The best cities to launch businesses are not San Francisco or New York, but Knoxville, Tennessee and Manchester, New Hampshire, according to a new survey.

The report, from Thumbtack's 2015 small-business friendliness survey, was based on responses from small local businesses and individuals who use Thumbtack’s online platform to market professional services to consumers. Users are largely sole proprietorships that aren't necessarily scalable, such as self-employed plumbers and piano teachers.

So what makes for a great place to start a business? Jon Lieber, Thumbtack's chief economist, says higher-ranked cities have lower costs and fewer steps in place for a potential new company to launch. The survey also measured things like attitudes toward regulations.

Manchester has a community of people who have positive attitudes toward entrepreneurship in general, Lieber says.

Respondents in Knoxville, including a videographer, house cleaner, and mover, said that professional licenses were relatively easy to come by, startup costs were low, and resources were available to help promote new businesses.

“Something is going right in Tennessee,” says Lieber.

For businesses looking to add employees, Birmingham, Alabama and Richmond, Virginia came out on top. Lieber says ease of hiring tends to come down to having clear rules and making it easy to comply with policies.

Rules such as paid sick leave can make it hard for small businesses to hire because of the need to track hours to know how much time an employee has accrued, he says. He adds that Thumbtack is aware, anecdotally, that some small businesses turned to hiring private contractors or 1099-form employees to avoid having to deal with employment regulations.

The top three states for ease of starting a business are, in order, New Hampshire, Idaho, and Texas.

The top three for ease of hiring are Kansas, Alabama, and Utah.

Overall, Lieber says, southern states tend to perform well on Thumbtack’s annual survey--perhaps because the governments are doing more to attract businesses, or perhaps because the governments are less aggressive about things like consumer protection policies.

Thumbtack also asked respondents about other factors, such as their feelings about regulations in their areas, and assigned an “overall friendliness” grade to states and municipalities that produced sufficient numbers of responses to be counted (50 for states, 30 for municipalities).

Lieber says rankings pertaining to regulations and overall friendliness were most relevant to the types of people who use Thumbtack. 

States that perform well on the Thumbtack survey--such as Texas, ranked highest for “overall friendliness”--tend to have relatively high economic output, he says.

Here are Thumbtack's rankings for overall friendliness toward small businesses:

States

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

Cities

  1. Manchester, N.H.
  2. Dallas
  3. Richmond, Va.
  4. Austin
  5. Knoxville, Tenn.
  6. Nashville
  7. Houston
  8. Fort Collins, Colo.
  9. Boulder, Colo.
  10. San Antonio

 

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Published on: Aug 18, 2015