Earlier today Thumbtack released our 2015 Small Business Friendliness Survey.
Based on nearly 18,000 responses from Thumbtack pros across the country, the study asks respondents to rate their state and city governments across a broad range of policy factors. We use those responses to grade 36 states and 95 cities for their friendliness towards small business. This is the largest survey of its kind and the only metric of the business environment that is based directly on the responses from very small, hard-to-reach business owners like the ones who use Thumbtack.
What makes our business owners special?
Small business users of Thumbtack have several things that make their perspectives unique and important to policymakers:
- They are hard to reach – These businesses tend to be very small, mobile service businesses. 90 percent have five employees or fewer, and about half are working alone. They tend not to be a part of trade organizations, and they don’t have any dedicated organization that speaks for them. This is a population that makes up about 20 percent of the workforce who work alone or at very small firms. And it is very hard to learn what they think.
- Service businesses matter – Thumbtack businesses tend to be slightly younger and more ethnically diverse than business owners nationwide, and we skew strongly towards people in service industries. Service industries make up about 80 percent of the employment in America today, and the long-term future of the country for jobs that are difficult to automate or outsource is in the service economy.
- Policies that affect them may someday affect everyone – Given that all the signs point towards increasing automation of once difficult tasks, it is more important than ever that individuals be empowered to work for themselves to share their unique skills with members of their communities. Policy environments that are friendlier to entrepreneurs will be more resilient during economic downturns, and provide alternatives other than traditional employment to the individuals who benefit from them.
This was our biggest sample ever in our survey, so we were able to dig deeper into the regulatory environment than we ever have before.
Our findings have been pretty consistent from year-to-year, with some interesting twists in the labor market this year. We have found that state and city governments that promote local business training and focus on ease of regulatory compliance are consistently perceived as being friendliest to small business. Once again, we found that entrepreneurs’ perceptions of their tax burdens were among the least important factors in judging governments. And we also showed that small business owners were of two minds when it comes to professional licensing – while some pros feel the licensing rules of their city or state were unnecessary burdens, other pros reported they supported the licensing rules for their profession, they just wanted to see them enforced more consistently.
This year our results show:
- Licensing was again more important than taxes – When evaluating their cities, small businesses said the ease of compliance with licensing rules mattered far more than tax rates, and that taxes mattered far less than any measure of regulatory compliance. For example, labor rules were 88 percent more important in driving state friendliness scores when compared to tax rates.
- Effective licensing was just as friendly as no licensing – Small business owners who found licensing compliance to be “very easy” were just as favorable towards their city governments as respondents who weren’t required to be licensed at all. By contrast, licensed professionals in cities with complicated requirements or inconsistent enforcement reported the lowest approval rates.
- Training experience was the top factor in both state and city rankings – Offering training on how to build and run a business and how to navigate the local economic and policy environment was the single biggest factor that influenced perceptions of friendliness. In cities, training was 78 percent more important than the number two factor. On the state level, small businesses who had a positive training experience were 1.5 times more likely to rate their states as being very supportive.
- High quality websites matter – Investing in a high quality, easy-to-use website that provides useful information and decreases the costs of regulatory compliance improves overall perceptions of a local or state government. Business owners who said their city had a “great” website ranked their cities 13 percent higher, while there was no difference in the rankings of business owners who were either unaware of or had had a bad experience on city websites.
Much has been written recently about a crisis of entrepreneurship in the United States, as seen the broad collapse of self-employment across industries and states and a declining rate of business starts. We believe that because of these trends, creating the right environment for small, unproven business start-ups is more important than ever.
Best and Worst Climates for Small Business
Thumbtack.com surveyed 17,633 small businesses across the United States. The 36 question survey, originally developed with experts at the Ewing Marion Kauffman Foundation in Kansas City, asked questions about the friendliness of states and cities toward small business, including specific questions about the regulatory environment for labor, tax, and licensing rules.
We then evaluated states and cities against one another along more than a dozen metrics.
Respondents to the survey were largely very small service businesses with fewer than five employees. Every state in the country was represented, although only states with more than 50 responses and cities with more than 30 responses were given a grade. Read more below: