Small businesses brace for election results

November 2, 2012: 10:45 AM ET

The candidates have offered starkly differently visions for the nation's future. Here's how some entrepreneurs are preparing.

By Elaine Pofeldt

FORTUNE – No matter who wins the election, Ted Devine isn't planning any radical moves for his business.

Devine, who is CEO of Insureon, an online commercial insurance agent based in Dallas, Texas that targets businesses with 10 employees or less, says the election will bring more certainty to the business community, but he thinks both candidates will help firms like his in their own way. "Both are very astute and understand how important small business is to creating jobs," he says.

During the past few years, many surveys have cited uncertainty as a major factor holding back small businesses -- a major engine of job creation in the economy -- from hiring. A mid-year survey by the National Small Business Association, an advocacy group based in Washington, D.C., found that 68% of respondents viewed uncertainty as the biggest challenge to the future growth and survival of their businesses.

However, with the presidential election looming, some of the ambiguity over where the country is heading will come to an end for small company executives like Devine. The two presidential candidates have offered significantly different visions for the nation's future, and the job-creating set will soon have a lot more clarity on where the nation's economic policies are headed.

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But will business owners actually rethink their strategies after they have a better idea of what they'll pay in taxes in the coming years, whether the Affordable Care Act will remain intact, and what will happen to other policies that may affect their overhead? And, most importantly, will they hire more workers?

According to a survey of more than 1,800 small business owners released in early October by Manta, an online community for entrepreneurs, 67% said they were optimistic about the outlook for their businesses after the election -- but 80% said they had not hired any employees in the past quarter. Among respondents, 47% planned to vote for Romney, compared to 35% for President Obama. However, President Obama's support was up by nine percentage points since August.

Another poll of more than 1,300 businesses with nine employees or fewer released in September by Wave Accounting found that 53% of firms said Romney and running mate Paul Ryan would be better for small businesses, compared to 39% who favored Obama and Biden's policies. Republicans surveyed said reducing bureaucratic red tape was the first thing government should do to help small businesses, with 90% citing this as a crucial priority. Among Democrats, 77% said improving healthcare options for small businesses should be top of the list.

Joel Gross, founder of Coalition Technologies, a Los Angeles and Seattle-based web design and marketing firm founded in 2009, says he is taking a "wait and see" approach to the election at his 24-employee business and expects his firm to "move on" and continue doing solid work, no matter who wins.

It's not what politicians promise to do that prompts entrepreneurs to make changes in their businesses, he says, but rather how they act upon their plans that matters to business owners. "What we react to is when we see actions," Gross says.

If President Obama is reelected, Gross, headquartered in Marina Del Rey, California, says he'll pay attention to how the health reform is implemented in his state and what that means for his overhead as well as his federal income tax rate, which he expects to increase by about 5%. He currently is in the 33% bracket but notes that the president has called for increasing this to 36%. In addition, he expects to see his capital gains taxes and Medicare payroll taxes rise. At the same time, the state of California is raising taxes to cope with a budget gap.

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Should Romney win, Gross says, he'll be watching to see how the candidate acts upon promises to streamline the tax code. "If he enacts the policies we're talking about, it would be a really positive thing for all businesses," says Gross.

Gross currently employs two in-house accountants to help him deal with taxes and regulations and believes that Romney would likely simplify things. "It's a real nightmare to try to track all that stuff down and figure it out," he says.

He'll also be watching to see if Romney succeeds in repealing the Affordable Care Act and parts of the Dodd-Frank Act, which imposed more regulations on lenders following the mortgage crisis.

Some business owners say they already have definite plans to run their businesses differently if there is a change in Washington. If Mitt Romney wins the presidential election, Mark Stevens, CEO of MSCO, a marketing and business advisory firm based in Rye Brook, N.Y., has a clear plan in place. "I will hire five new people, immediately, in December and January," says Stevens, who currently has more than 40 employees working at the 18-year-old firm. He also expects to move forward on opening an office in another city -- an investment of about $1 million -- and increase his advertising budget by 25%.

If President Obama is reelected, however, Stevens plans to scale back, because he believes he'll face increased taxes. "I'll probably terminate a couple of people," he says. His rationale? If the business has less money to reward employees with raises, he'd rather let go of his bottom performers so he can afford to pay his better people more.

Jennifer Schaus, principal of Jennifer Schaus & Associates, an eight-year-old consultancy in Washington, D.C. that advises companies that want to sell to the government, says that her clients' economic prospects will be affected by the election results -- and she is preparing for that.

Since the downturn, many of the small and midsize firms that have approached her for advice are struggling. "These companies are on their last legs and considering government markets as their last attempt to keep the company alive," she says.

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Even those that are in a position to grow are in a holding pattern, waiting to see if and how President Obama's policies will affect them -- and the federal budget, she says.

If Romney is elected, she expects to see more businesses prepare to ramp up plans to hire and expand. She believes the candidate will help trim waste in government and free money for programs that help small businesses get loans and government contracts. "The economy will improve, and our prospects will be more qualified," she argues.

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