The Small Business Watchdog

As the voice of small business in government, Advocacy invites you to post your thoughts on this moderated blog, provided as a forum for the small business community.

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Innovative Funding Model from Silicon Valley Could Change How Non-Profits and Socially Responsible Firms Do Business

October 8th, 2014 · Comments Off

By Jonathan Porat, Regulatory Economist

Startups such as Dropbox, Reddit, and Airbnb have become aspirational success stories for entrepreneurs. They have made people’s lives easier, disrupted established industries through simple innovations, and in some cases received billion-dollar valuations. Some people however may not be aware that these high-growth and high-value startups have all taken advantage of an innovative funding mechanism for small businesses: the accelerator program. Now, startups in the non-profit sector are taking note and hoping to use this model traditionally leveraged by the tech sector to advance important public policy goals.

To paraphrase recent research from Cohen and Hochberg, accelerator programs are short-term mentorship programs for groups of startups that culminate in a demo day or a public pitch to large groups of investors. Often accelerators are for-profit entities that will provide mentorship services as well as some seed funding and additional resources in exchange for an equity stake in a participating startup. While accelerators have been around for almost a decade, due to the success of prototypical accelerators such as Y Combinator (the accelerator behind the companies mentioned at the top of this post), their popularity has surged.

Catalyzed by accelerator success stories and investors’ increasingly favorable view of them, the non-profit sector has started experimenting with this innovative model. Startups in the non-profit sector may have difficulty getting early-stage venture capital funding making these entrepreneurs hungry for an alternative.

One exemplar of this type of new “social accelerator” program is Conscious Ventures Lab, a benefit corporation located in Howard County, Maryland. In September, Conscious Ventures held its first demo day for its first cohort of five companies: all startups with social-welfare goals. These included one startup designed to connect women entrepreneurs to resources and funding sources and another that provides a curated marketplace for socially conscious consumers. The local economic development authority has even partnered with the accelerator to work toward its economic development and public policy goals. It will be interesting to see from these early efforts what lessons can be learned about future applications of the accelerator model in the non-profit and public sectors.

Clearly, the accelerator model has a lot of potential to be used to grow small businesses and could act as an agent of change in meeting public policy goals. However, there is no guarantee of success when participating in one of these programs. More importantly, there are still many unanswered questions about the accelerator model. There is little authoritative data available on accelerators, and it is unclear how to evaluate their success. In addition, possible unintended consequences and policy resistance of applying this model outside of the tech sector have been largely unexplored.

To add to the scarce research on this topic, on October 16th the Office of Advocacy released the new research report, Innovation Accelerators: Defining Characteristics among Startup Assistance Organizations, plus an issue brief. This research highlights key questions around accelerators as well as further explores the relevance of these programs for small businesses and policymakers. Advocacy looks forward to continuing to contribute to research and discussions on small business marketplace innovations.

Pictured: Jeff Cherry, executive director of Conscious Venture Lab, discusses its social and entrepreneurial mission. The lab has partnered with the Economic Development Authority of Howard County, Maryland. Photo: HCEDA.

Pictured: Jeff Cherry, executive director of Conscious Venture Lab, discusses its social and entrepreneurial mission. The lab has partnered with the Economic Development Authority of Howard County, Maryland. Photo: HCEDA.

Potential investors, supporters, and entrepreneurs turned out for Conscious Venture Lab’s first demo day in September. The audience heard pitches from five graduates of the first CVLab cohort, as well as a panel discussion on why non-profits should be part of the conscious capitalism movement. On the panel were Lawrence Twele, Howard County Economic Development Authority; Mike Couch, MakingChange; Bill Strathmann, Network for Good; Jeff Cherry, Conscious Venture Lab. Photo: HCEDA.

Potential investors, supporters, and entrepreneurs turned out for Conscious Venture Lab’s first demo day in September. The audience heard pitches from five graduates of the first CVLab cohort, as well as a panel discussion on why non-profits should be part of the conscious capitalism movement. On the panel were Lawrence Twele, Howard County Economic Development Authority; Mike Couch, MakingChange; Bill Strathmann, Network for Good; Jeff Cherry, Conscious Venture Lab. Photo: HCEDA.

