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Thumbtack.com & Kauffman rate the best states in which to start a business

Thumbtack.com, in partnership with the Ewing Marion Kauffman Foundation, today released the third annual Thumbtack.com Small Business Friendliness Survey showing that small business owners in Utah, Idaho, Texas, Virginia and Louisiana gave their states the highest rating for friendliness to small business. Small businesses in Colorado Springs, Boise and Houston gave their cities the highest ratings.

In contrast, small business owners gave California, Rhode Island and Illinois an "F," while Connecticut and New Jersey both earned a "D" grade. Sacramento, Providence and Buffalo were the survey’s worst-performing cities as rated by their small business owners.

Thumbtack.com surveyed 12,632 small businesses across the United States. The survey asked questions about the friendliness of states and cities toward small business, such as:
  • "In general, 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?" and
  • "Do you think you pay your fair share of taxes?"
The Thumbtack.com Small Business Friendliness Survey is the largest survey of its kind and is the only survey to obtain data from an extensive, nationwide sample of small business owners to determine the most business-friendly locations. The survey ranked 82 cities and most states on what makes a positive environment for small businesses.

“Creating a business climate that is welcoming to small, dynamic businesses is more important than ever, but rarely does anyone ask small business owners themselves about what makes for a pro-entrepreneur environment,” says Jon Lieber, chief economist of Thumbtack.com. “Thousands of small business owners across the country told us that the keys to a pro-growth environment are ease of compliance with tax and regulatory systems and helpful training programs.”

Some of the survey's key findings include:
  • Small businesses in Texas, Utah and Idaho have rated their states in the top five every year this survey has run, while 
    • California and Rhode Island have been rated in the bottom five every year.
  • The friendliness of professional licensing requirements was the most important regulatory issue in determining a state’s overall friendliness to small businesses. Closely following licensing requirements was the ease of filing taxes.
  • Once again, tax rates were a less important factor than the ease of regulatory compliance in determining the overall friendliness score of a jurisdiction. 
    • Two-thirds of respondents said they paid their “fair share” of taxes – that is, they felt like they were neither under-paying nor over-paying.
  • Small business owners who were aware of training programs offered by their government were significantly more likely to say their government was friendly to small business than those who weren’t. 
    • Awareness of training programs raised overall scores by 10 percent, while 
    • 76 percent of those who said they were aware of government-sponsored training programs for business owners ranked their local government as “somewhat” or “very supportive,” and 
    • only 8 percent of these said local government was unsupportive.
  • Only 19 percent of respondents said they were prepared to implement the Affordable Care Act.
  • Female entrepreneurs were more likely than male entrepreneurs to say that their state government was friendly to small business, while male entrepreneurs were more likely than female entrepreneurs to have a positive view on the outlook of their state economy.
  • Kentucky’s grade was this year’s most improved, jumping from a B- to an A.
“It is critical to the economic health of every city and state to create an entrepreneur-friendly environment,” said Dane Stangler, vice president of Research and Policy at the Kauffman Foundation. “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.”

Complete results can be accessed below, including full sets of rankings and dozens of easily searchable quotes from small businesses nationwide. Each state and city also has its own data visualization showing its detailed survey results.


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Sources:
  1. The Ewing Marion Kauffman Foundation is a private, nonpartisan foundation that aims to foster economic independence by advancing educational achievement and entrepreneurial success. 
  2. Headquartered in San Francisco, Thumbtack is a consumer service that helps millions of people accomplish the personal projects that are central to their lives. Whether looking for a painter for their home, a math tutor for their child, or a DJ for their wedding, Thumbtack provides anyone in the U.S. with an easy and dependable way to get started, compare options, and hire with confidence. 

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