Many study rankings distill all of the evaluated factors into one final number. While having the advantage of providing a simple and easily comparable result, we felt that this is an oversimplification and fails to provide the level of detail that is needed by small businesses and those studying them. Acknowledging that different factors are important to different businesses, we provide rankings and grades for each category. Although we do assign a ranking and grade for “Overall Business Friendliness,” it is based on its own questions, and not a combination of the other questions in the survey.
Small business owners ranked Idaho, Texas and Oklahoma as the most friendly states to small business, with Oklahoma City and Dallas-Ft. Worth taking top honors among cities across the nation. Vermont and Rhode Island found themselves on the opposite end of the spectrum, joined in the bottom-five by New York, California and Hawaii. Beyond the overall grades and rankings, there were other data points worth considering, particularly in the context of a national conversation about what we need to get small businesses growing again.
A focal point of the national debate over job creation is the overall tax rates in states and municipalities. And while many might assume that a location’s tax structure would be a dominant factor in overall small business friendliness, our survey found that small businesses actually care nearly twice as much about the area’s licensing requirements. Over half of respondents were subject to special regulations, like annual licensing fees for pet sitters or months-long permitting processes for electricians, and the ease of complying with these requirements was by far the most important factor in determining overall small business friendliness. Striking the right balance between making it easier for businesses to start their enterprise and protecting consumers should be an important priority for lawmakers.
Another one of the best predictors of small business friendliness is whether small business owners are aware of state or local governments offering training programs for small businesses. This is a point often lost in the national debate, but there is a role that state and local governments can play. They can help foster job creation in their communities by ensuring that local would-be entrepreneurs have the opportunity to receive certain training programs. Small business owners aren’t pining for less government as much as they are for smarter government.
Overall, our Small Business Survey paints a nuanced picture of the conditions that entrepreneurs value when considering whether to start a business. For example, the local tax code is more important than the cost of hiring a new employee to would-be small business owners in Texas, while the opposite is true in California.
So much of the debate in Washington surrounding job creation is focused on what Washington can do to create jobs and get the economy growing. If anything, federal policymakers should take note that the one-size-fits-all policy prescriptions coming from Washington may not hold the key to economic growth. It appears that job creation, like politics, is local.
Sander Daniels is a co-founder of Thumbtack.com, a website for consumers looking for services from local, pre-screened businesses.