Comments OffTags: Research & Statistics

Advocacy Helps Guide Small Food Importers through FDA Regulations

September 24th, 2014 · 3 Comments

By Yvonne Lee, Region 9 Advocate

Jacklyn Sher’s parents were refugees from Laos who came to the United States in 1976 with nothing but hope for a better life for their family. They worked hard—their first job was as night janitors at a fast food restaurant—and saved enough money to buy an old station wagon. The Shers then started delivering soy sauce to southern California food businesses. Twenty-seven years later, HC Foods is a successful food import and distribution company serving food businesses throughout the western U.S. This family-owned business now employs 25 workers and the Shers are most proud that they can provide for their employees health insurance, 401(k) and other benefits.

Recently Jacklyn was one of over 100 food importers, distributors and business owners who participated in an SBA National Ombudsman Regulatory Fairness Hearing in Cupertino, California, that the Office of Advocacy helped convene. It was the first time that most of these business owners have attended a government meeting and spoken before a government body about their experience with federal regulatory compliance and enforcement. For the past two years, Advocacy’s Assistant Chief Counsel Linwood Rayford and regional advocates have worked with food businesses like HC Foods to make sure they were aware of, and engaged with, the regulatory reviews under the U.S. Food and Drug Administration’s (FDA) Food Safety Modernization Act (FSMA). This law was enacted in 2012 to ensure all food available to American consumers—domestic and imported—adheres to high safety standards.

Food importers told Advocacy that they support the goals of FSMA since their businesses depend on food safety as it directly affects their bottom line. However, they said that any new regulations must take into account the differences between independent small operations like theirs and large businesses. Food importers said they are particularly interested in FSMA’s Foreign Supplier Verification Program (FSVP). The proposed FSVP regulations would require importers to verify that the importer’s foreign suppliers produce food in compliance with processes and procedures, including risk-based preventive controls, that provide the same level of public health protection as those required under the domestic requirements of the Food, Drug and Cosmetic Act.

Small importers assert that the new program’s verification requirement would create an undue economic burden on small firms since they wouldn’t have the needed human and financial resources that larger corporations have to meet compliance. While these businesses told Advocacy they welcome their role in ensuring food safety, they said that the regulations need to be flexible, practical and reasonable to reflect the small food businesses’ resource challenges. Moreover, as more regulations under FSMA are implemented, they suggest that the final rules need to be enforced fairly and with transparency.

Advocacy has facilitated several public forums where small business stakeholders dialoged with FDA officials over the FSMA’s foreign facility re-inspection, importer re-inspection fee rates, importer risks and food transport safety provisions. The Asian Food Importers Alliance told Advocacy the discussions were positive and it would be the first time they would submit a comment letter to a federal agency.

As the FSMA’s regulations progress, Advocacy will continue to work with food importers and other industry stakeholders to ensure they have the opportunity to add their voice throughout the process.

→ 3 CommentsTags: Regulatory Policy · State and Regional

Proposed DOJ Rules Would Require Small Movie Theaters to Purchase Expensive Accessibility Devices for Disabled Patrons

August 28th, 2014 · Comments Off

By Janis Reyes, Assistant Chief Counsel

Last week, Economist Jonathan Porat and I visited the bustling University Mall Theatres in Fairfax, Virginia, to speak to owner Mark O’Meara about proposed Department of Justice (DOJ) rules that would require movie theaters to provide special accessibility equipment for guests with visual and hearing disabilities. We met O’Meara at the entrance of the three-screen theater on its popular “Two Dollar Tuesday,” where he sold discounted tickets and welcomed busloads of students and young families to his theater. The highest ticket price at this affordable theater is $4.

“Movie theater owners are all showmen,” said O’Meara. “We want to serve the audience.”

O’Meara has already voluntarily upgraded his two theaters to be able to show movies to disabled guests (he additionally owns another small theater, the Cinema Arts Theatre, which is also located in Fairfax). When he took out a loan of $600,000 to convert his theaters from analog to digital screens, he spent an extra $40,000 to purchase the equipment that the DOJ rules would require. However, under the proposed rules, he may have to purchase more of the devices.

During our visit to the theater, O’Meara allowed us to test the accessibility equipment at a showing of the animated movie “Rio 2.” First, we set up the closed captioning device, which costs around $500 each. The device, which attaches to the seat’s cup holder, allows deaf theatergoers to read the movie dialogue on a small individual screen in front of them. It was amazing how quickly my eyes grew accustomed to reading on this screen. We had previously tested closed captioning glasses (which cost approximately $1,000 each) at another theater. The glasses offered a better experience; however they are twice the price and more fragile.

We also tested the audio description equipment for blind guests, which are headphones that play audio describing what is happening in the scene on top of existing dialogue. Because we were watching a loud cartoon, it was harder to focus and understand what was going on in the movie using this technology.

