Entrepreneur Survey Ranks Michigan Among the Worst In the Nation For Small Businesses

A new survey of small businesses across the nation gives Michigan a “D” in overall friendliness, ranking it among the worst in the country.

According to Michigan entrepreneurs who participated in the survey, the state scored highest with “ease of hiring” – though only grading as a “C+.” It was given a “D+” or lower in five of the 10 areas ranked, with the tax code, zoning and regulations scoring the worst. As a result, Michigan is rated the sixth worst state to do business among the 42 states ranked.

“While many of the agencies that are in existence to assist the contractors do their job well, there are some who take the approach that their only job is to police regulations and code and they pursue this with antagonistic zeal,” a licensed residential builder from East Jordan said in the survey. “This creates an atmosphere of friction rather than support for the small businessman.”

The project is a partnership between Thumbtack.com and the Kauffman Foundation. Thumbtack.com is a website where small businesses and entrepreneurs can advertise their services and customers can find and negotiate for jobs they need done. It has 275,000 business accounts. The Kauffman Foundation does economic research that focuses on education and entrepreneurship. This is the second year the groups have teamed up to do the survey.

Information for the survey results is drawn from 7,700 of the small business owners who register with Thumbtack.com. According to the methodology of the study, it is unique because of how it directly conveys the attitudes and concerns of small business owners rather than focusing on a specific agenda or policy appeal.

The survey also shows rankings by metropolitan areas and counties. Northern Michigan and the Upper Peninsula are rated the highest, with the west side of the state next and the Metro Detroit region third. Small businesses rank eastern mid-Michigan over to the Thumb as the places with some of the worst business burdens.

Sander Daniels, co-founder of the website, said the survey is unique because most studies focus on large businesses since it is easier to collect information while this report focuses on smaller companies.

"The technology has made it easier to get good data on the way small businesses rate the friendliness of their areas," he said.

One finding many people might find surprising is that small businesses rated regulatory rules as a bigger problem than taxes.

“The study also includes lots of good data about the way small businesses perceive various types of regulations and taxes,” Daniels said. “For example, one of the most interesting findings from this year's study is that small businesses rated professional licensing requirements as 30 percent more important than taxes in determining a state's overall business-friendliness.”

Michigan is one of the most highly-regulated states in the nation, causing problems for many entrepreneurs trying to get a business off the ground. For example, the state requires 2,000 hours of training to be a barber and a host of burdensome rules to perform seemingly safe work like painting or putting up gutters and laying down tile thanks to Michigan’s licensing apparatus. 

Nationwide, Utah was the top-rated state followed closely by Alabama, New Hampshire and Idaho. Texas, Virginia, Kansas and Colorado also received an “A” or above. Rhode Island was the state ranked the worst, with Maine and Hawaii also given an “F.” California, Illinois and Michigan joined them among the lowest-ranked tiers.

In last year’s survey, Michigan scored worse overall. One small business owner is hopeful for improvement.

“The state is getting better for small business,” said a builder from Holland. “Governor Snyder and the [legislature] are doing a good job of trying to cut some regulations and taxes.”