Detroit, Michigan Make Big Leaps in Small Business Friendliness Survey

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Detroit earned a “B+” and Michigan as a whole received a “B-” for small business friendliness in the annual Small Business Friendliness Survey conducted by Thumbtack, an online service that matches small businesses with customers who need their service.

Detroit’s grade was an improvement over the “C” received last year in the survey last year. The city ranked 24th among 95 cities ranked. Michigan’s improvement was more dramatic. Last year, Thumbtack gave the state a “D.”

Nearly 18,000 U.S. small business owners responded to this year’s survey, including 211 in Detroit and 409 in Michigan. The study asked respondents to rate their state and city governments across a broad range of policy factors. Thumbtack then evaluated states and cities against one another along more than a dozen metrics.

Some of the key findings for Detroit and Michigan:

• Detroit’s highest scores included a “B+” for the ease of starting a business and a “B+” as a location entrepreneurs would encourage others to start a new business.
• Michigan earned “B” grades for its training and networking programs, as well as “B” grades for both its environmental and zoning regulations.
• The worst score for Detroit was a composite “C+” for its regulatory environment, which included licensing, tax and labor rules.
• Michigan’s best scores were a “B” for training and networking programs, as well as B grades for both environmental and zoning regulations.
• Michigan’s worst scores were “C+” grades for tax, health, and labor regulations.
• Detroit earned the highest overall score in Michigan in this year’s survey; both Ann Arbor and Grand Rapids earned “B-” grades overall.

“Small business owners on Thumbtack have consistently told us that they welcome support from their governments but are frequently frustrated by unnecessary bureaucratic obstacles,”Jon Lieber, chief economist of Thumbtack, said in a statement. “Despite lower scores on the regulatory front, Detroit has improved its grade this year as small businesses reported improved scores in starting a business and in the availability of training.”

Complete results for here for Detroit and here for Michigan.

The top cities and states were:

Cities

1. Manchester, NH
2. Dallas, TX
3. Richmond, VA
4. Austin, TX
5. Knoxville, TN
6. Nashville, TN
7. Houston, TX
8. Fort Collins, CO
9. Boulder, CO
10. San Antonio, TX

States

1. Texas
2. New Hampshire
3. Utah
4. Louisiana
5. Colorado
6. Idaho
7. Tennessee
8. Virginia
9. Georgia
10. Kansas

Some trends among the respondents:

• 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. Tax equity – the actual rate at which business owners pay 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 developing a business and navigating 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.

The 36-question survey asked about the friendliness of states and cities toward small business, including specific questions about the regulatory environment for labor, tax, and licensing rules.

Respondents to the survey were largely very small service businesses with five or fewer 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. More information about methodology is found here.

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