Starting a business is more than just creating a product or service, renting space, and putting an Open sign in the window; there are also plenty of legal and governmental compliance hoops that you have to jump through. Many of these regulations are made at the city and state level, which means that cities and states vary widely in how easy it is to start a small business. A new Thumbtack survey is shedding some light on this topic, with a ranking that lists the least and most business-friendly cities and states.
Small Business Friendliness Survey
Data for the ranking comes from the Small Business Friendliness Survey, which has been conducted every year since 2012. In the 2016 survey, over 12,000 small business owners rated 35 states and 78 cities across the United States. The respondents represent a range of skilled services and industries, including home improvement, personal services, events & weddings, professional services, and others.
What Makes a City or State Business-Friendly?
In addition to the overall ratings, respondents scored their city and state on a number of sub-categories, including:
- Ease of Starting a Business
- Ease of Hiring
- Health & Safety
- Employment, Labor & Hiring
- Tax Code
- Training & Networking Programs
The factors that are most important to small business owners include licensing requirements, tax regulations, and hiring rules; since 2012, these areas have been ranked as the top concerns for businesses. Cities and states that were ranked higher in these areas were more likely to be perceived as business-friendly.
It’s interesting to note that most states get a ‘mixed bag’ rating when looking at the individual elements listed above. For example, New York received a B in Ease of Hiring, but an F in Licensing. California received a B- in Training & Networking Programs, but an F in Environmental. Only a few states show a consistent pattern. For example, Texas is overall favorable, with its “worst” grade being a B in Training & Networking Programs, and New Jersey is overall unfavorable, with its “best” grade being a C- in Ease of Hiring.
To explore the results, Thumbtack has created a neat interactive tool that displays the state and city ratings for each of the individual elements.
Most Business-Friendly Cities and States
So which areas are perceived as the most business-friendly? Here’s a look at the cities and states that topped the charts:
- San Antonia, TX (Grade A+, up from an A in 2015)
- Nashville, TN (Grade A+, same as 2015)
- Memphis, TN (Grade A+, up from a C+ in 2015)
- Fort Worth, TX (Grade A, up from an A- in 2015)
- Houston, TX (Grade A, down from an A+ in 2015)
- Texas (Grade A+, same as 2015)
- Utah (Grade A+, same as 2015)
- Tennessee (Grade A+, up from an A in 2015)
- Georgia (Grade A, same as 2015)
- Colorado (Grade A, same as 2015)
Least Business-Friendly Cities and States
Finally, the cities and states that got the lowest ratings include:
- Syracuse, NY (Grade F, down from a C- in 2015)
- Oxnard, CA (Grade F, down from a C- in 2015)
- San Francisco, CA (Grade F, down from a C in 2015)
- Bridgeport, CT (Grade D, down from a B- in 2015)
- Tucson, AZ (Grade D, down from a C in 2015)
- Connecticut (Grade F, same as 2015)
- Illinois (Grade F, same as 2015)
- California (Grade F, same as 2015)
- New York (Grade D, same as 2015)
- Alabama (Grade D+, down from a B in 2015)
Once again, to see the scores of all 35 states and 78 cities, check out the Thumbtack interactive tool.
The Thumbtack Small Business Friendliness Survey demonstrates that there is lots of variation in how easy it is to start a small business depending on your geographic location. This fact has been recognized by the Small Business Administration; in fact, in our interview with SBA administrator Maria Contreras-Sweet, she told us about their Startup in a Day initiative that is aimed at working with local governments to help them make it easier to start a business in their city. Such programs are vital to creating more business-friendly cities and states where small businesses can flourish.