Starting a Small Business? Which States are the Friendliest?

Small businesses need all the help they can get these days. So if your company resides in one of the friendlies states for small business, you have something going for you. Thumbtack.com, in partnership with the Ewing Marion Kauffman Foundation, recently released the second-annual Thumbtack.com Small Business Friendliness Survey showing that Utah, Alabama, New Hampshire, Idaho and Texas rated as the top-five friendliest states for small business.

In contrast, small business owners gave Hawaii, Maine and Rhode Island an “F,” while California and Illinois rounded out the bottom five, both earning a “D” grade. The top performing cities were Austin, Virginia Beach and Houston.

Thumbtack.com surveyed 7,766 small businesses across the United States. The survey asked questions about the friendliness of states and cities toward small business, such as:

  • “How would you rate your state’s support of small business owners?”
  • “Would you discourage or encourage someone from starting a new business where you live?”
  • “Do you think you pay your fair share of taxes?”

It is the only survey to obtain data from an extensive, nationwide universe of job creators and entrepreneurs in order to determine the most business-friendly locations. While there are various “business climate rankings” that rate locations as good or bad for business, there are no others that draw upon considerable data from small business owners themselves.

“Small businesses are top-of-mind for lawmakers nationwide, but too often their needs are more a matter of conjecture rather than actual evidence,” says Sander Daniels, co-founder of Thumbtack.com. “Some 7,000 businesses owners across the country have told us that they care about a lot more than just taxes – for most businesses, simple licensing regulations and helpful training programs are even more important to their success.”

Some of the survey’s key findings include:

  • Texas had three of the top five cities (Austin, Houston and San Antonio), while California was home to three of the bottom five (Los Angeles, San Diego and Sacramento). Newark, NJ finished last in this year’s rankings.
  • Professional licensing requirements were 30 percent more important than taxes in determining a state’s overall business-friendliness, confirming the findings from last year’s study. Furthermore, this year’s research revealed that 40 percent of U.S. small businesses are subject to licensing regulations by multiple jurisdictions or levels of government.
  • Small businesses were relatively unconcerned with tax rates – more than half of small business owners felt they pay about the right share of taxes.
  • African-American and Hispanic small business owners were significantly more likely than their white counterparts to encourage others to start a new business.
  • North Carolina was the most improved state, making strides across multiple categories and rising from a “C+’” to a “B+” grade overall.
  • The ease of obtaining health insurance was an important factor for many businesses. One-third of small business owners rated obtaining and keeping health insurance as “Very Difficult,” versus only 6 percent who rated it “Very Easy.”

 

The full survey results include full sets of rankings, dozens of easily searchable quotes from small businesses nationwide, regional comparisons within states, and Census data comparing states’ and cities’ key demographics against those of other states and cities.