Why half of all workers may struggle to get weight-loss drug health insurance coverage

An injection pen of Zepbound, Eli Lilly’s weight loss drug, is displayed in New York City on Dec. 11, 2023.

Brendan McDermid | Reuters

Companies are increasing access to new blockbuster weight-loss drugs for employees, but size of employer may make a big difference in early access. Small businesses and their workers are often stuck between a rock and a hard place when it comes to this burgeoning health insurance coverage market.

Small businesses employ roughly half of the workers in the U.S. labor market, and they have been adding jobs at a faster pace than large employers. Since the first quarter of 2021, small-business hiring accounted for 53% of the 12.2 million total net jobs created across all employers, according to the U.S. Bureau of Labor Statistics, consistent with the longer-term trend.

The blockbuster obesity drugs, called GLP-1 agonists, cost roughly $1,000 per month on average — and they are typically taken for a long time. Access to these weight-loss drugs is coming from an increasing number of sources in the marketplace, drug makers are ramping up production, and use cases continue to increase, with clinical trials showing benefits for conditions from sleep apnea to heart disease risk. But many of the 100 million American adults who are obese can’t afford to pay out of pocket for drugs like Novo Nordisk’s Wegovy and Eli Lilly’s Zepbound, and are turning to their employers for help. 

A survey last October of 205 companies by the International Foundation of Employee Benefit Plans found that 76% of respondents provided GLP-1 drug coverage for diabetes, versus only 27% that provided coverage for weight loss. But 13% of plan sponsors indicated they were considering coverage for weight loss. Covering these drugs, however, is harder for smaller employers, many of whom rely on off-the-shelf plans offered by their insurance carriers. While there are plans that cover GLP-1 drugs, the cost can be prohibitive for many small businesses.

There’s strong demand from employees for coverage and smaller employers would like to be able to do it, but there are trade-offs, said Shawn Gremminger, president and chief executive of the National Alliance of Healthcare Purchaser Coalitions, a nonprofit purchaser-led organization. Companies have to consider the impact on wages or other benefits they might like to offer. “The company money has to come from somewhere,” he said.

In some cases, small employers, even if they want to cover weight-loss drugs, are simply priced out of the market and they may have to accept they can’t offer the coverage they would like to. 

“Given the price of these drugs, you have to do the cost-benefit analysis and for a lot of small companies — even some larger ones — they just can’t do it,” Gremminger said. “No matter how much they want to.”

Here are a few issues for small business employers and employees to understand in accessing expensive weight-loss drugs as part of job benefits.

Annual benefits deals are being brokered now. Open enrollment season for health insurance doesn’t occur until the fall, but employers should be having renewal discussions with their benefits broker or agent now, and that conversation should include weight-loss drugs. Small business employers should be telling a broker they would like to be able to provide weight-loss drugs for employees, and ask for help in finding the right carrier or the right plan, said Gary Kushner, chair and president of Kushner & Company, a benefits design and management company.

The market is changing quickly. Last year, an insurance carrier asked about covering weight-loss drugs may have said no, but it’s worth asking the carrier again because they may have been forced to make changes to their offerings for competitive reasons, said Kate Moher, president of national employee health and benefits for Marsh McLennan Agency, which advises employers on plan designs and benefits programs. “You should be asking the question every year,” she said. 

Insurance premiums may rise. To gain access to weight-loss drugs, many small businesses may have to switch insurance carriers, and probably pay more. “It most likely will be more expensive if one is not covering the drugs and the other is,” Kushner said.

Employers also have to decide how much of that can be reasonably passed to employees, without unduly burdening workers who may never need these drugs. “If 20% of your population takes it, everyone’s premium goes up by whatever percentage that is to cover the cost,” Gremminger said.

Small businesses should consider a ‘captive health’ plan. Generally speaking, any business with at least 50 employees might consider working with a captive health insurance plan like Roundstone, ParetoHealth, Stealth and Amwins, Moher said. These businesses allow groups of companies who couldn’t self-insure — the approach most large corporations take — to pool resources and design a group health plan together. 

This approach may allow a small business and its employees more flexibility, Moher said, but owners still have to weigh the costs and there are requirements to qualify. It’s also not something businesses can change every year like they could when working with a traditional insurance carrier. “It’s a long-term play; you can’t jump in and out,” Moher said. 

These plans are designed for the long-term because, as member-owners, the participants all agree to spread the risk, an approach that can keep costs down over time and decrease volatility. But if business owners are looking for a quick-fix or prefer to wait and see how the market develops over the next year, it’s probably not the right model.

A GLP-1 drug standalone coverage option could also work for some small businesses. Companies like Vida Health, Calibrate, Found Health and Vitality Group provide these offerings separate from an employer’s primary carrier, Gremminger said. Employers need to do the math to determine whether it could be more cost effective, and whether the option truly suits their employees’ needs based on the offerings.

Use an FSA to help cover weight-loss drug costs. If insurance coverage options aren’t an effective solution today, small employers may have a few other ways to help employees defray the cost of weight-loss drugs. They might consider, for instance, making contributions to employees’ flexible spending accounts or health savings accounts. They could also consider a health reimbursement arrangement, or HRA, which is an employer-funded plan that reimburses employees for qualified medical expenses. 

However, there are strict rules and requirements for each of these options. For example, with an FSA, the IRS limits an employer’s contribution based on how much the employee contributes, and this still isn’t likely to suffice to cover the cost of these drugs long-term. “Does it help? Sure. Does it solve the problem? No,” Kushner said.

It’s also not a move to make without first getting sign-off from legal counsel. “You need the guidance of your ERISA attorneys to make sure you meet all the criteria,” Moher said. “It’s a creative way of doing it, but you have to make sure you’re meeting all of your compliance requirements.”

Right now, the end result can be very discouraging for small businesses and their employees given the costs and limited options, but it’s also important to know that there are 20 or so drugs in the approval pipeline. Once they get approved, costs are likely to come down, Moher said. “This is something that may be a short-term thing until we get more GLP-1 drugs approved.”

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Inflation fears among America’s small businesses are rising again and their faith in the Fed is falling

The fight against inflation was going well for the Federal Reserve and economy for much of last year and into 2024, but one important demographic remained unconvinced about the progress being made in lowering pricing: small business owners.

Now, more influential parties are coming around to a view that small businesses have been stubborn in saying is closer to the on-the-ground truth: inflation isn’t coming down fast enough. On Wednesday, Federal Reserve Chair Jerome Powell conceded that after three months of disappointing data on inflation, there has been a “lack of further progress” this year. Market traders, who not long ago were in interest rate cut euphoria mode and forecasting up to six rate cuts by the Fed this year, are now more likely to see one or two cuts at most.

Disappointment over inflation is nothing new for small business owners, and their frustration over high prices is increasing again, according to the CNBC|SurveyMonkey Small Business Survey for Q2 2024.

One in four (24%) small business owners tell CNBC that they think inflation has reached a peak, down from 29% in the previous quarter, and back to where the economic sentiment reading was a year ago. The percentage of small business owners who expect inflation to rise from here is trending up as well — 75% this quarter, up from 69% in Q1.

“Small business owners are the engine of our economy, and the data shows they are still pessimistic about overcoming inflation,” Lara Belonogoff, senior director of brand management and research at SurveyMonkey, said in a statement upon the Q2 survey’s release.

This CNBC|SurveyMonkey online poll was conducted April 8-12, 2024 among a national sample of 2,130 self-identified small business owners ages 18 and up.

Despite a positive market reaction to Fed Chair Powell’s comments after the FOMC meeting on Wednesday — in the least, Powell all but ruled out another rate hike this year — small business confidence in the Fed has declined. Last quarter, a little over one-third (35%) of business owners said they had confidence in the Fed. That’s not fallen back to 31%, where it was in Q2 of last year.

“Inflation remains a top concern, clearly, for small businesses,” said U.S. Small Business Administration head Isabel Casillas Guzman in an interview with CNBC’s Kate Rogers at the virtual Small Business Playbook event on Thursday. “We’ve tried to make sure the SBA is more readily available to credit worthy borrowers out there. Half of businesses don’t get the capital they need fully, or at all.”

She suggested small business owners start with local SBA resource partners, local district offices, which can connect them with lenders on the ground, as well as starting with the SBA’s online Lender Match tool.

One finding over which small businesses are in line with a broader macro view is the overall state of the economy. Over one-quarter (27%) describe the economy as “excellent or good,” which has not trended lower even as inflation fears have picked back up. It’s also notably up from 21% in the year-ago quarterly survey. The economy’s performance helps explain why nearly three times as many business owners cite inflation as the biggest risk they face (37%) compared to the No. 2 threat, consumer demand, at 13%.

SBA Administrator Guzman cited the 17.2 million new business applications filed during the Biden administration as a sign of the economic optimism despite inflation. She pointed to the Biden legislation that is spurring government spending on infrastructure and clean energy, which are economic growth drivers. “These are all small business trades across those opportunities,” she said. “That’s the economic growth the president has been focused on.”

Increasingly, though, it’s also a fiscal policy-linked spending plan and rise in federal debt that economists are tying to sticky inflation.

The CNBC|SurveyMonkey Small Business Confidence Index was unmoved quarter-over-quarter, at 47 out of 100, and up one point from Q2 of last year.

Fed's Jerome Powell: Inflation remains too high and path forward is uncertain

The CNBC|SurveyMonkey data is consistent with other recent small business survey findings. Goldman Sachs’ 10,000 Small Businesses Voices survey released this week cited 71% of small business owners saying inflationary pressures have increased on their businesses over the past three months and 49% saying they’ve had to raise the prices. In the CNBC survey, 48% said they are raising prices.

Inflation will loom large in how America’s small business owners tilt in the presidential election.

Inflation is the No. 1 issue over which small business owners say they will vote, with 63% of survey respondents citing it, followed by economic growth at 61%.

Confidence in President Biden’s handling of the presidency — which is typically low in a small business demographic that skews conservative — remains underwater in the new survey, at 31%, down by two percentage points quarter over quarter. Among Republican small business owners taking the survey, 5% approve of the job Biden is doing. Among Democrats, 82% of small businesses approve of Biden, though pollsters say that approval ratings under 90% within one’s own party are a signal of dissatisfaction.

Biden has made some gains with his supporters, with the overall Small Business Confidence Index reading among this survey subset unchanged quarter over quarter at 61, and up from 55 in Q3 of 2023.

The CNBC survey found that in one area, small business owners who identify as either Republicans or Democrats do reach a rare point of consensus: both say that when it comes to government policy, they are getting slighted compared to large corporations.

The Goldman Sachs survey found that 55% of business owners are unhappy with the amount of focus small business issues get from candidates. Inflation, at 73%, was the issue cited most frequently.

Guzman said that the SBA has doubled the number of small-dollar loans, including to startups, as well as to women and people of color, who she noted are starting businesses at the highest rates. She also said more of the government loan volume is going into “rural banking deserts.”

And the total amount of government contracts going to small businesses has reached 28%, Guzman said, roughly $178 billion, according to the recent government scorecard. “We want more people to do business with the largest buyer in the world,” she said. 



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It’s open enrollment season for health coverage. If you’re self-employed, you can’t afford to ignore it

Open enrollment season can be a time of trepidation for the self-employed

The stakes are especially high because if you need to buy individual or family coverage, the next few weeks could be your only chance for 2024, barring certain exceptions such as moving to a different state, getting married, divorced or having a child. 

“For most people, the nationwide open enrollment period for individual and family coverage is your best shot to review your options and enroll in a new plan,” explained Anthony Lopez, vice president of individual and family and small business plans at eHealth, a private online marketplace for health insurance, in an email.

More from Year-End Planning

Here’s a look at more coverage on what to do finance-wise as the end of the year approaches:

Picking health insurance on your own — without the help of a human resources department — can be daunting. Instead of throwing up your hands in frustration, here are answers to questions self-employed individuals often have about open enrollment.

Healthcare.gov and other options for information

Freelancers, consultants, independent contractors and other self-employed individuals can visit www.healthcare.gov to research and enroll in flexible, high-quality health coverage, either through the federal government or their state, depending on where they live. You can also choose to work directly with an insurance agent or with a private online marketplace to help you wade through options. To be considered self-employed, you can’t have anyone working for you. If you have even one employee, you may be able to use the SHOP Marketplace for small businesses

The deadlines you need to stay on top of

Most states set a deadline of Dec. 15 for coverage that begins Jan. 1, so don’t delay when it comes to signing up for benefits, said Alexa Irish, co-chief executive of Catch, which helps self-employed individuals choose health-care plans. Also, remember to pay your first month’s premium before your health care is supposed to start or you’ll be out of luck as well. “If you miss those deadlines, there’s no wiggle room,” said Laura Speyer, co-CEO of Catch.

If you are already enrolled in a marketplace plan

Those who were already enrolled in a plan last year can make changes by Dec. 15 for coverage that begins Jan. 1. Doing nothing will mean they are automatically reenrolled in last year’s marketplace plan. 

Qualifying for tax credits and other savings

Many people assume they won’t be entitled to savings, but they should still investigate their options, Irish said. Indeed, 91% of total marketplace enrollees received an advance premium tax credit in February 2023, which lowers their monthly health insurance payment, according to data from the Centers for Medicare & Medicaid Services, a federal agency within the U.S. Department of Health and Human Services.

Credits and other eligible savings are available based on an applicant’s income and household size and can be estimated even before they officially apply. It’s advisable to check for savings possibilities every year, Irish said.

What to consider in making coverage decisions

The thought process will be similar to what you went through when picking health insurance offered by an employer. Whether you are signing up for the first time — or deciding whether to renew your existing plan or choose a different one — you’ll want to consider factors such as who in the family needs the coverage and for what purposes, and how different plans compare in terms of coverage options and cost. This analysis needs to take into account copays, prescription drugs you take or may start to take, whether the plan covers your doctors, and out-of-pocket maximums. 

If you’re self-employed and aiming to grow your business in the coming year, possibly by hiring employees, it’s good to know you can enroll in a small business plan at any time of the year, Lopez said. “Small business group plans aren’t governed by the same open enrollment rules as individual and family plans. So, you can enroll in an individual plan today, then switch over to a group plan in mid-2024 if you add a couple employees and want to provide them with health benefits,” he said.