DOJ released its proposed rules on August 1, 2014 which would amend the Americans with Disabilities Act to require movie theaters to have these technologies available at all movie showings. Digital theaters would have six months to purchase individual captioning devices for roughly two percent of their seating capacity and one audio description device per screen. DOJ is also seeking public comment on whether it should adopt a four-year compliance date for movie theaters with analog or film screens to adopt captioning and audio description requirements or whether it should defer rulemaking on analog theaters until a later date.

For O’Meara, these new rules would mean that he would have to purchase additional devices to meet the two percent requirement, at an estimated cost of $20,000. Under the rules, he would be required to have more than 30 individual captioning devices and nine audio descriptive devices for his two theaters.

Other small businesses may have to expend even more resources if they have not yet converted to digital or purchased additional hardware and individual equipment. O’Meara stated that these high device requirements (2 percent of seats) do not reflect the low demand he has seen for this equipment at his theaters and hopes that the agency will adjust these ratios.

DOJ is accepting comments on this rule until September 30, 2014. The Office of Advocacy is holding a Small Business Roundtable to gather feedback on this rule on Monday, September 15, 2014, from 2:00 to 4:00 p.m. EST at the Small Business Administration Headquarters, 409 Third Street SW, Washington, DC. A conference call line is also available. If you are interested in attending, contact Janis Reyes at Janis.Reyes@sba.gov. Further information on the proposed rule can be found on Advocacy’s web site.

Mark O’Meara, owner of the University Mall Theatres in Fairfax, VA, speaks with a patron on a recent “Two Dollar Tuesday,” before a showing of “Rio 2.”

Mark O’Meara, owner of the University Mall Theatres in Fairfax, VA, speaks with a patron on a recent “Two Dollar Tuesday,” before a showing of “Rio 2.”

An individual closed captioning device is being used to display subtitles for the movie “Rio 2” at the University Mall Theatres in Fairfax, VA.

An individual closed captioning device is being used to display subtitles for the movie “Rio 2” at the University Mall Theatres in Fairfax, VA.

Comments OffTags: Regulatory Policy

August 2014 Issue of The Small Business Advocate Released

August 14th, 2014 · Comments Off

The Office of Advocacy released the August 2014 edition of The Small Business Advocate. The newsletter features Chief Counsel for Advocacy Winslow Sargeant’s recent trip to Oklahoma, where he met with small business representatives. In addition, the newsletter highlights Advocacy staff news and regulatory news.

In This Issue

Regional News:

  • Advocacy Leaders Learn About Oklahoma’s Small Business Landscape, 1

Staff News:

  • Christine Kymn Appointed Chief Economist and Director, Office of Economic Research, 2
  • Tayyaba Waqar Joins Advocacy as Assistant Chief Counsel, 2

Message from the Chief Counsel:

  • Leaving Advocacy in the New Year, 3

Regulatory News:

  • EPA, Corps Rules Would Redefine Scope of Waters Subject to the Clean Water Act, 3
  • FDA Rule Concerns Sanitary Transport of Food, 4
  • FWS Rule Would List Snakes as “Injurious,” 4
  • DOJ Proposes Rule Requiring Captioning for Movie Theaters, 4
  • CFPB Proposes to Amend Regulation C, 4

The full issue of the newsletter can be found on Advocacy’s website here.

newsletterAug2014

Comments OffTags: Regulatory Policy · State and Regional

June-July 2014 Issue of The Small Business Advocate Released

July 22nd, 2014 · Comments Off

The Office of Advocacy released the June-July 2014 edition of The Small Business Advocate. The newsletter highlights The Office of Advocacy’s efforts to help the University of New Orleans (UNO) obtain a grant to study and improve a device used by coastal fisherman to protect sea turtles from their nets. Advocacy worked with small shrimping businesses along the coast of Louisiana to identify their concerns about the device, known as the turtle excluder device (or TED). UNO’s project aims to improve the device and make it easier and more cost-effective for small shrimpers to utilize. In addition, this issue covers recent Advocacy roundtable sessions dealing with two Department of Labor rulemakings: one on proposed minimum wage rules for federal contractors, and the other focusing on overtime regulations. The newsletter also introduces Advocacy’s new and improved State Small Business Profiles; summarizes a new Advocacy study on small business procurement goals; and links to recent comment letters.

