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States Ranked on Small Business “Friendliness”

By | 07.01.14

States Ranked on Small Business “Friendliness”

Thumbtack and Ewing Marion Kauffman Foundation just released the third annual Thumbtack.com Small Business Friendliness Survey. Thumbtack.com is an online broker for area consumer service providers, while the Ewing Marion Kauffman Foundation is a private foundation that encourages entrepreneurship.

Small business owners were asked to rate their states on 10 areas concerning:

  1. ease of starting a business
  2. ease of hiring
  3. licensing
  4. regulations
  5. health and safety
  6. tax code
  7. employment, labor, and hiring
  8. environmental
  9. zoning
  10. training and networking

The top five states in this year’s Small Business Friendliness Survey were:

  1. Idaho
  2. Louisiana
  3. Texas
  4. Utah
  5. Virginia

California, Rhode Island, and Illinois ranked among the least friendly of the United States for small business.

Information was based on responses received from over 12,600 business owners across the county, according to a report by Business Administration Information. Texas, Utah, and Idaho have each placed in the top five every year that the survey has been in place.

Best scores varied by category:

  • Texas ranked best in zoning
  • Idaho ranked best in employment labor and hiring
  • Utah ranked best in overall friendliness

The majority of the states and 82 cities received letter grades that ranged from “F” to “A+.”

Top 3 Cities:

  1. Colorado Springs, Colorado
  2. Boise, Idaho
  3. Houston, Texas

Sacramento, California; Providence, Rhode Island; and Buffalo, New York received the lowest grades.

California, Rhode Island, and Illinois received “F” rankings; California and Illinois dropped from “D” rankings in 2013. California and Rhode Island have consistently ranked very low since the inception of the survey and have received the worst grades in employment hiring and labor, while Illinois ranked the lowest in overall friendliness and Connecticut and New Jersey received “D” ratings.

Georgia was ranked among the friendliest states and Atlanta one of the friendliest cities, according to The Atlanta Journal-Constitution, ranking 10th nationwide for the second year.

Thumbtack.com’s chief economist, Jon Lieber, said that firms reported that Pennsylvania’s regulations were difficult to comprehend, that it offered insufficient training programs, and that its tax code was confusing, according to Newswork. “We found that most of our respondents weren’t too up in arms about the amount of taxes that they were paying,” he said. “The tax rate wasn’t as important as the ease of complying with, and understanding, the tax code, so Pennsylvania got a ‘D’ in this area.” Philadelphia and Pittsburgh also earned “D” grades. “It can be hard to hire workers in Philadelphia. The employment, labor, and hiring regulations are considered pretty unfriendly, and it’s also difficult to start a business,” added Lieber. “In Pittsburgh, those things are both true, but even worse.” Because there were not sufficient respondents, Delaware was not included.

“Policymakers put themselves in the best position to encourage sustainable growth and long-term prosperity by listening to the voices of small business owners themselves,” Dane Stangler, vice president of Research and Policy at the Kauffman Foundation, said.

The Business Journals indicated that about 19 percent of small business owners indicated that  they were not able to implement the Affordable Care Act. Also, female business owners were likelier, when compared to their male counterparts, to indicate that state governments were friendly to big businesses. Men were likelier to look more positively on their states’ economies.

The key issue for small business owners was business-friendly licensing regulations, which was closely followed by ease of tax filing, although tax rates came in as the least critical element. In fact, two-thirds of business owners responded that they were taxed fairly; rates were neither too high nor two low. Of the small businesses that ranked their states highest for overall friendliness, they indicated that their states were effective in informing them about government-sponsored training programs. This fact alone raised some states overall friendliness ratings by 10 percent, Business Administration Information reported.

References:

Ojaide, Dafe. “Survey: Idaho, Louisiana, Texas, Utah and Virginia Ranked Most Small Business Friendly States“; Business Administration Information. June 27, 2014.

Otterbein, Holly. “Small businesses Give Pa., N.J., Philly Dismal Ratings“; Newsworks. June 30, 2014.

Markiewicz, David. “Georgia, Atlanta “Friendly” to Small Business“; Atlanta Journal-Constitution. June 24, 2014.

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