Download This Special Report

Saturday, March 11, 2006

Solution Providers See Great Opportunity in Small Business Compliance Emergency

With the annual cost of federal regulatory compliance reaching $1.1 trillion in 2004 for small businesses and professionals, solutions providers have the chance to grow their business. This amount marks an increase of nearly 16 percent in spending since 2000, or so a study by the Small Business Administration reports.

A small business is defined by a company with 20 or fewer employees. These companies will experience the greatest financial emergency as a result of increasing prices of compliance issues. The average per-employee price for achieving compliance within these small businesses was $7,647 in 2004, 45 percent higher than for larger businesses with 500 or more employees even within the same industries.

The reason for this discrepancy is primarily that setting up compliance systems has many fixed costs that do not depend on the size of the company. However, once these systems are implemented, the larger companies typically make up for the initial cost because of considerable economies of scale. Solution providers have the chance to turn to small businesses to help them cope with some of the costs and make their companies more efficient.

The study showed the most marked discrepancies in cost in the manufacturing industry. Average per-employee compliance costs for small companies within this market were almost $22,000, which was more than twice the cost for large companies.

Since small businesses cannot take advantage of economies of scale, they will need solution providers to help them create custom-fit systems to reduce compliance costs per employee as much as possible so their businesses can survive and grow. Solution providers with the right skills to serve particularly those within the manufacturing industry will be in high demand in the coming years.

Added By: Computer Consulting 101