California earns ‘D’ grade from small businesses, Bay Area again ranks as top region in state

CA Biz Survey graphic

“The local and state agencies make it extremely difficult to be legitimate, but at the same time show very little interest in accountability to enforce the mandated requirements on the dozens of local companies that are not permitted.” Moving company owner, Roseville

(San Francisco, CA) 4/25/2013:, in partnership with the Ewing Marion Kauffman Foundation, has released the second-annual Small Business Friendliness Survey showing that although California again did not perform well in various categories, earning an overall ‘D’ grade from small business owners, the state did manage to improve from last year’s failing grade. 

The 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.

In surveying thousands of small businesses across America, we found that clear and consistent regulations and relevant training programs are among the most important factors in determining how they view their region’s friendliness,” said Sander Daniels, co-founder of “Given the enormous size and importance of California’s economy, it is particularly important that state and local officials listen to the concerns of the state’s small business owners and provide them with an environment conducive to growth and success.”

Some of the key findings for California include:

  • California earned a ‘D’ grade, up from an ‘F’ in 2012. Although the state struggled overall, it ranked above average for its online resources for small businesses.

  • The Bay Area was the top rated region in California for the second year in a row, followed by the Central Coast. San Francisco was the state’s highest ranking city, followed by San Jose.

  • Nationally, professional licensing requirements were more important to small business owners than taxes in determining a state’s overall business-friendliness, confirming the findings from last year’s study.

  • African-American and Hispanic small business owners were more likely than their white counterparts to encourage others to start a new business.

  • The top ranking states overall were Utah, Alabama, New Hampshire, Idaho, and Texas.  The lowest rated were Illinois, California, Hawaii, Maine and, in last place, Rhode Island.

  • California’s highest grade was a ‘C+’ for its small business training and networking programs.

  • Within California, more than a third of small businesses rated obtaining and keeping health insurance as “Very Difficult.”

It is critical to the economic health of every city and state to create an entrepreneur-friendly environment,” said Dane Stangler, director of Research and Policy at the Kauffman Foundation.  “Policymakers put themselves in the best position to encourage sustainable growth and long-term prosperity by listening to the voices of small business owners themselves.”

The full survey results can be seen here and include full sets of rankings, easily searchable quotes from California small businesses, regional comparisons within states, and Census data comparing California’s key demographics against those of other states.

“For me, it’s not any one thing that makes doing business difficult, it’s adding them all up. Workers comp insurance and rules, business insurance, contractor license requirements, corporate requirements, and taxes. The more legit you become, the harder & more expensive it is. The resources available might be great (classes, internet help, etc.), but when just trying to hang in there, it’s very hard to take advantage of them.” General contractor, San Francisco

Survey methodology surveyed 7,766 small businesses across the United States. The survey asked questions about the friendliness of states and cities toward small business, 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 and Kauffman ranked states and cities against one another along more than a dozen metrics.  The full methodology paper can be found here.

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