How much health insurance costs the self-employed

Cost will vary, depending on the plan you choose, who is covered and what subsidies you’re eligible for. But, as a general guide, the average total monthly premium before tax subsidies in February 2023 was $604.78. The average total premium per month paid by consumers after the tax subsidies was $123.69, according to the Centers for Medicare & Medicaid Services.

Self-employed individuals may also be eligible for a cost-sharing reduction, a discount that lowers the amount paid for deductibles, copayments and coinsurance. You’ll find out what you qualify for when you fill out a marketplace application, but keep in mind, you need to enroll in a “Silver” plan, one of four categories of marketplace plans, to get the cost-sharing reduction. 

Wading through policy options, working with an agent

You don’t have to go through the process alone. There are assisters who are trained and certified by marketplaces to help you apply and enroll. If you want more specific help, you can also choose to work with an agent or broker who is trained and certified to sell marketplace health plans in the state they are licensed. Agents can advise you and give you more detailed information about the plans they sell, and since health insurance premiums are regulated by your state’s Department of Insurance, you don’t have to worry about paying more by working with an agent.

A few things to note: Some agents may offer other plans that aren’t available on government exchanges, but that comply with government requirements. However, to take advantage of a premium tax credit and other savings, you must enroll for a plan through a state or federal marketplace, on your own or through an agent. 

The risk and reward of high-deductible plans

Marketplaces offer multiple plans to choose from and they will vary in terms of coverage and price. One option that’s becoming more popular, especially with young entrepreneurs, is called a high-deductible health insurance plan. This type of insurance plan comes with higher deductibles in exchange for lower premiums, which could be a good choice for people who are healthy and don’t visit the doctor much. Another benefit of a qualified high-deductible plan is the ability to contribute to a tax-advantaged savings vehicle known as a health savings account, or HSA. 

When deciding whether to choose a high-deductible plan, individuals should take into account factors such as how often they visit the doctor, how much they can afford to pay out of pocket, whether their doctors are in network and what the out-of-pocket maximums are. It’s also important to know you have the means to cover a high-cost medical event, should the need arise. If a high-deductible plan makes sense for your circumstances, you can then consider an HSA.

Lopez recommends people don’t delay when it comes to reviewing their coverage options, which may also include dental and vision insurance. “The last week or so of open enrollment can be a busy time for licensed agents too; if you want the best chance of talking to an agent to get your personal questions answered, don’t put it off.”

Don’t miss these stories from CNBC PRO:

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A big climate change stress test is coming for Amazon sellers and suppliers

As Amazon and other big businesses ramp up efforts to reduce their carbon footprint, they’re putting pressure on their suppliers to do the same, and those who don’t may pay a big price.

Starting in 2024, Amazon will require suppliers to share their emissions data, set emissions goals, and report on their progress, the e-commerce giant said in its recently released sustainability report. With that move, it joins Microsoft, Walmart, Apple, and others in saying that suppliers must step up decarbonization efforts. 

The mandates come as big businesses face more demand than ever to adopt eco-friendly practices. Consumers, investors, regulators, and governments are pushing firms for more progress and transparency.

“The pressure is coming at companies, who are then putting pressure on suppliers,” said Bob Willard, a corporate consultant and author of six books on sustainability. 

And in a cascade, those suppliers are leaning on their suppliers.

Businesses typically track three levels of emissions. Scope 1 come directly from operations. Scope 2 are from purchased energy such as electricity. And scope 3 relate to a company’s activities but come from indirect sources such as supplier emissions and emissions from customers using their products. An analysis of major industries by the non-profit CDP found that, on average, scope 3 accounts for about 75% of all emissions. 

Companies have much more control over their suppliers than many other areas of indirect emissions, says Andrew Winston, author of several sustainability-related business strategy books.

For instance, while a consumer goods company can’t force a detergent buyer to wash in cold water, it can be selective in working with eco-conscious suppliers. 

“The supply chain is where there’s going to be continued rising pressure and transparency because companies have a direct impact over that,” Winston said.  

Decarbonization mandates are getting tougher

Salesforce now requires suppliers to disclose scope 1, 2, and 3 emissions, deliver products and services on a carbon-neutral basis, and fill out a supply scorecard each year. AstraZeneca suppliers are expected to annually report emissions data to the CDP and set science-based goals. 

While Amazon doesn’t include suppliers in its scope 3 accounting, it’s effectively dealing with this in the way many other firms have started doing, by forcing suppliers to report emissions to them and set goals which emissions levels can then be tracked against. “We know that to further drive down emissions, we must ensure those in our supply chain make the operational changes necessary to decarbonize their businesses,” Amazon said in the sustainability report. 

Third-party sellers and suppliers — especially smaller ones — face a paradox as the climate mandates arise and become increasingly tougher. Even if they’re eco-conscious, many say they don’t have the resources to meet the tracking and reporting demands. 

Eight in ten small and medium-sized business owners say reducing emissions is a high priority, yet 63% also say they don’t have the right skills, and 43% say they lack the funds, according to a survey from the non-profit SME Climate Hub. In a survey from Intuit QuickBooks, two-thirds of small business owners said they were taking steps to reduce their environmental impact, such as recycling and using renewable materials. Businesses that weren’t acting cited a lack of money, time, and resources. 

“Tracking emissions data is no easy feat,” says Karen Kerrigan, president and CEO of the Small Business & Entrepreneurship Council. 

She says compliance costs can vary, but upfront expenses can be considerable, which is challenging for the many firms with a tight cash flow.

The information is out there to start getting a handle on the task. Yet, one of the first things that business owners will learn is that it is going to be time consuming, says small-business owner Chaitali Patel, who founded the sustainability advisory firm Evergood. She points to a 152-page document on scope 3 supply chain accounting and reporting from the Greenhouse Gas Protocol, which provides standards for measuring and managing emissions. 

“If you look at the process of data collection and recordkeeping alone to comply with these requirements, it will take up significant resources,” Patel said. 

Small businesses already under economic stress

Amid ongoing fears of recession, higher interest rates cutting into sources of capital, signs of weaker consumer demand, and labor market challenges, small businesses have focused more on employees and their bottom line than sustainability. When asked what issues matter most to them, nearly 40% said jobs and the economy, while 10% said the environment, according to the CNBC|SurveyMonkey Small Business Survey for the third quarter. 

Yet ready or not, suppliers big and small will have to step up soon. “This is coming,” he said. “The procurement arm of the business community is reaching into their supply chains and is starting to ask more pointed questions.”

In addition to the pressure from investors and politicians, another reason big companies will be looking farther down the supply chain is because they are currently coming up short in their emissions reduction goals. Amid the boom in consumer demand and global growth post-pandemic, many of the world’s largest corporations are producing more carbon emissions than they can reduce.

A recent review by the New York Times of climate documents for 20 major food and restaurant companies found that over half have made no progress in reducing emissions or are increasing emissions. The report found, as previous climate accounting has typically shown, that the majority of emissions come from suppliers.

A recent Just Capital report found that more companies than ever before are making carbon reduction commitments, but the results aren’t there yet in the disclosures. Of companies with existing science-based targets, only 26 out of 123 in the Russell 1000 disclosed emissions reductions. Meanwhile, among companies without specific targets — just general net zero targets — emissions have gone up.

Companies that want to retain high-quality suppliers are apt to help partners meet any sustainability requirements, says Mark Baxa, the present and CEO of the Council of Supply Chain Management Professionals.

