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4 reasons some small-business owners are actually grateful for regulation

Catherine Clifford

One of President-elect Donald Trump's rallying cries is that regulation is a $2 trillion problem that's devastating American businesses, and that he is going to do away with it.

And while many small-business owners do struggle to stay atop what can feel like a constantly shifting terrain of new rules and norms, not all of them resent regulations the way Trump claims they do. CNBC spoke to entrepreneurs across the country and found that a surprising number of them even appreciate what regulations do for their businesses and their customers.

Here's why.

1. Regulation helps businesses earn customers' trust

"We look at regulation as our friend," says Jeff Dachis, the CEO and Founder of One Drop, a mobile platform for managing diabetes. Complying with extensive regulations is a way for One Drop to show that it is willing to work to make sure it will keep patients safe.



"We want [patients] to feel confident that we are operating with not only the individual's best interests but the interests of society as a whole, and that consumers and our corporate partners can count on us," he says.

"It really works to our advantage to have a high bar to doing business, and then exceeding that bar."

2. Regulation weeds out businesses that aren't fit to compete

Working in health care, Dachis deals with what he himself describes as "stringent regulations." He did a hefty load of research into the regulatory environment before launching One Drop; he even hired a regulatory consultant.

But if Dachis has to do all that, then so do any potential competitors. A high barrier to entry is a good thing: It keeps out the hacks, he says.

3. Regulation protects the resources entrepreneurs rely on

Steve Silberberg is the founder of Fitpacking Weight Loss Backpacking Adventures in Massachusetts, which takes people on backpacking trips. He has 15 part-time employees and makes less than $50,000 a year.

"I don't buy into the notion that the big, bad government is ruining my business. In fact, the regulations help keep the wilderness from being overcrowded," says Silberberg.

"The notion that regulations strangle small business is overblown," Silberberg says. "To me, this is a crutch used by business owners who feel outraged because they can't [pollute / deny people basic rights / abuse animals / provide inferior products] in order to realize a nominal monetary gain."

4. Regulations aren't that time-consuming to comply with, at least not for some

David Jacobson is the founder and producer of TrivWorks in Long Beach, California, which produces live trivia entertainment events for companies and events. He is the only full-time employee, though he contracts work out to about 15 freelancers.

He spends only one to two hours per month staying compliant with regulations.


For the mid-sized small-businesses with storefronts and full-time employees, though, regulation is often more cumbersome than it is for small, nimble start-ups.

Augie Grasis has experience with both. In 2000, he launched Handmark, a mobile app and services company which he grew to over 100 employees before selling it to Sprint in 2013. And now Grasis is the CEO of FreightorGator, an online freight exchange which allows shippers to compare quotes and book through leading freight carriers.

The Kansas City, Missouri, start-up launched this summer and currently has five full-time employees. "But we are a fast- growing company that will in the near future have 20 then 50 and then 100 employees," says Grasis. "It is both costly and distracting to deal with the real costs and the administrative costs of those future regulations, whether they be health care, employment and labor law, privacy laws or taxation."

Having been at the helm of both a mid-sized small business and a start-up, Grasis observes that regulation burdens increase proportionally to a business's size.

"I am not an expert on all the regulations but I can say with conviction that when you have five or 10 employees the regulations and requirements are much less stringent than when you have 50 or 75 employees," says Grasis. "As CEO of a start-up with five employees, I can honestly say that the regulation is fairly minimal and manageable at that size."


Given the benefits, why does regulation come up so often as a problem that needs to be solved?

Dachis believes that regulation often serves as a convenient scapegoat for business owners.

"Oftentimes, when I hear this excuse that regulations are holding companies back, I chuckle a bit at the well paid CEO's that complain they can't hack it in this over-regulated environment," he says.

"I look at the record profits U.S. corporations are making across every single industry, I look at the record highs in the stock market, and I think that if you are going to operate in regulated markets then you better have a profitable plan that embraces those regulatory environments," he says.

"A little foresight now on how to do it right is worth the cost to us all later when companies get it really wrong."