do we get by investing in criminals?  Will they work 80 hours a week to improve themselves?  Will they put their own money and time into building businesses which will hire others?  Will they improve our communities and make them visitor friendly?  

Going briefly off topic: I get it, really.  There was (and is) pressure to punish police for poor choices.   Unfortunately, the WRONG decisions were made.  Part of the blame could be traced to a bad culture in some precincts.  Part of the blame could be placed on uneven training and hiring practices.  Those should have been dealt with by new policing legislation, instead of de-funding the entire program,  eliminating bail, and resorting to “catch and release” programs.  We knew these mistakes would fail, didn’t we!

Three results of the “de-fund” movement:  First, officers were made second-class citizens.  Second, the poorest communities suffered most.  Third, small businesses and their employees have suffered great harm.

To go forward, it is obvious we need to go backward first.  We need to step back from our current criminal-centric decisions and return to a healthier base.

To bring peace back to our poorest communities we need to restore law and order.  To lend strength to those who live good lives we need to restore law and order.  To allow small businesses to flourish naturally we need to restore law and order.

Otherwise, we face a very long and very deep economic depression in a broken society.

Copyright 2023 Donald Whelpley

[PLEASE NOTE that Don is always open to discussing the thoughts and opinions he shares here and welcomes comments as shared in the comment section. He doesn’t use other social media platforms, as I do, and won’t see whatever you’d like to share with him if you post it elsewhere. ~ Sherry]


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