Corporate giants are offering assistance that ranges from direct funding and better terms to training and access to clean tech.

For its part, Amazon said in its sustainability report that it will use its “scale, investment, and innovation to date to provide our suppliers with products and tools that will help them reach their goals — whether that’s transitioning to renewable energy or having more access to sustainable materials.”

But the retail giant also made clear that there may be consequences for partners that don’t measure up. “We will continue to look for suppliers that help us achieve our decarbonization vision as we select partners for business opportunities,” Amazon said in its report.

Amazon spokespeople declined to comment beyond its publicly available materials.

In the end, it comes down to suppliers choosing what works for their business.

“The suppliers themselves and the suppliers of suppliers have to come to their own independent decision on how they’re going to approach this,” Baxa said.

At the same time, companies have to address scope 3 emissions. “Often, they’ll go with a supplier who can comply,” he said. And for those that don’t, “Eventually, the hard conversation will take place.”

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How to buy insurance for a business so financial disaster doesn’t strike

Many Main Street businesses could be playing with fire — literally — by not maintaining appropriate levels of business insurance coverage, especially given the spate of natural disasters affecting multiple areas of the U.S.

Skimping on property damage and business interruption coverage is understandable to some extent, given the cost. While the price of a business owner’s policy — designed for small businesses in low-risk industries — varies based on a variety of underwriting factors and optional coverages selected, generally speaking, a small business owner might pay somewhere between $500 and $3,500 per year for this type of policy, according to Pogo, which helps owners find insurance.

But pinching pennies can be foolhardy as climate change continues to impact the severity of weather-related events. As of Sept. 11, there had been 23 confirmed weather/climate disaster events this year with losses exceeding $1 billion each in the U.S., according to The National Centers for Environmental Information, which was above both the long-term and five-year annual averages. These events included two flooding events, 18 severe storm events, one tropical cyclone event, one wildfire event, and one winter storm event. 

Hurricanes don’t just happen in Florida and tornadoes don’t just touch down in Kansas, said John Hyland, who leads the Sentry Insurance unit that providers business insurance solutions. Especially with weather patterns changing, a natural disaster is “coming to your neighborhood more and more often,” he said. 

Consider Friday’s flash floods in New York as an example of this new reality.

Here’s what small businesses need to know about business insurance amid climate change:

Understand property damage exclusions and deductibles — the fine print matters more than ever.

There’s often a big disconnect between coverage business owners think they are getting and what they actually are getting, said Hubert Klein, partner and practice leader for the Financial Advisory Services Group at EisnerAmper. They should press for greater detail with insurance agents and know, for instance, what property damage is covered and what exclusions may apply. They should also know what their deductible is and when coverage kicks in. It’s also important to understand whether the policy covers the full cost of replacement cost and what limitations apply.

Owners also have to understand the nuances of business interruption coverage, which can include waiting periods, co-insurance requirements and provisions for civil authority bans, when certain areas are declared inaccessible after a disaster. 

The fine print matters, Klein said. He offers the example of a business with multiple locations and roughly $20 million of coverage. If there’s a $1.5 million per-location limit and the business suffers extensive damage to multiple facilities, the business may not be adequately covered. By contrast, a policy that has a blanket limit might be more favorable, even with a slightly lower limit overall, Klein said.

Don’t rely on a policy’s ‘summary’ info or opt for lower cost without a thorough understanding of coverages.

Many small businesses chase prices without understanding what they are giving up, Klein said. At renewal time, they may get sticker shock and ask for a premium reduction, but they don’t always understand there are trade-offs for a $300 or $3,000 policy reduction, he said. He recommends owners read their policy carefully, not relying solely on the summary of costs or summary of coverages. 

Run through likely weather scenarios and don’t expect to ‘beat the storm.’

To ensure they are appropriately covered, owners should perform a thorough evaluation of what could go wrong with respect to their business property, whether that’s fire, flood, hurricane or something else. This analysis should take into account how much cash the business owner has on hand in the event of a disaster.

Owners “tend to think they can outsmart the weatherman or beat the storm,” Klein said. 

Even businesses that aren’t directly affected by disasters can face unexpected issues. In the aftermath of Superstorm Sandy, for example, some businesses didn’t have direct damage to their facilities, but utility company issues left them without power for weeks, Hyland said. Businesses that were properly covered for this type of occurrence had a source of revenue to continue paying their employees and the other expenses, he said.

Decisions related to specific coverage, endorsements and deductibles will vary based on a particular business’s needs, but it’s important to understand the various exposures, Hyland said. Even if businesses decide not to purchase particular coverages, they shouldn’t be oblivious to the potential exposure, he said.

Conduct an annual review and include inflation in business valuation and property replacement cost estimates.

Inflation makes the cost of replacing property more expensive, and the coverage you planned for three years ago may no longer be appropriate given a changed price environment. Yet many businesses don’t re-evaluate their insurance needs and coverage yearly, Klein said. 

Most business policies build in inflation-adjustments, but they often aren’t enough to keep up with real-world scenarios such as supply issues, significantly higher labor costs and longer completion times, said Nancy Germond, executive director of risk management and education at The Independent Insurance Agents & Brokers of America.

Check if more emergency cash might be required in your geographic market.

In certain areas of the country, the deductible for perils related to fire, wind and hail are higher than deductibles for other covered events, said Jen Tadin, managing director of the global small business practice at Gallagher, an insurance brokerage and risk management consultant. Especially in riskier markets, business owners may have to keep more cash on hand than say 30 or even 45 days, especially when there are higher deductibles to consider. “We can’t change the fact that in Florida, you’ll have a higher deductible. But you have to plan for it,” Tadin said.

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AI is policing the package theft beat for UPS as ‘porch piracy’ surge continues across U.S.

A doorbell camera in Chesterfield, Virginia, recently caught a man snatching a box containing a $1,600 new iPad from the arms of a FedEx delivery driver. Barely a day goes by without a similar report. Package theft, often referred to as “porch piracy,” is a big crime business.

While the price tag of any single stolen package isn’t extreme — a study by Security.org found that the median value of stolen merchandise was $50 in 2022 — the absolute level of package theft is high and rising. In 2022, 260 million delivered packages were stolen, according to home security consultant SafeWise, up from 210 million packages the year before. All in all, it estimated that 79% of Americans were victims of porch pirates last year.

In response, some of the big logistics companies have introduced technologies and programs designed to stop the crime wave. One of the most recent examples set to soon go into wider deployment came in June from UPS, with its API for DeliveryDefense, an AI-powered approach to reducing the risk of delivery theft. The UPS tech uses historic data and machine learning algorithms to assign each location a “delivery confidence score,” which is rated on a one to 1,000 scale.

“If we have a score of 1,000 to an address that means that we’re highly confident that that package is going to get delivered,” said Mark Robinson, president of UPS Capital. “At the other end of the scale, like 100 … would be one of those addresses where it would be most likely to happen, some sort of loss at the delivery point,” Robinson said.

Powered by artificial intelligence, UPS Capital’s DeliveryDefense analyzes address characteristics and generates a ‘Delivery Confidence Score’ for each address. If the address produced a low score, then a package recipient can then recommend in-store collection or a UPS pick-up point. 

