Our 10th Annual Small Business Friendliness Survey
Andrew Heritage•Last updated Aug 26, 2021
Last updated Aug 26, 2021
Table of Contents
- How states, cities and the federal government scored
- How states scored with minority-owned businesses
- Economic opportunities and obstacles
- Community support of small businesses
- Building a Better Future
- Who is the small business owner
- More Information
- 2021 Small Business Friendliness Survey Methodology
- 2021 ‘Gen-pop’ Survey Methodology
Over the past decade, we’ve conducted an annual Small Business Friendliness Survey, giving small business owners on Thumbtack the opportunity to grade their federal, state and local governments. This report represents the largest continuous study in the U.S. of small business perceptions on government policy. With all of the uncertainty and adversity caused by the pandemic, understanding service providers’ perception of economic opportunity, community support and government aid is more important than ever.
This year, 44 cities and 43 states received grades from “A+” to “F” on overall friendliness as well as regulations, taxes, and training opportunities. These results reflect the perceptions of local service businesses across the country, primarily in the home maintenance, home construction, and home systems industries (42 percent) as well as in events, education, health and wellness, pets, and business services.
We heard from over 3,600 small business owners in all 50 states. Here’s what they said.
How states, cities and the federal government scored
Since the pandemic began in March 2020, federal, state, and local governments have taken unprecedented measures to help small businesses survive and retain their employees. When asked to rate each level of government, the top scoring state on ‘small business friendliness’ in this year’s ranking was Maine, receiving an “A+,” followed by New Hampshire “A+”, South Carolina “A+”, Florida “A” and Georgia “A-”.
Maine also led the country in the helpfulness of training and educational opportunities available to business owners. Many of these states fared better than average in other dimensions as well. New Hampshire, South Carolina and Florida all received an “A+” in their state’s business regulatory environment on labor regulation, licensing, and taxes.
The lowest scoring states on ‘small business friendliness’ this year were Pennsylvania, Minnesota, Oregon, and Michigan, all receiving an “F”. Overall, average grades were lower this year compared to past surveys as the past 18 months have been challenging for small businesses to navigate and adapt to the COVID-19 pandemic. Small business owners’ evaluation of state government supportiveness reflects this decline in overall sentiment.
Since the pandemic began in March 2020, the federal government undertook unprecedented measures to help small businesses survive and retain employees such as the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) programs. In comparison to state grades, small business owners gave the federal government a “C+” on small business friendliness. Small businesses view the federal government as slightly more supportive than not this year.
When taking a closer look at rankings on a city level, the top scoring cities on the ‘small business friendliness’ scale were Jacksonville, FL “A+”, Salt Lake City, UT “A+”, Orlando, FL “A”, Baltimore, MD “A”, and Seattle, WA “A-”. The lowest scoring cities were Detroit, MI; San Diego, CA; Nashville, TN; and Kansas City, MO, all receiving an “F” score.
You can see the full set of state and city scores here:
How states scored with minority-owned businesses
In addition to overall grades, this year’s report ranked states on their support of women-owned and BIPOC-owned businesses.
Maryland came in first place with an “A+” as the most supportive state for women-owned businesses, followed by Washington “A+”, Massachusetts “A-”, Georgia “A-” and Virginia “B-”. When looking at states creating a supportive environment for BIPOC-owned businesses, Virginia ranked at the top of the list with an “A+” alongside Florida, Maryland, Georgia, and New York, who all scored an “A+” as well.
Newly formed businesses are far more likely to be BIPOC-owned. Just 26 percent of small businesses that have been in operation for 10 years or more are BIPOC-owned compared to 46 percent of businesses that have existed for less than one year. This increase in BIPOC-owned small businesses shows increased opportunity for BIPOC communities as well as an opportunity for digital platforms to empower and support these businesses.
Economic opportunities and obstacles
Nationwide, 87 percent of local service professionals — including women and BIPOC owners — believe there’s enough economic opportunity in their community for their business to thrive. This finding, which is up 11 percentage points from 2019, shows increased optimism compared to pre-pandemic levels. And pros aren’t the only ones feeling more optimistic, in a new ‘Small Business Support’ gen-pop survey of 1,150 Americans, 94% of homeowners said they’re comfortable having a service professional work inside their home. Of those, 33% are comfortable having a service professional work in their home provided they have been vaccinated against COVID-19 and 19% are comfortable if the professional wears a mask or uses sanitizer.
