California gets an F for friendliness to small businesses, one of the worst grades in the country, according to a survey of 12,632 businesses nationwide.
The survey was conducted by Thumbtack.com – an online marketplace that connects service providers with consumers and allows then to negotiate work – in conjunction with the nonprofit Ewing Marion Kauffman Foundation in Kansas City, Mo.
Respondents deemed Utah, Idaho and Texas to be among the friendliest states for small businesses out of 38 states total, while pushing California, Illinois and Rhode Island to the bottom of the rankings.
Among the 82 cities included in the final data, Sacramento was voted the worst for small businesses. San Diego was 78th, Oxnard was 76th and Los Angeles was 74th.
Overall, California received the lowest grade possible for small businesses' experiences with labor and hiring, health and safety, regulations and ease of starting a company.
The state's zoning process, tax code and licensing procedures all received D grades.
Small businesses are a powerful engine of commerce – more than 99% of U.S. employers fit the bill and employ nearly half of all private sector workers.
In California, continued high unemployment and rampant underemployment have driven many into freelancing, contract work or launching small start-ups. Scores were better in the northern quarter of the state and along the coast until San Diego County.
Nationwide, half of respondents said healthcare was difficult to obtain for their business. Licensing requirements also weighed heavily on their perceptions of the local business environment, as did the ease of filing taxes.
The tax rate, however, wasn't statistically significant in determining overall friendliness to small businesses. Two thirds of respondents said their taxes were fair, though larger businesses tended to think they were overpaying.
Business owners or operators with 20 or fewer employees visiting Thumbtack over a span of two months could click on a link to the survey. The data excluded any cities or states with fewer than 30 respondents.
The San Francisco-based website tends to attract independent professionals looking to boost their work flow, so roughly three quarters of the survey's respondents are in the services sector. The sample under-represents agricultural, retail and manufacturing businesses.
And because the questionnaire was hosted online, the educational level of participants was higher than the average American businsess owner.
The grading system for each category – such as overall regulatory friendliness and ease of starting a small business – was created by converting responses for each question into numerical scores and then averaging them together.
Instead of relying on data such as unemployment rates, income per capita or tax rates to determine business climate, Thumbtack economists said they chose a survey format to give entrepreneurs more of a voice.