In This Issue

Regional News:

  • Public-Private Effort Focuses on Improving Device to Protect Sea Turtles, 1

Message from the Chief Counsel:

  • Our Small Business Landscape: Advocacy Improves State Small Business Profiles, 3

Research News:

  • Office of Advocacy Releases Small Business Profiles, 2
  • Study Examines Small Business Procurement Goals, 7

Regulatory News:

  • Advocacy Roundtable Examines Proposed Minimum Wage Rules, 4
  • Small Business Representatives Discuss Overtime Regulations in Listening Session, 5
  • Regulatory Comment Letters, 8

Advocacy News:

  • Advocacy’s Chief Counsel Speaks on National Journal Panel, 6
  • Legal Interns Join Advocacy for the Summer, 7

The full issue of the newsletter can be found on Advocacy’s website here.

June-July newsletter front

Comments OffTags: Regulatory Policy · Research & Statistics · State and Regional

Small Business Quarterly Bulletin for First Quarter 2014 Released

July 14th, 2014 · Comments Off

The Office of Advocacy released its Small Business Quarterly Bulletin for First Quarter 2014. This two-page publication includes charts and tables of economic variables to show the status of small business. This latest quarterly bulletin shows positive indicators for small businesses. The bulletin includes data about establishment birth and death rates, proprietors’ income, employment change by size of firm, labor turnover and self-employment.

The Small Business Quarterly Bulletin for First Quarter 2014 can be accessed on Advocacy’s web site here.

quarterly bulletin 2014

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New Date Announced for Roundtable on Waters Protected under the Clean Water Act

June 30th, 2014 · Comments Off

The Office of Advocacy’s environmental roundtable on the scope of waters protected under the Clean Water Act (CWA) has been rescheduled. The roundtable will now be held on Monday, July 21, 2014, from 10 a.m. to noon. The meeting will be held at the Washington Marriott at Metro Center, 775 12th Street NW, Washington, DC 20005.

As described in an earlier blogpost, the roundtable is being convened to discuss a regulation proposed by the U.S. Army Corps of Engineers (Corps) and the Environmental Protection Agency (EPA). The proposed rule defines the scope of waters protected under the Clean Water Act (CWA).

Advocacy’s upcoming roundtable was announced on June 11 by EPA Deputy Administrator Robert Perciasepe at a hearing held by the House Transportation and Infrastructure Subcommittee on Water Resources and Environment which explored the potential impacts of the proposed changes to the CWA jurisdictional rule.

The July 21 environmental roundtable meeting is open to all interested persons, with the exception of the press, in order to facilitate open and frank discussion about the impacts of the proposed regulation on small entities. The roundtable will feature a presentation of the rule by EPA and Corps representatives and a discussion of small business implications.

Please contact Assistant Chief Counsel Kia Dennis or 202-205-6936 to learn more about the roundtable or to RSVP.

Background: Under the proposed rule, decisions regarding whether a body of water is subject to the CWA will affect small entities which need to determine whether their activities require authorization and/or permits under CWA.

Under the regulations, the term “waters of the United States” would mean:

(1) All waters which are currently used, were used in the past, or may be susceptible to use in interstate or foreign commerce, including all waters which are subject to the ebb and flow of the tide;
(2) All interstate waters, including interstate wetlands;
(3) The territorial seas;
(4) All impoundments of waters as specifically identified in the rule;
(5) All tributaries of waters as specifically identified in the rule;
(6) All waters, including wetlands, adjacent to a water specifically identified in the rule; and
(7) On a case-specific basis, other waters, including wetlands, provided that those waters alone, or in combination with other similarly situated waters, including wetlands, located in the same region, have a significant nexus to a water specifically identified in the rule

Waters that do not meet this definition are not subject to the CWA. There are several programs under the CWA that would be affected by this proposed rule including but not limited to Section 311, oil spill prevention programs; Section 402, which requires permits for pollutant discharges; and Section 404, which covers permits for the placement of dredged or fill material in waters of the United States. Comments on the proposed rule are due by October 20, 2014.

At a Glance:
Who: U.S. Small Business Administration, Office of Advocacy

What: Environmental Roundable on rules proposed by the EPA/Army Corps of Engineers implementing the Clean Water Act

When: Monday, July 21, 2014; 10 a.m. – noon

Where: Washington Marriott at Metro Center, 775 12th Street NW, Washington, DC 20005

Contact: Assistant Chief Counsel Kia Dennis, 202-205-6936

Comments OffTags: Regulatory Policy

Advocacy Roundtables to Examine Proposed Overtime Regulations

June 26th, 2014 · Comments Off

The Office of Advocacy is hosting two roundtable listening sessions concerning the presidential memorandum issued on March 13, 2014, directing the Department of Labor to propose revisions to modernize and streamline the existing overtime regulations under the Fair Labor Standards Act.