And while 41 percent of respondents report generating more revenue during the first half of 2021 than the same timeframe in 2020, challenges remain. Across the board, the costs of operating a business remain the biggest roadblock as about one-third of owners want policymakers to improve access to healthcare and insurance benefits and 45 percent would like their tax burden lowered.
Suburban and urban businesses were more likely to feel optimistic, while rural business owners were less optimistic about local economic conditions with 20 percent believing their community did not have enough economic opportunity for their business to thrive. Among owners that did not believe their community had enough opportunity, 26 percent expressed a desire to move their business to a new location to be closer to their region’s customers.
Many small business owners are finding that the shortage of qualified labor is an obstacle to the growth of their business. 23 percent of local service businesses reported difficulty hiring new employees in the past year with home construction businesses having the most difficulty finding qualified workers (40 percent). Overall, 31 percent of businesses said they were not able to find qualified workers. In sharing their perspective on these challenges, 18 percent of business owners felt that extended unemployment has been an impediment to hiring new employees and 14 percent shared they could not find employees that are willing to work at the wage they’d like to pay. The long-term growth of small businesses will depend on increasing the available pool of qualified workers through increased labor force participation and overall investments in and adoption of training programs.
Community support of small businesses
According to our new ‘Small Business Support’ survey, over the last year, communities around the country rallied around their neighbors to support local businesses. Americans gave larger tips to service workers (75 percent), made donations to local businesses (36 percent) and continued paying local professionals even if they were not receiving services (22 percent). What’s more, 21 percent of respondents supported local businesses twice as much or more in the past year than they had previously, showing an increased interest across the country in supporting companies in their community.
We also found that while 70 percent of respondents had a favorite local business permanently close due to the pandemic, communities around the country have rallied around their neighbors to support small businesses. Over the past year, 48 percent of respondents supported local businesses on a weekly basis; 32 percent on a monthly basis; and 10 percent on a daily basis.
Building a Better Future
Through all of the changes brought on by the pandemic over the past year, some silver linings have emerged as small businesses adapted to new ways of operating. Bringing the future forward faster, service providers have accelerated their use of digital tools — which has helped to strengthen their businesses in the short-term and will empower growth in the long-term.
Over the past year, small business owners reported that they were most likely to use digital means to conduct business during the pandemic. 22 percent reported using video or remote consultations and 18 percent expanded their service area to increase their customer volume in order to survive. These measures helped many businesses stay afloat and will serve them well into the future.
Small business owners have proven their adaptability and resilience as they’ve found ways to continue to operate and serve their communities throughout the pandemic. Moving forward, providers have made it clear that they need lawmakers to champion policies to help them thrive by reducing their tax burden, streamlining regulation and improving access to healthcare. Additionally, programs providing deeper investment in broadband, digital training programs and access to technology for small businesses will be crucial, pushing past the reactive policy limitations currently in place. These changes will enable them, and future entrepreneurs, to thrive.
Who is the small business owner
The small business owners who participated in the survey represent the wide breadth of service professionals across the country, spanning different industries, from home construction to wellness professionals, tutors and events professionals, bridging diverse political ideologies and differing stages of entrepreneurship. Check out the pros who use Thumbtack below.
More Information
For previous years’ results of the Small Business Friendliness Survey, check out thumbtack.com/survey.
2021 Small Business Friendliness Survey Methodology
In a survey of Thumbtack professionals, 3,648 responses were collected nationwide from 6/7/2021 to 7/26/2021 with a margin of error of +/- 2%. A sufficient sample size was collected to grade 43 states and 44 metropolitan areas. The eight graded metrics evaluate: overall government support, ease of starting a business, ease of hiring employees, labor regulation, tax regulation, licensing regulation, and training and networking programs availability and helpfulness. Full methodology can be found here: https://medium.com/thumbtack-blog/2021-sbfs-methodology-9501b389f757
2021 ‘Gen-pop’ Survey Methodology
A survey of 1,150 U.S. adults aged 18 or higher were collected on 8/7/2021 with a margin of error of +/- 3%. Questions pertained to consumer trends related to the small business economy and the housing economy.
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