New Study Ranks Virginia 7th Friendliest State for Business
By Sarah Steele Wilson
Jul 13, 2012, 11:08
From 1993 to 2009, small businesses accounted for 65 percent of new jobs created in this country, according the U.S. Small Business Administration. The SBA also says that small businesses employ nearly half of all private sector employees.
Given the statistics, small businesses are also a national subject of conversation.
“When we started looking into this, we thought that although a lot of people talk about small businesses, it’s a talking point in national debates, there actually isn’t that much data about what’s important to small businesses because it’s really hard to reach and survey them,” said Sander Daniels, co-founder of Thumbtack.com, explaining the motivation behind a recently released study his company conducted in partnership with the Kauffman Foundation.
The study sought input from small businesses that use Thumbtack, a website that connects service professionals with the people who need them, to discover what issues matter most to those in the trenches of small business management.
“There are about 275,000 businesses all over the country that use us, so last fall we said, ‘gee, we have this interesting access to all these small businesses, why don’t we see what topics are important to them and have them tell us what the most important issues to them in relating to their governments are,’” Daniels said.
Thumbtack collected data from 6,000 small business owners across the country.
Virginia received an “A” grade and was ranked the 7th friendliest state for doing business.
The study asked the businesses for information about how easy it was to start the business and how taxes and regulations in different areas of business affected the owners.
The Central and Eastern Virginia region, which includes Richmond and the Tri-Cities area, fell in the middle of the pack of Virginia’s six regions in the area of “overall friendliness towards small businesses.” But the region was rated as the state’s second most costly region for hiring a new employee.
“I think what we found generally in the region, was the region fared not as well when compared to other regions in Virginia for getting a business started,” Daniels said, noting that the area showed poorer results in terms of the cost of hiring new employees and licensing regulations. “But once you got a business started, it was pretty easy to maintain.”
“One mover in Richmond said it was somewhat difficult in the beginning, to get started, but things were looking up. I think that’s kind of the sentiment that we heard from a lot of businesses in the area,” Daniels said.
Becky McDonough, Executive Vice President of the Hopewell-Prince George Chamber of Commerce said that in Hopewell and Prince George, the Crater Small Business Development Center provides a valuable tool to help ease the process.
“I feel like we have one of the best small business development centers,” she said.
In addition to the facts about where different states and businesses ranked in terms of business friendliness and other metrics, the study also revealed that what is talked about with regards to small businesses isn’t always what actually matters most to them.
“We found something really interesting,” Daniels said. “Nationwide, and this also holds true in Virginia, small businesses told us that they cared almost twice as much about professional licensing regulations as they do about tax rates and tax related regulations.”
Daniels said that many of the write-in responses they collected through the survey mentioned licensing requirements.
“With that metric, what we heard was the problem was not that the regulations existed,” he said. “In fact, many people were happy to have their profession regulated, but the problem started when it was difficult to get information about how to get licensed or when permitting processes took a long time and delayed projects.”
Daniels said that the study did indicate a correlation between the ease of licensing and the ease of starting a business. He said that most businesses don’t have a high tax burden when they start, because their income is relatively low. Also, most business owners expect to pay taxes, but are sometimes surprised by the fees and paper work they need to do to obtain licenses.
McDonough said that regulation is the area she hears the most concern about, but did note that licensing is on business owners’ minds.
“The ease with which you can get your license is an indication of how much the community values businesses,” she said, noting that in Hopewell, in the past, all the offices entrepreneurs need to visit to acquire the proper licenses have not been in the same location, leading to some complaints.
It is something the city is working to change.
“We know that time is a valuable commodity to small business owners and it’s great that Hopewell is looking at ways to streamline the process,” she said.
Hopewell City Manager Ed Daley said that Economic Development Coordinator Andy Hagy has been looking at ways to facilitate the process of starting a business.
“How do we streamline it so it’s a little easier?” is the main question Daley said.
To that end, the city has placed building inspections in the same office as planning and development so entrepreneurs can acquire their building and zoning permits in one spot. That office is now on the same floor as the office of the Commissioner of the Revenue, so a business license is a short walk away.
Kevin Theriault, who started Crash and Safety Consultants, LLC, in Hopewell in 2008 and who participated in Thumbtack’s survey, said that establishing financial assets, filling out paperwork and choosing the best kind of financial structure for the company were some of the hardest aspects of doing business.
“One of the issues I had was trying to get a start up loan or assetsfor the company,” he said. “Eventually I just had to use my credit card to do it, but other than that, I’m a single employee company right now and my company growth has increased since I started, which is a good thing based on what the economy has been like the past few years since I started.”
McDonough said that problem is continuing for would-be business owners today.
“In general, the access to capital for small businesses is terrible right now,” she said.
Theriault also noted that a reduction in the cost of a business license for startups might help draw businesses to the area.
But the main challenge described by Theriault holds true everywhere.
“The major challenge, I feel, of being a business owner is trying to get your clients to use you and getting yourself known out in the community.”