The two roundtables will be held on:

  • Friday, July 11, 2014, from 10:00 a.m. to 12:00 noon (EST); and
  • Friday, July 18, 2014, from 10:00 a.m. to 12:00 noon (EST).

Both sessions will be held at the U.S. Small Business Administration, Eisenhower B Conference Room (concourse level), 409 Third Street, SW, Washington, DC 20416. The SBA headquarters is located at the Federal Center SW Metro stop on the Orange and Blue lines.

Dr. David Weil, Administrator of the Wage and Hour Division of DOL, and Dr. Winslow Sargeant, Chief Counsel for Advocacy, will be present to listen to comments from small businesses on the potential impact of this memorandum. When DOL issues proposed regulations, there will be a formal notice and comment period during which all interested parties will have an opportunity to comment on the proposal.

Please RSVP by email if you plan to attend the meeting to: Janis.Reyes@sba.gov or Jonathan.Porat@sba.gov. Please RSVP for only ONE of the above times, as space is extremely limited. A call-in option will also be available upon request.

Background:
On March 13, 2014, President Barack Obama issued a memorandum to the Department of Labor, directing the agency to modernize and streamline the existing regulations for executive, administrative and professional employees (often referred to as “white collar exemptions”). Most workers covered under the Fair Labor Standards Act receive Federal minimum wage and overtime pay. The upcoming DOL regulations may change the standards for white collar exemptions; and may increase the pay threshold (it is currently $455 a week/or $23,660 a year) and may change other requirements.  This could result in more workers eligible for overtime pay. Many small businesses may be impacted in a wide variety of industries, including businesses in the retail, hospitality, manufacturing, construction, finance and technology fields.

Comments OffTags: Regulatory Policy

Roundtable to Address Proposed Increase in Minimum Wage for Federal Contractors

June 25th, 2014 · Comments Off

The Office of Advocacy is hosting a roundtable discussion on July 8, 2014, to discuss a rule proposed by the Department of Labor implementing Executive Order 13658, which increases the hourly minimum wage for federal contractors, subcontractors and their workers to $10.10 per hour. Advocacy is interested in obtaining feedback from small business stakeholders at the roundtable because it has heard concerns from small federal contractors and subcontractors that this rule would have a significant economic impact on a substantial number of small businesses. Please see Advocacy’s Regulatory Alert on this rule.

The Department of Labor has set a due date for comments on this rule for July 17, 2014. However, the Office of Advocacy recently sent a letter to DOL requesting an extension of the comment period.

Details: The roundtable will be held on Tuesday, July 8, 2014 from 2:00 to 4:00 p.m. (EST) at the U.S. Small Business Administration, 409 Third Street, SW, Washington, DC 20416. It will take place in the Eisenhower Conference Room B (concourse level). DOL representatives have been invited to provide a briefing of this regulation at the roundtable.

Please RSVP by email if you plan to attend the meeting, or if you wish to obtain more information, to Janis.Reyes@sba.gov or Jonathan.Porat@sba.gov.

A call-in option will also be available upon request.

Comments OffTags: Regulatory Policy

Small Business Profiles Released

June 20th, 2014 · Comments Off

The Office of Advocacy released its annual report entitled Small Business Profiles for the States and Territories. In a new and improved format, the profiles feature information on small business employment, industry composition, small business borrowing, exporting, and survival rates, as well as business owner demographics. This annual publication provides information for the 50 states, the District of Columbia, the U.S. territories and the United States.

Some key statistics from the report include:

  • The U.S. is home to 28 million small businesses.
  • Small businesses represent 99.7 percent of all businesses with employees and employ about 55 million of the nation’s private-sector workforce.
  • Small businesses with fewer than 100 employees have the largest share of small business employment.
  • The top three small business industries with the most jobs include health care and social assistance, accommodation and food services, and retail trade.
  • Most small businesses are sole proprietors. Annual income from sole proprietorships increased 7.1 percent in the 3rd quarter of 2013 and totaled $1.2 trillion.

The full report, as well as each individual state’s profile, can be accessed here on the Office of Advocacy’s web site.

us state profile

Figure from the U.S. Small Business Profile

Comments OffTags: Research & Statistics