Enact easier, more transparent rules
Starting a business is challenging and costly, but cities can reduce this stress and uncertainty by streamlining rules for getting a business off the ground.
Starting a business, especially during an economic crisis, is already a risky endeavor. Entrepreneurs must gauge whether their products or services will satisfy a need in their community and if their business model will turn a profit.
Lack of transparency
Local governments often add to the uncertainty, too, with complex rules that lack transparency and confuse would-be business owners. Applicants for licenses or permits are often left not knowing which registrations they’ll need, how much everything will cost, and the time it will take to get from start to finish.
This contributes to what entrepreneurs describe as a “death by a thousand cuts.” Applicants get stifled by red tape that piles on from multiple departments, then lack the peace of mind of knowing exactly what those requirements will entail.
A common-sense solution for encouraging residents to start businesses and create jobs is to streamline rules for getting a business off the ground. To support entrepreneurs, some policymakers have already explored ways to cut back—for example, on licensing requirements:
- In 2012, officials in Chicago passed legislation to reduce the number of business license categories by around 60 percent, from 117 to 49.
- Mississippi reformed occupational licensing rules that required hair braiders to obtain unrelated cosmetology licenses. By 2016, more than 2,600 braiders had taken advantage and registered with the state.
- Phoenix does not require a general business license for all businesses; instead, it licenses a smaller set of less than 20 business it deems higher–risk.
A simpler, clearer process
Reforms like these can ease the pathway to entrepreneurship. Especially for those without the means to hire expediters, more transparency means better opportunities to start businesses and earn an honest living. To simplify the licensing process and increase transparency, cities should:
- Create a one-stop shop, with effective checklists and guides, for applicants to manage interactions with agencies.
- List fees and expected wait times for permits and licenses.
- Streamline in-person visits to agencies so multiple consultations or checks can be accomplished in a single visit. Where possible, in-person visits should be an option rather than a requirement.