How Cities Can Help Small Business

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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