The initial version was designed to integrate with the existing software of major retailers through the API —a beta test has been run with Costco Wholesale in Colorado. The company declined to provide information related to the Costco collaboration. Costco did not return a request for comment.

DeliveryDefense, said Robinson, is “a decent way for merchants to help make better decisions about how to ship packages to their recipients.”

To meet the needs of more merchants, a web-based version is being launched for small- and medium-sized businesses on Oct. 18, just in time for peak holiday shipping season.

UPS says the decision about delivery options made to mitigate potential issues and enhance the customer experience will ultimately rest with the individual merchant, who will decide whether and how to address any delivery risk, including, for example, insuring the shipment or shipping to a store location for pickup.

UPS already offers its Access Points program, which lets consumers have packages shipped to Michaels and CVS locations to ensure safe deliveries.

How Amazon, Fedex, DHL attempt to prevent theft

UPS isn’t alone in fighting porch piracy.

Among logistics competitors, DHL relies on one of the oldest methods of all — a “signature first” approach to deliveries in which delivery personnel are required to knock on the recipient’s door or ring the doorbell to obtain a signature to deliver a package. DHL customers can opt to have shipments left at their door without a signature, and in such cases, the deliverer takes a photo of the shipment to provide proof for delivery. A FedEx rep said that the company offers its own picture proof of delivery and FedEx Delivery Manager, which lets customers customize their delivery preferences, manage delivery times and locations, redirect packages to a retail location and place holds on packages.

Amazon has several features to help ensure that packages arrive safely, such as its two- to four-hour estimated delivery window “to help customers plan their day,” said an Amazon spokesperson. Amazon also offers photo-on delivery, which offers visual delivery confirmation and key-in-garage Delivery, which lets eligible Amazon Prime members receive deliveries in their garage.

Debate over doorbell cameras

Amazon has also been known for its attempts to use new technology to help prevent piracy, including its Ring doorbell cameras — the gadget maker’s parent company was acquired by the retail giant in 2018 for a reported $1 billion.

Camera images can be important when filing police reports, according to Courtney Klosterman, director of communications for insurer Hippo. But the technology has done little to slow porch piracy, according to some experts who have studied its usage.

“I don’t personally think it really prevents a lot of porch piracy,” said Ben Stickle, a professor at Middle Tennessee State University and an expert on package theft.

Recent consumer experiences, including the iPad theft example in Virginia, suggest criminals may not fear the camera. Last month, Julie Litvin, a pregnant woman in Central Islip, N.Y., watched thieves make off with more than 10 packages, so she installed a doorbell camera. She quickly got footage of a woman stealing a package from her doorway after that. She filed a police report, but said her building’s management company didn’t seem interested in providing much help.

Stickle cited a study he conducted in 2018 that showed that only about 5% of thieves made an effort to hide their identity from the cameras. “A lot of thieves, when they walked up and saw the camera, would simply look at it, take the package and walk away anyway,” he said. 

SafeWise data shows that six in 10 people said they’d had packages stolen in 2022. Rebecca Edwards, security expert for SafeWise, said this reality reinforces the view that cameras don’t stop theft. “I don’t think that cameras in general are a deterrent anymore,” Edwards said.

The best delivery crime prevention methods

The increase in packages being delivered has made them more enticing to thieves. “I think it’s been on the rise since the pandemic, because we all got a lot more packages,” she said. “It’s a crime of opportunity, the opportunity has become so much bigger.”

Edwards said that the two most-effective measures consumers can take to thwart theft are requiring a signature to leave a package and dropping the package in a secure location, like a locker.

Large lockboxes start at around $70 and for the most sophisticated can run into the thousands of dollars.

Stickle recommends a lockbox to protect your packages. “Sometimes people will call and say ‘Well, could someone break in the box? Well, yeah, potentially,” Stickle said. “But if they don’t see the item, they’re probably not going to walk up to your house to try and steal it.”

There is always the option of leaning on your neighbors to watch your doorstep and occasionally sign for items. Even some local police departments are willing to hold packages.

The UPS AI comes at a time of concerns about rapid deployment of artificial intelligence, and potential bias in algorithms.

UPS says that DeliveryDefense relies on a dataset derived from two years’ worth of domestic UPS data, encompassing an extensive sample of billions of delivery data points. Data fairness, a UPS spokeswoman said, was built into the model, with a focus “exclusively on delivery characteristics,” rather than on any individual data. For example, in a given area, one apartment complex has a secure mailroom with a lockbox and chain of custody, while a neighboring complex lacks such safeguards, making it more prone to package loss.

But the UPS AI is not free. The API starts at $3,000 per month. For the broader universe of small businesses that are being offered the web version in October, a subscription service will be charged monthly starting at $99, with a variety of other pricing options for larger customers.

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Small business confidence is tanking again, especially when it comes to banks and Biden

As President Biden begins to more forcefully build a reelection case citing Bidenomics, Wall Street forecasts and actual GDP data are supportive, as are recent improving sentiment scores from consumers and CEOs. But on Main Street, small business owners remain a difficult group for Biden to win over.

Small business confidence is back at an all-time low, according to the just-released CNBC|SurveyMonkey Small Business Survey for the third quarter. That’s nothing new for Biden, as small business confidence has hung around a low throughout his presidency. In fact, the latest decline in the confidence index to a score of 42 out of 100 matches the all-time low from exactly one year ago.

With a business owner demographic that skews conservative, the twin economic issues of inflation and rising interest rates have compounded the general concerns about a Democratic administration. But at a time when signs are pointing to progress in the fight against inflation and a potential though by no means certain end to Federal Reserve interest rate hikes, the Q3 data presents more specific — and potentially more troubling — concerns for the president.

Even with a resilient economy, with interest rates at a multi-decade high, the number of small business owners who say they can easily access the capital needed to operate their firms continues to decline, now at under half (48%) versus 53% last quarter. This should not come as a surprise, as higher interest rates make banks stricter when it comes to lending requirements, a dynamic that tends to disproportionately punish small businesses, and linger or even intensify the longer a higher rate environment persists. Even for businesses that can secure loans, double-digit percentage rates are a cash flow challenge.

Data released on Monday from small business trade group NFIB reported similar difficulty among business owners attempting to access capital, with over half (58%) who borrowed or tried to borrow reporting high interest rates as their biggest complaint, and 40% of owners saying interest rates were a significant issue in the ability to access capital.

Wall Street banks and Main Street lending

The latest monthly report from alternative lending firm Biz2Credit from earlier this month shows small business loan approval percentages at banks with over $10 billion in assets at 13.3% in July, an approval rate that has been falling steadily and, pre-pandemic, had been as high as 28.3% in February 2020.

Rohit Arora, CEO of Biz2Credit, noted in a release on his firm’s data that as regulators raise capital requirements at some large banks in the years ahead, steps being taken today to prepare include more hesitancy to lend to smaller companies, since these loans can often range from five to seven years in term length.

Beyond recent concerns about the stability of regional banks, rating agencies say that even the largest Wall Street banks are on downgrade watch, not a situation in which banks are likely to be more accommodating to the capital needs of small firms, and in fact, the CNBC|SurveyMonkey data recorded a sharp drop in financial system confidence among business owners who work with large banks.

