Clues That Your State or City Is Welcoming to Small Businesses—and What to Do If It’s Not

When survey results declare certain states or cities welcoming to small business, owners in those regions pat themselves on the back. And rightly so. Scoring high in metrics such as ease of hiring, starting up, or following regulations means that a region is keen to make successful entrepreneurship possible. Your job, as a small business owner, gets a little less rocky, and that’s a good development.

But not every small business can land in Texas, New Hampshire, Utah, Louisiana, or Colorado—the locations that respondents in this recent Thumbtack survey called the best places for running their small businesses. (Thumbtack is a consumer-oriented database where small businesses list their services.)

Even if your location isn’t on that list, here are clues that the place you’ve set up shop is truly welcoming to small business. And if your city or state seems to have a whole lot of very unfriendly red tape, read on for notes describing how you can make doing business feel a little smoother anyway.  

What is small business friendliness?

Many factors play into how friendly you’ll find a particular spot for doing business. In surveys such as Thumbtack’s, the goal is to paint a picture of what creates a thriving atmosphere for running a small business. Of course, averages and statistics can’t always outline an image that’s specific to your company’s needs. In addition to general measures like the tax code, the ease of starting up, and the strength of the local economy, there are hyperlocal metrics like mass transit routes, blue laws, frequency of fairs and festivals, and town ordinances. While a single small business owner may not be able to change state-wide regulation, you can research and perhaps influence the little factors that add up to up to making your state, city, neighborhood, or even block a good place to do business.   

Taxes, regulations, and licensing

There are two considerations at stake here: the actual tax code and list of regulations and licensing requirements, and the perceived effects of this trio on the small business.

Surprisingly, though, it’s “how easy it is to comply with such a [licensing] regime that matters most to businesses,” according to the Thumbtack analysis, not whether a license is needed. Likewise, “the level of taxation as measured by self-reported perceptions of the ‘fair share’ of taxes also matters less than the friendliness of complying with a tax regime.” Municipalities with clear requirements, easy-to-understand regulations, and user-friendly websites make running a business better even than lower taxes and fewer regulations.

And what if your region has a lot of red tape and hard-to-find regulations? Your business probably can’t alter licensing requirements or tax codes. But you can reach into your entrepreneurial bag of tricks and pull out your can-do attitude. If you turn regulatory hiccups into necessary business challenges like forecasting or hiring, you may find that applying for licensing or filing taxes is not the burden you expect.


If a local government supports small businesses with training programs, the owners in that state found their region to be remarkably more friendly than in states where awareness of such education was lower.  

If your state does not seem to offer training programs, you might try calling the office to see if there are in fact programs in existence that just aren’t well-promoted. If you come up empty handed, look to the federally run Small Business Administration or to hyper-local chambers of commerce or private business organizations instead.

Local sentiment

Is the local economy strong? If so, you probably find your region comfortable to do business in; the strength of the local economy is one of the most important factors influencing the friendliness score, according to the Thumbtack data.

But there’s a follow-up question you can ask even if the local economy is floundering: are your potential customers serious about supporting small business? While one business may not be able to turn a whole economy around, you can use some marketing savvy to look for customers outside your local economy. Is there a big city a few hours away? Maybe you can subcontract with companies who do business there. Is a chamber of commerce hatching plans to solidify warm sentiment in your community? Join up, and see what you can do to develop leads.

All business owners can wish and hope to live in states or cities that have eliminated red tape, lowered taxes, improved local economies, or helped with training. In reality, even without government-sponsored complications, small business ownership will always offer challenges. If your state is a little unfriendly, try to reimagine the headaches as obstacles to overcome.