SMB-Friendly States and Cities

SMB-friendly states and cities

Small- to medium-sized businesses (SMBs) want a lot of the same things that bigger businesses do. They want business-friendly regulations, tax rates, et cetera.

But SMB owners have slightly different concerns than large corporations do. Here are some of the main factors that make states and cities business-friendly for SMBs.

SMB Top 3 Priorities

Large corporations are plug-and-play in some ways. They need infrastructure, transportation and other things, but they don’t really need help running their businesses.

SMBs, including startups, often need help with maintaining, developing and growing their businesses. Consequently, small business owners prioritize a little differently than boards of Fortune 500 corporations.

Here are the top three concerns for small business owners in 2016, according to a survey by Thumbtack.

Quality training on developing a business and navigating the local economic and policy environment is the most important factor that influences a small business’s perception of business friendliness…

Ease of compliance with licensing rules mattered far more than even tax rates. Cities where licensed professionals find complicated requirements or inconsistent enforcement had the lowest approval scores…

Small businesses are increasingly equating the user friendliness of a city’s small business-oriented websites with the business-friendliness of the city.

Easy-to-use websites that provide useful information and decrease the costs of regulatory compliance improve overall perceptions of a local or state government. Business owners who said their city had a “great” website ranked their cities 13 percent higher than those who ranked theirs lower.

Ease of Compliance Versus Tax Rates

The survey by Thumbtack found that small business owners care less about tax rates than they do about complicated compliance procedures.

On the city level, they’re concerned mostly with licensing requirements, while on the state level they’re concerned mostly with tax regulations.

Labor regulations are also a concern, although they tend to matter more when the economy is on solid footing and the job market is strong. (With the economy rebounding and unemployment down, companies are hiring more and are, understandably, more concerned with favorable labor rules.)

Why is complying with regulations more important to small business owners than paying more in taxes?

SMB owners typically have tight budgets, especially startups. A larger tax burden can certainly affect an SMB’s bottom line.

However, SMBs almost always have limited resources. They often have to execute compliance procedures with limited resources and expertise. Sometimes it’s the business owner making sure the company stays in compliance and not a tax or labor professional at all.

Meanwhile, non-compliance can cost a lot more than extra tax dollars. Non-compliance can sink a company.

It’s not the compliance requirements that small business owners object to—it’s complicated compliance procedures. The easier it is for a company to comply with local and state regulations, the more likely the company is to succeed.

SMB-Friendly States and Cities

According to the Thumbtack survey, here are the most SMB-friendly states and cities in the country.

The states on top of the list are Texas, New Hampshire, Utah, Louisiana, Colorado, Idaho, Tennessee, Virginia, Georgia and Kansas.

The cities on top of the list are Manchester (New Hampshire), Dallas (Texas), Richmond (Virginia), Austin (Texas), Knoxville (Tennessee), Nashville (Tennessee), Houston (Texas), Fort Collins (Colorado), Boulder (Colorado) and San Antonio (Texas).

SMB-Friendly States and Cities

SMB owners need good infrastructure, lower tax rates and generally business-friendly regulations, like any business. But they need other things as well.

Easy compliance, training or business incubator opportunities as well as good communication with local and state governments are particularly important to SMB owners.


By Charlie Smith

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