When it comes to accessing capital, small firms that hold accounts with large banks recorded the largest drop quarter-over-quarter, a 10% decline, from 59% saying it was easy for them to access business capital down to just 49% now. That was a much larger decline than among business owners who bank with a regional bank (down 2% quarter over quarter) and those who work with a community bank (down 4%). The largest group of small businesses (41%) conduct their business with large banks.

SurveyMonkey’s analysis of the data pointed to a gap between business owners who express confidence and a lack of confidence in banks that has widened from just 1 percentage point in Q2 (49% confident, 50% not confident) to 9 points now (45% confident, 54% not confident) this quarter.

“These data are a good reminder that the general economy for small business owners can often be very different from the economy that consumers on one side or large corporations on the other are experiencing,” said Laura Wronski, research science manager at SurveyMonkey.

The CNBC|SurveyMonkey Small Business Survey was conducted among over 2,000 small business owners across the U.S. between August 7-August 14.

While concerns across the economy about the banking crisis have lessened since the last quarter, that is not reflected in the conditions that small businesses are facing.

“Banking concerns have become even more top-of-mind for small business owners now, with their confidence in the U.S. banking system weakening and their ability to access needed capital hampered,” Wronski said.

Biden’s business supporters are increasingly negative

The CNBC|SurveyMonkey quarterly confidence index includes a series of core sentiment indicators related to policy that contributed to the decline back to the all-time low, with more small business owners saying they expect immigration policy and tax policy to be a negative. 

That’s notable, according to SurveyMonkey analysis of the results, with these index components that had the largest drag on the overall scores not those tied to hiring or economic conditions, but “two factors that fall squarely within the remit of the president and Congress.”

Business owner expectations for revenue and hiring were largely unchanged, and the percentage that describe economic conditions as “good” changed only slightly, from 40% to 38%. More describe conditions as “middling,” up from 43% to 46% this quarter. But only 15% describe business conditions as “bad.”

“Small business owners seem to be more heavily factoring the political environment into their confidence estimations than the economic environment. The economy has shown promising growth over the last quarter, with fewer concerns about a recession economy-wide now and less immediate threat from a banking crisis,” Wronski said.

In the confidence index scoring, rather than broader survey questions, there was a notable drop for Biden. According to SurveyMonkey, overall approval of the president now matches the same level as Q3 2022 survey, with 31% saying they approve and 68% saying they disapprove of the way Joe Biden is handling his job as president. The small business survey data matches the overall trend in the recent FiveThirtyEight polling average.

But Wronski said, “What’s really surprising is that general confidence among small business owners is falling now for the first time among Biden’s supporters.”

With the overall confidence index back at the all-time low of 42, the gap in confidence index scoring specifically between Biden’s supporters and his detractors is now a record-low 18 points, according to SurveyMonkey (55 versus 37). Among survey respondents who identify as Democrats, the quarterly confidence score declined from 58 to 52, the lowest it has been since Biden became president. Among independents, the decline was from 49 to 42, the lowest it has been among these respondents since the first quarter of 2021. Republican confidence moved the least, declining from a score of 39 to 37.

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How gas station economics will change in the electric vehicle charging future

As electric vehicles proliferate, some gas stations are making expensive overhauls to add EV charging stations. 

In most cases, they aren’t scrapping traditional liquid fuel pumps. But select locations, including an RS Automotive in Takoma Park, Md., and a Shell station in Fulham, England, have made a full switch.

Location, cost, power requirements and conversion time are among the multiple considerations that factor into a gas station’s decision to convert all or a portion of their existing infrastructure to allow for EV charging. 

“Figuring out how to do this on an active site can be complex and challenging,” said Neha Palmer, chief executive of TeraWatt Infrastructure, which is developing a network of electric vehicle charging centers for fleet operations across California, Arizona, and New Mexico. “How do you sequence the construction when you have vehicles that might want to fuel there?” 

Here’s what gas station owners need to know about the EV charging trend and their future.

The EV fast-charging model

Locations like office complexes, hospitals and hotels typically offer a slower charging option, since people generally stay put for hours at a time. Gas stations, however, are investing in Level 3 chargers, which are more powerful and generally charge a car in 20 to 30 minutes. 

While slower charging stations are often free to motorists, that’s not generally true for fast charging stations, given ongoing operational expenses such as electricity and extra fees charged by utilities in commercial settings, said Seth Cutler, chief operating officer of EV Connect, whose software tools help companies build charging station networks.

Big oil company franchisers and car dealers are on board

For large oil giants, adding EV chargers is both a defensive and offensive play. 

Gas station numbers have been decreasing at a sharp rate in the past three decades and the trend is expected to continue in the coming years, according to Shubhendra Anand, vice president of research and strategy at Market Research Future. In fact, at least a quarter of service stations globally are at risk of closure by 2035 without significant business model tweaks, according to consulting firm BCG.

The Biden administration has a stated goal of having 500,000 electric vehicle chargers nationally where EVs make up at least 50% of new car sales by 2030. By current administration estimates, there are more than three million EVs and more than 130,000 public chargers nationwide.

The European oil majors are among the energy sector leaders in the global EV charging push.

Shell has EV-charging-only mobility hubs in China and the Netherlands, in addition to the Fulham location. The company intends to own more than 70,000 public EV charge points worldwide by 2025, and 200,000 by 2030, according to an email statement from Barbara Stoyko, senior vice president of mobility for Shell Americas.

BP also sees the need for mixed-use hybrid refueling and EV charging stations, according to Sujay Sharma, chief executive of BP’s electric vehicle charging business in the U.S. “Today’s gas stations are well positioned to adopt EV charging due to locations in high-demand areas, in addition to their existing convenience offerings including restrooms, food and beverage,” Sharma stated in an email. 

Franchise car dealers are also increasingly getting on board, thanks to pushes from automakers like GM and Ford.

As of late last year, 65% of Ford’s dealers had opted into the EV certification program (a little under 2,000, according to data shared by Ford), as it has started to make the role of car dealers central to the EV transition process. 

The National Automobile Dealers Association said in a May release that franchise owners will spend an estimated $5.5 billion on EV infrastructure across OEM brands, with per store costs ranging from $100,000 to over $1 million. 

Upfront costs can be jaw-dropping, incentives help

Adding EV charging capabilities is not a one-two decision that owners should take lightly. Indeed, the return on investment could be seven to 10 years on average, according to an estimate provided by Yair Nechmad, co-founder and chief executive of Nayax, a global commerce enablement and payments platform, which offers its services to gas stations.

The hardware and software for fast charging can run between $50,000 for one charger and $500,000 for multiple fast chargers and dispensers, said Michael Hughes, chief revenue officer of ChargePoint Holdings, a technology company that makes EV charging hardware and software to help drivers find local charging stations and amenities. The infrastructure, meanwhile, which includes the cost of breaking ground, running power, permits and contractors, generally costs about twice that, he said.

That makes it advisable to incur all the infrastructure changes upfront, even if a gas station only intends to make a few chargers available at the onset, said Rohan Puri, chief executive of Stable Auto Corporation, which helps make charging stations more profitable for companies that own and operate them. His advice: “Put in as much power as you think you’re going to need in 10 years.”

There are numerous federal, state and utility-based incentives for commercial businesses to purchase and install fast chargers. This includes the U.S. Department of Transportation’s Federal Highway Administration NEVI Formula Program, which provides generous funding to states to strategically deploy EV charging stations. 

