Calley: Michigan small businesses want to slow change, ease up on new rules

• Michigan’s 900,000 small businesses are looking for stability in 2024 as the pandemic recedes and economy calms
• They’d also welcome fewer business-specific rule changes
• Calley says the state would benefit most from broad improvements to education and economic policy

Change has come quickly for Michigan’s small business owners. 

From pandemic-related closures, to higher wages and Democratic repeal of state Right-to-Work laws, it’s been a lot, said Brian Calley, president and CEO of the Small Business Association of Michigan.

This year, business leaders are warily watching more legislative proposals, several of which Calley warned could deter business development in the state. They include mandatory long-term paid leave benefits and a repeal of local preemption that could create a patchwork of different minimum wages, overtime rules and labor laws across the state.

“The best thing that we can do for small businesses is to let the pace of change slow down,” Calley, former Republican lieutenant governor of Michigan, told Bridge Michigan Business Editor Paula Gardner in a recent interview.

Here are excerpts from the conversation on what 2024 might bring to the state’s business climate:

What are your goals for small businesses success in Michigan in 2024?

To create an environment of certainty, of stability. The business-focused legislative proposals that I'm sure are well-meaning would create uncertainty, hardship and concern among people that own small businesses. They will get between the employer-employee relationship. 

What would you suggest the state focus on instead?

I think it'd be great if we had a shift away from dramatic changes in the operating environment that small businesses face and instead start concentrating on things that support broad strategies, like making the best K-12 educational system.

We also should shift economic development efforts to really concentrate on building and scaling the businesses, entrepreneurs and ideas that are present here in Michigan already.

The Growing Michigan Together Council has put forward three strategies that are quite well-informed and I think hit the mark on what the state ought to be focused on. With economic development, if we are trying to be an innovation hub and a scale-up state for businesses (as the recent plan suggests), we should ask on all policies: Does this help or hurt the growth of businesses here? And jobs and opportunities here? 

Democratic legislators proposed changes to large-scale economic development funding, adding community-based aspects to the Strategic Outreach and Attraction Reserve (SOAR) incentives. Would that address some of your points?

We’ve not been highly engaged in the debate over SOAR or larger-scale economic development tools because they haven't been particularly relevant to small businesses, or at least not directly.

Related: 

• Michigan workforce quietly passes pre-pandemic levels, shows resilience
• Michigan is spending to fill critical worker gaps. Here’s what’s needed
• Michigan stories to watch in 2024, from politics and schools to EVs and energy
• Michigan council hears bold (if vague) ideas to solve population crisis

For smaller businesses, the most important thing that we can do is to take steps that are industry agnostic in terms of creating a better overall climate for growth. That’s opposed to trying to figure out what industry is the next big thing or to go into a particular community or region and just kind of decide here's the direction it should go. 

That sounds like a recipe for organic growth. 

That's why education is so important to us. Our labor force participation rate is pretty low. Michigan is pretty much recovered to pre-pandemic levels, but it was (low then). 

It would be great to have a bunch of people move to Michigan, but before you start growing the first step is to stop shrinking. 

The first key to stop shrinking is to ensure that people that are here already are experiencing a high level of success and opportunity (and then we) will lose fewer people. Michigan will be their best option.

When you think about mitigating Michigan’s weaknesses, what is the first step that you would take that would make a difference to the business community?

The first order of business is do no harm. And there are plenty of things that are on the table that could have the impact of making small businesses less viable.

Every time the government comes in and says here's the one way and everybody has to do this thing exactly the same, it increases costs and decreases flexibility. It makes small businesses less competitive because flexibility is the main competitive advantage that small businesses have in the marketplace. 

What about on the proactive side?

The state has made a lot of great advancements in removing obstacles and creating incentives to enter the workforce. Look at everything that's happened at child care in the last several years. In the top line numbers, you can see that it is making a difference. 

And there's been an enormous amount of work done in removing obstacles for people to move into higher education.The more education you have, the better off you are. So (we support) things like connectors between high school students and community colleges. It would be great if every kid in the state had access to higher education while they were still in high school. 

It seems like U.S. business confidence measures mirror the lackluster consumer confidence reports. There are signs of success in the economy, but they aren’t creating a positive outlook.

It depends on the industry and somewhat on the region as well. There are certain industries, like with real estate investment, where confidence is shaken or people are pessimistic because they have high capital costs and therefore their borrowing costs are very high. 

Entrepreneurs are a very optimistic group of people. You have to be to build a small business.

Our quarterly survey asks, “Are you taking steps to prepare for challenges in the future?” They are confident, but we also see some pulling back, some wait-and-see pauses before spending more capital or taking on more debt in order to expand.

That seems to touch on both inflation and higher interest rates.

Monetary tightening policies have been working. It just took more severe actions than what I think most people anticipated going into this rising interest rate environment. And now it’s almost like a freeze. 

Interest rates have definitely slowed things down. And then when it comes to inflation, a lot of businesses found they had no choice but to raise prices, or else they were gonna have to downsize their operations. That is starting to taper off somewhat. 

Many are still “eating” the cost increases, figuring out ways to skinny everything down in order to try to just get by. Raising prices is a gut-wrenching decision to make,  knowing that some of their customers will not be able to afford them anymore.

We've talked about the difficulty in hiring and increased wages over recent years. What are you seeing now?

Over the last few months, it looks to be kind of leveling off. Today, when a business may have decided not to expand, they can dedicate more of their resources toward retention. 

The other thing that I've noticed is that businesses who are willing to pay top dollar are having some success, but they are also increasing their standards to get top talent…A few years ago, there was so much desperation to find people that employers were really willing to put up with almost anything.

The state committed $73 million in American Rescue Plan Act funding to create Small Business Support Hubs, and SBAM is among 27 organizations that will be encouraging entrepreneurs to grow their businesses.Tell me your hopes for the SBAM entrepreneurial hub.

SBAM will focus on late first-stage and early second-stage businesses. So often when people think of small business support, they immediately think startup and we have a lot of great startup services. But there are fewer resources for those that are past that startup phase that are ready, willing and able to grow. 

What are examples?

As you grow the complexities of the business grow, like financial know-how,  human resources and compliance rules. 

The element in our plan that I'm most excited about is that SBAM has an embarrassment of riches of highly experienced highly successful business owners that have made it to a stage where they're just looking for ways to give back and help others experience success as well. And I think this is going to give us an opportunity to create mentorship connections in a way or at least at a scale that you don't really see anywhere else.