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How Cities Can Help Small Business

Author: Bill Dunkelberg, NFIB Chief Economist Date: June 01, 2014

The answer is simple: Reduce regulations.

While some cities are doing amazing things to help small businesses succeed (I can think of at least five), other major cities, with shrinking tax bases relative to their budgets, have me concerned.

Few cities are pursuing economic policies that would develop healthy business communities, which, in turn, would revitalize the areas and create jobs. Consequently, these cities are facing various degrees of financial distress—some even declaring bankruptcy. Take, for example, Detroit, which has become the poster child for the future that many cities, large and small, now face.

The causes of this problem are pretty clear: Politicians with little experience in management are making promises to political constituencies that their cities cannot fund. They are also implementing non-business-friendly tax and regulatory policies in pursuit of revenue. When burdensome regulations and taxes become too large for taxpayers to handle, they flee the city.

So, how can cities create a more supportive climate for small businesses and reap the rewards of the jobs and tax revenue they would bring?

Build Strong Communities

Small businesses can’t survive without local support, which means they must be located in areas with healthy populations. To grow their cities’ populations and make them attractive places to live, city managers must improve schools, control crime and provide municipal services at reasonable costs.

But that’s not enough. City leaders must attract and retain small businesses by reducing state and local regulations. In fact, small business owners in one well-known city identified the agency managing licenses and inspections as one of the major impediments to growth and new startups in the area due to compliance costs and delays.

One particularly burdensome regulation that city councils across the country entertain is forcing businesses to provide paid sick time. Most proposed legislation requires business owners to keep more records and impose stiff penalties on them for mistakes. Leaders proposing such rules ignore the fact that these requirements would raise the cost of labor and put their cities at a disadvantage to the surrounding communities.

Show Support With Resources

Rather than enforcing onerous regulations on small business owners, city leaders should encourage their success. Ideas include providing workshops for entrepreneurs, organizing small business appreciation days, and hosting small business roundtables and networking events—the opportunities are endless.

If city management is truly committed to economic development, leaders must remember that small businesses are the core of their cities’ vitality.

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