Gas station owners can search for information on incentive programs they may qualify for.

Location is a key factor, gas station franchise concerns

Even with incentives, there can be barriers to entry, location being a major factor. According to the U.S. Department of Energy, 80 percent of EV charging happens at home, which makes adding EV charging less appealing for in-town gas stations, Hughes said. Local gas stations also don’t generally have amenities to keep people entertained while they are charging their vehicles.

Real estate can also be prohibitive. A traditional gas station may have two islands with four pumps each for liquid fuel; the same utilization rate would require about 40 charging stations, Hughes said.

By contrast, gas stations along major highways between highly traveled destinations can be ideal for electric charging hubs. These locations tend to have multiple amenities, offering people the opportunity to grab a cup of coffee, get a quick bite to eat, stretch their legs or walk the dog while they charge their vehicle, Hughes said.

Convenience stores like Sheetz, Wawa, Royal Farms and Buc-ee’s that double as gas station operators are also starting to add electric chargers at certain locations, said Albert Gore, executive director of The Zero Emission Transportation Association, a federal coalition that advocates for EVs, and who is a former Tesla and SolarCity executive. It can’t be “a place that you’re just going to run in and buy a Snickers,” Gore said.

While there can be a first-mover advantage for gas stations, some owners, like Blake Smith, founder of SQRL Holdings, a gas station and convenience store operator, are taking it slow. His company operates more than 150 convenience store gas station locations and offers electric charging in select locations in Florida. By contrast, the company hasn’t installed any EV charges in Arkansas, where it has more than 60 stations.

“I would never recoup my investment,” he said, adding that a move to all electric charging could be decades away. “We’re not flipping a switch to where gas vehicles are getting off the road and it will be EV-only.”

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Phishing scams targeting small business on social media including Meta are a ‘gold mine’ for criminals

With so much of daily life happening over social media, it’s not surprising that small businesses are relying more and more on Instagram, Facebook and other platforms to spread the word about their business and sell products.

But there is one big catch: small business owners are at a big disadvantage on these platforms when it comes to cybersecurity. 

Take it from Pat Bennett, an entrepreneur who sold granola in the Cleveland area and got about half of her sales through Instagram. The business was already under pressure from the rising cost and availability of sweeteners and oats when her business Instagram page, Pat’s Granola, came under attack. 

The attack looked innocuous. Bennett received a message on Instagram from a small business owner she knows personally. Using a link, her acquaintance asked Bennett to vote for her in a contest. It was a legitimate contest, and it wasn’t unusual for Bennett to communicate with people on Instagram Messenger. As it turned out, it was an attack that went to everyone in her contact’s address book. Bennett lost control of her Instagram and Facebook accounts and hasn’t regained access, despite using all the channels Meta recommends. 

With help, she was able to track the IP addresses to Europe, but that wasn’t enough to avoid a worst-case scenario. Bennett received a letter saying she could regain control of her accounts if she paid close to $10,000. She declined to pay the ransom and had to start all over again. 

Pat Bennett, a Cleveland-based entrepreneur who sells granola says about half of her sales are through Instagram, but she became victim to an Instagram Messenger hack that resulted in Bennett to losing control of her Instagram and Facebook accounts, and she hasn’t regained access, despite using all the channels Meta recommends.

Source: Pat Bennett

Bennett’s experience isn’t isolated. As it turns out, small businesses like Pat’s Granola are frequent targets of hacking rings. CNBC quarterly surveys of small business owners in recent years have indicated that many do not rate the risk of cyberattack highly, yet the FBI says that in recent years a wave of hacks has targeted small business. In 2021, the FBI’s Internet Crime Complaint Center received 847,376 complaints regarding cyberattacks and malicious cyber activity with nearly $7 billion in losses, the majority of which targeted small businesses.

Small business owners say social media giants such as Meta have done little to help them address the problem. 

A Meta spokesperson declined to offer specific comment in response to small business owner concerns, but pointed to its efforts to protect businesses targeted by malware. The company has security researchers that track and take action against “threat actors” worldwide and has detected and disrupted nearly 10 new malware strains this year. Malware can target victims through email phishing, browser extensions, ads and mobile apps and various social media platforms. The links look innocuous and rely on tricking people into clicking on or downloading something. 

Why Main Street is an easy target 

With marketing and selling over Instagram and other social platforms being an attractive way for small businesses to reach and expand their customer base, it’s not surprising that criminal organizations have followed.

According to SCORE, a nonprofit partly funded by the U.S. Small Business Administration, nearly half of small business owners cited social media as their preferred digital marketing channel. Compare that to 51% who cited their company website and 33% who prefer online advertising. Moreover, 73% of business owners said they consider social media to be their most successful digital marketing channel, with 66% citing Facebook, 42% citing Alphabet’s YouTube and 41% Instagram. 

“Criminals are in the business of stealing, so you’re going to go where you can make money and get away with it. And social media accounts of small businesses are like a gold mine,” said Joseph Steinberg, a cyber security privacy and AI expert, who sees small business social media accounts as “low hanging fruit.” 

Bryan Palma, chief executive officer at Trellix, a cybersecurity company that worked with the FBI and Europol to take down Genesis Market, an “eBay” for cybercrime criminals, earlier this year, said he has been seeing a range of cybercriminals targeting platforms such as Instagram, YouTube and Facebook. Some are independent hackers, while others are larger, organized crime groups that target social media accounts with more than 50,000 followers. 

Common online scams to watch out for

One common scam, Palma said, is criminals will create a fake Instagram page notifying the user that there’s a problem with their post, and they should “click here, and we’ll help you fix it.” The link redirects users to a fake site asking them to type in their Instagram credentials. 

That’s similar to what happened to Cai Dixon, owner of Copy-Kids, which makes video content for kids. Dixon created an active online Facebook group with 300,000 followers and was getting as much as $2,000 a month in performance bonuses. In March, she got a message purporting to be from Meta, asking if she would like a blue badge verification. Because she was already in contact with Meta employees over Messenger, she believed the message and gave her private information. 

Turns out, it was a phishing scheme. Almost immediately, Dixon lost control of the account and the Facebook group she had spent years cultivating. The hackers removed Dixon and all the other page moderators and started posting animal cruelty videos, videos of heavy machinery and fake content. When she finally talked to someone on Facebook, “they said the only thing I could do was to tell all my friends to report it hacked and then they could take it down.” 

Cai Dixon, owner of Copy-Kids, which makes video content for kids, created an active online Facebook group with 300,000 followers and was getting as much as $2,000 a month in performance bonuses. But in March, a phishing scheme led Dixon to lose control of the account and the Facebook group she had spent years cultivating.

Source: Cai Dixon

These common hacks for small businesses offer little recourse.

“It’s especially damning for a small business, which has a pretty minuscule security budget compared to a General Electric or GM, which are running the best tools,” said Greg Hatcher, founder of White Knight Labs. 

Companies with 100 or fewer employees experience 350% more social engineering attacks than larger companies, according to Barracuda, a cloud security company. More than half of social engineering attacks are phishing, and one in five organizations had an account compromised in 2021. 

