Small business survey

An advocacy group for small business is out with a report today showing Minnesota ranks 42nd in its calculations of business-friendly states.

Neighboring South Dakota ranks #1, according to the survey. The group favors lower personal income, corporate tax, and capital gains tax rates. It also objects to family leave policies, health insurance regulations, and a higher minimum wage.

There’s not a lot new in the survey — businesses have made the claim that these issues cost jobs for years. But it doesn’t entirely track with other surveys.

For example, the highest percentage of start-up companies is in the West and while many of these states are among the top-ranked, South Dakota isn’t one of them. Idaho, ranked 32nd in the small-business group’s survey was among the top five states for start-ups in a 2000-2005 survey Kauffman Foundation; so was Montana (31st in the small business ranking). The lowest percentage of startups included Connecticut, Ohio, and Massachusetts. While Connecticut and Massachusetts are ranked close to Minnesota, Ohio’s poor ranking conflicts with its #11 ranking by the Small Business and Entrepreneurship Council.

Meanwhile, a survey out today shows optimism by small business owners remains stuck in recession levels.

Let’s hear from some small business owners.

  • How about a former small business owner?

    These business lobby surveys tend to be very similar — focusing on taxes and regulation, while giving short shrift to other important factors like education, state-supported (university) R&D, quality of life, infrastructure and transportation connections, access to international markets, etc. Another factor they discount is state per capita income.

    If your business is selling to people in the state, you want a prosperous population. If you’re just trying to exploit labor (hello, South Dakota), low pay and low per capita income is a positive.

    In short, they aren’t really about what drives creation of new business. They’re about reducing the cost of doing business for business owners, which is not quite the same thing.

    Next, there are start-ups and then there are viable start-ups. Most of them fail, and their contribution to new job creation is about a wash.

  • One more interesting bit: “the assumption that more company formation will result in a higher rate of creation of high-growth outfits is flawed. There is little relationship between places with high rates of firm formation and high shares of high-growth companies.”