Compliance SOS

By John Roberts, CRN
March 10, 2006 3:00 PM ET

The annual cost of federal regulatory compliance for businesses and private citizens reached $1.1 trillion in 2004, up 16 percent since 2000, according to a study by the Small Business Administration.

JOHN ROBERTS
Can be reached via e-mail at jorobert@cmp.com.

On the corporate side, small businesses—defined in the SBA study as those with fewer than 20 employees—bear the largest burden. The average per-employee cost of complying with federal regulatory requirements for small businesses amounted to $7,647 in 2004. This was 45 percent higher than for large businesses, defined as those with 500 or more employees.

The main reason for the difference is that setting up compliance systems involves a certain level of fixed costs, regardless of business size. But once these systems are in place, bigger companies can take advantage of significant economies of scale.

Looking at different sectors of the economy, the SBA study shows that cost differences are greatest in manufacturing. Average per-employee compliance costs for small businesses in this sector in 2004 were nearly $22,000, more than double the cost for large companies.

Lacking the ability to take advantage of economies of scale, small businesses will be looking to the channel to provide customized solutions to reduce compliance costs. With these costs trending ever higher and with millions of small businesses in the United States, a huge opportunity awaits solution providers with the right skills.

What are your compliance costs? Contact me via e-mail at jorobert@cmp.com

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