Social media companies are aware of the problem, but fending off attacks on small businesses is time-consuming and expensive. It’s one matter when a large Fortune 500 company that spends millions on advertising or a high-profile individual encounters a hacker. But when it comes to small business owners, there’s less financial incentive. 

“It is often better for social media companies from a purely bottom line to ignore small businesses when they have problems,” Steinberg said, adding that small businesses are generally getting the service for free or close to free. 

Two-factor authentication and cybersecurity tools

Though the threat seems vast, cybersecurity experts said the most effective defense is fairly basic. Not enough people use the security features that social platforms already offer, like two-factor authentication. Entrepreneurs can also use business password managers, designed for multiple users who may need access to the same accounts. 

“Small businesses don’t have to be completely hung out to dry. They can have good cyber hygiene, with a good password policy,” said Hatcher, emphasizing length, ideally 30-40 characters, over complexity as well as two-factor authentication. 

Knowing what to look for and being wary of any links or requests for information can also go a long way. For the unfortunate who get hacked and lose access to accounts, the Identity Theft Resource Center is a nonprofit that can help victims figure out the next steps.   

For now, the online world is still under-regulated and monitored.

Cyberattacks conducted through tech giants have caught the attention of the federal government’s main cyber agency, the Cybersecurity and Infrastructure Security Agency. In an interview with CNBC’s “Tech Check” in January of this year, CISA director Jen Easterly said, “Technology companies who for decades have been creating products and software that are fundamentally insecure need to start creating products that are secure by design and secure by default with safety features baked in,” she said. But the U.S. government has so far taken a cautious approach with support for small business specifically – a spokeswoman for the U.S. Cybersecurity Infrastructure Agency told CNBC in January that it doesn’t regulate small business software, instead pointing to a blog post with guidance aimed at helping businesses large enough to have a security program manager and an IT lead.

“There are a lot of people spending the majority of their time in the virtual world, but the resources are not as extensive. We still have more resources protecting streets,” Palma said. Some of the big online scams get addressed, but there are many “smaller issues” that are costing people and small businesses real money, but governments and companies aren’t equipped to deal with it. “I think over time, we have to shift that balance,” he said. 

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Franchising industry holds its breath as FTC takes a closer look at regulations

The franchising industry is bracing to see whether the U.S. will change how it regulates a structure that fuels brands from McDonald’s to Marriott.

Last month, the Federal Trade Commission wrapped up a public comment period in response to its request for information on the sector and its business practices. The agency sought input from stakeholders, including franchise operators, workers and parent corporations, as it scrutinizes franchising practices.

The move suggested the FTC is potentially considering closer regulation of the sector — with big implications for some of the largest restaurant and hospitality companies in the U.S. and their employees. The agency declined to comment on any potential changes or when they could come.

Now the industry awaits an outcome. 

The FTC told CNBC it received more than 5,500 comments on the inquiry, indicating “broad interest in ensuring fairness in franchising.”

“We are thoroughly reviewing each comment and are assessing next steps. All options are on the table,” an FTC spokesperson said in a statement. The agency’s statement earlier this year on its request for information said it “would begin to unravel how the unequal bargaining power inherent in [franchise] contracts is impacting franchisees, workers, and consumers.”

Franchising is a major contributor to the U.S. economy. The International Franchise Association, the industry’s leading advocate, says its membership covers more than 300 business format categories and some 800,000 businesses in the country that employ millions of workers.

A potential change to franchise regulations fits into the FTC’s broader oversight agenda, as the agency proposes banning noncompete clauses and considers whether the policy should apply to clauses between franchisors and franchisees. FTC Chair Lina Khan’s regulatory push has also targeted corporate giants like Microsoft and Activision, Twitter and Amazon.

Aside from potential rulemaking shifts at the FTC, the industry is also watching for changes to joint employer rules and local regulations like AB 1228 in California, both of which stand to shift more liability to parent companies of franchised businesses. 

Industry watchers say an initial proposal from the FTC on franchise rule amendments could come as soon as the end of year. In its submission to the FTC, the IFA raised concerns about how the FTC could use the public comments to shape new rules.

“We are particularly troubled that the Commission might rely on those anecdotal accounts, including many made anonymously, to engage in a formal rulemaking process that would halt the growth of franchised businesses with overly restrictive regulation of franchise relationships, to the detriment of consumers, business owners and workers,” the advocacy group said.

IFA President and CEO Matt Haller said the group is concerned about “one-size-fits-all” regulatory changes. Customers want a consistent experience, but also one that evolves to meet their needs, he said.

“If the FTC limits the ability for franchisors to evolve their systems to meet customers’ demands, then that’s negatively going to impact franchisees, because customers will stop patronizing these businesses if they’re not able to get the products and services they want in a consistent and convenient fashion,” Haller said in an interview, pointing to successful operating changes that franchisors made during the pandemic as an example.

Some labor advocates hope potential oversight changes improve working conditions for franchised employees. In its submission, the Service Employees International Union and the Strategic Organizing Center had pointed words about franchising and worker relationships.

“The extractive franchise model, based on franchisors having meticulous control over – but virtually no responsibility for – numerous small businesses, results in lowmargin businesses under constant pressure to reduce costs and cut corners, in which labor costs are almost the only cost variable the franchisees control. Our evidence of worker harm demonstrates that workers ultimately bear the brunt of this exploitative system designed primarily to enrich the firm at the top – the franchisor,” the groups’ comments said.

Major brands that use the model including Marriott, Hilton, Yum! Brands and Sport Clips, along with franchisees, submitted commentary highlighting the positive aspects of franchising. Some urged the FTC not to make regulatory changes or treat the industry as one, as many concepts operate under the broader sector’s umbrella.

McDonald’s was among the large restaurant brands that saw comments submitted to the FTC from both operators and the corporation. The National Owners Association, an advocacy group of over 1,000 McDonald’s franchisees, encouraged its membership to submit comments to the FTC on both franchising and noncompete clauses found in its contracts.

Some owners have clashed with the fast food giant over changes its made over the last year to how restaurants are graded and how franchise contracts are renewed.

The NOA’s public submission said, “The McDonald’s system was, and could again be, the gold standard for the franchise business model. The comments and examples provided here by members of the NOA are meant to illustrate how time has not made the franchisee-franchisor model stronger, but sadly more adversarial, less cooperative, and severely fractured.”

In a statement to CNBC on the FTC’s request for public comment, McDonald’s highlighted the role its franchise system plays in boosting small business owners and creating jobs. McDonald’s said it shares the agency’s view that the model should benefit “everyone: customers, franchisees, workers, suppliers, franchisors, and local communities,” adding, “that’s precisely what our franchise system has done for over six decades.” 

“Our franchise model thrives on having a common set of standards and requirements that ensure equitable treatment of franchisees, protection of franchisee investments and secured value for the McDonald’s brand,” the company said. “A one-size-fits-all regulation threatens the successful investments these small business owners have made in themselves and their communities.”

The National Franchisee Leadership Alliance’s Chair Danielle Marasco echoed that sentiment in a statement shared with CNBC.

“The NFLA, the only elected representative voice of McDonald’s franchisee organizations across the U.S., is opposed to any regulation that would undermine our franchise system and threaten our independent ownership rights,” Marasco said. “Since McDonald’s founding in 1955, our franchising model has successfully served the brand, franchisees, employees and the local communities we operate in.”

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