2013 Thumbtack.com Small Business Friendliness Survey: Methodology & Analysis

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.

The Thumbtack.com Small Business Friendliness Survey 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.

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 results can be seen here and 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.

Survey methodology

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

Thumbtack.com and the Kauffman Foundation evaluated states and cities against one another along more than a dozen metrics. The full methodology paper can be found here.