America Is Open for Business

But there’s a growing disconnect between the American Dream we’re selling and the financial reality entrepreneurs are experiencing.

Opening a business is one thing. Keeping it profitable is another.

For years, we’ve measured our economy’s health through employment numbers, consumer spending, stock market performance, and GDP growth. These indicators tell us something important about the country, but they don’t necessarily reflect what’s happening inside a privately owned business.

The daily digest for entrepreneurs and business leaders

A company can generate record revenue while its owner takes home less money than the year before. And that’s a problem we should be talking about.

The cost of doing business has changed

Consider what it takes to operate a small business today: commercial insurance, employee benefits, payroll, technology, financing, and customer acquisition all compete for a company’s cash. Even when inflation moderates, many of the price increases businesses have already absorbed remain embedded in their operating expenses.

A business generating $5 million in annual revenue with a 15 percent profit margin earns $750,000 before taxes. If operating costs rise by just five percentage points of revenue and the company cannot increase prices, that profit falls to $500,000.

Revenue hasn’t changed. The business hasn’t lost a single customer. Yet its profitability has declined by a third.

Now imagine that same business needs to hire additional employees or replace equipment. Perhaps it is opening another location. What once looked like an expansion opportunity suddenly becomes a more complicated financial decision.

This is why I believe we need to stop confusing revenue growth with business success.

The entrepreneur is the shock absorber

When operating expenses increase, large corporations have options that smaller businesses often don’t. They can negotiate more favorable supplier contracts or spread administrative expenses across larger operations. They can also access institutional financing or absorb temporary losses.

Smaller businesses have fewer places to hide. When expenses increase, owners face three immediate choices: raise prices, reduce costs, or accept smaller margins. Each comes with consequences.

Raise prices too aggressively and customers may leave. Reduce expenses and you risk compromising service or losing valuable employees. Accept lower margins and you limit the capital available for future growth.

In many cases, the founder becomes the company’s financial shock absorber, absorbing additional risk while protecting employees, customers, and suppliers.

It’s a strange reality of entrepreneurship. You can be responsible for millions of dollars in revenue, dozens of employees, and significant economic activity while personally experiencing greater financial uncertainty than someone working for a large corporation.

Access to capital is different than access to opportunity

We frequently celebrate the availability of venture capital and business financing as evidence of a healthy entrepreneurial ecosystem. But the kind of capital available matters.

A technology startup pursuing rapid growth might be able to attract investors willing to finance several years of losses. A profitable regional service company seeking $500,000 to expand into another market faces a very different financing environment. Its options may include bank financing, personal guarantees, expensive credit facilities, or selling equity to private investors.

Each changes the economics of ownership. Borrowing money creates fixed repayment obligations. Selling equity reduces the founder’s share of future profits and potential exit proceeds.

Neither is inherently problematic, but both deserve careful consideration. Entrepreneurs can access capital, but can they access it on terms that make their businesses more valuable?

Reward growth or profitability

At some point, entrepreneurship became synonymous with scaling. We’re fascinated by billion-dollar valuations, extraordinary fundraising rounds, and companies that expand into dozens of markets almost overnight.

There’s nothing wrong with ambition. But a business that doubles its revenue while destroying its profitability hasn’t necessarily created additional value for its owners.

I’ve built businesses and managed growth. I have navigated the decisions that come with preparing a company for an exit. One lesson experience has reinforced is that growth needs to serve a financial objective. Expansion should create value, not just increase the size of an organization.

Sometimes, the more attractive opportunity is a smaller, highly profitable business that generates consistent cash flow and retains its customers. It operates without depending on continuous outside investment. We should celebrate those businesses, too.

The American Dream needs to remain financially viable

I’m optimistic about American entrepreneurship. Technology continues to lower barriers to entry. New industries are emerging and talented founders have opportunities that previous generations could hardly imagine.

But optimism shouldn’t prevent us from acknowledging the financial pressures facing business owners. Policymakers debating taxes, regulation, healthcare, and economic growth should consider how their decisions affect smaller employers’ cash flow and investment capacity.

And entrepreneurs themselves need to become more disciplined about measuring profitability and managing debt. They should understand the financial returns of expansion.

The American Dream is about creating opportunity and building wealth. It includes achieving greater independence through hard work and calculated risk. If running a business requires founders to assume ever-increasing financial exposure without corresponding economic rewards, we need to examine what has changed.

Because America doesn’t just need more businesses. It needs more businesses that are financially worth owning.