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My view: Utah named 'most friendly' state for small business

By Jon Lieber

For the Deseret News

Published: Tuesday, Aug. 12 2014 12:00 a.m. MDT

Updated: Monday, Aug. 11 2014 9:33 p.m. MDT

Salt Lake City.

Ravell Call, Deseret News Archives

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When you think of things that Utah does better than any other state, you might think of the state’s natural beauty or the charitable nature of its people. But another superlative can now be added to that list: Utah has been named the most friendly state in the nation for small businesses.

Thumbtack.com, a consumer service that links individuals to business professionals who can help them accomplish personal projects, partnered with the non-partisan Kauffman Foundation to ask nearly 13,000 small business owners nationwide what they thought made for a friendly environment for them to serve their customers. And for the second year in a row, Utah was named as the friendliest state in America.

Utah did well across the 11 metrics in the study, ranking in the top five of every category except for one (more on that in a minute). Small business owners said the state made it easy to start a business, and the excellent workforce and low cost of living made it easy to hire new workers. When it came to regulations, Utah was one of the friendliest states in the nation, earning A or A+ grades for its licensing, tax code, zoning, environmental, health and safety and labor laws.

And Utah’s small business owners were extraordinarily optimistic – owners and operators of small businesses said they felt more optimistic than business owners in any other state. It could be the great access to outdoor activities or the booming economy in Utah, but business owners felt great about the future. A therapist in Salt Lake City said, “Salt Lake City is a great place to start a small business. While more and more people are moving to the state, there is still ample room for new businesses to get started and prosper, which is encouraged by the local government.”

The one area of the survey where there is room for improvement was the availability of training and networking programs in the state - nationwide, awareness of these tended to improve overall friendliness scores by 10 percent in the survey. While Utah did well in this category, earning a B+, there is room for civic organizations to work with local governments to improve the visibility of such programs.

Nationwide, small business owners told us they wanted to spend their time building their businesses and serving their clients - time they had to spend dealing with government rules and regulations was a major distraction from this core focus. Small businesses don’t have the employees or resources to dedicate to complicated regulatory regimes. This was an issue across the board, even in states that were friendlier to small business like Utah.

States that made regulations easy to comply with and that created, and consistently enforced, simple rules for businesses did better in the survey than states that instead piled on time-consuming regulation. A video producer in Farmington echoed this common sentiment in our survey: “If a small businessman didn't have to be an accountant and a lawyer in addition to an expert in the subject he or she is starting a business in, there'd be a lot more successful businesses.”

The costs in terms of time lost to small businesses in complying with regulations, specifically professional licensing regulations, were so dramatic that the friendliness of licensing regulations had twice the effect of the complexity of the tax code on our overall friendliness metrics. For states like Utah, which received an A+ for the friendliness of its licensing, this was not a problem. But in other states where the licensing rules are so complex, with overlapping and sometimes contradictory rules in different jurisdictions, the unfriendliness of licensing caused small businesses to perceive their state governments as downright hostile to them.

Other states’ losses are Utah’s gains, however, and this shows in the fact that Utah experienced the second-fastest population growth in the nation last year, attracting businesses and workers from all over the country. Utah’s business friendliness has resulted in a deluge of new jobs, resulting in the third-lowest unemployment rate in the country. And it has brought in fast-growing tech companies looking to expand.

Thumbtack gave Gov. Herbert the first ever Champion of Small Business Award for the outstanding showing that Utah had in our survey. Through a concerted effort to attract out-of-state businesses to open up in Utah, and the legacy of an educational system that has created a top-notch workforce, Gov. Herbert has earned this award on behalf of all the institutions that help make Utah a great place to do business.

Jon Lieber is the chief economist at Thumbtack.com.

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