You hear it often: Small business is the backbone of our economy. For every Microsoft or Boeing or Nordstrom, there are dozens of individually owned dry cleaners and pet stores and plumbers and machine shops. If they have fewer than 50 employees, they’re officially “small businesses” in the eyes of the state. And they matter greatly.
Something else you’ll hear over and over, if you’re listening to a certain set of voices, is that Washington state, for some inexplicable reason, has it in for small businesses, even though they provide four out of 10 private-sector jobs in the state. If it weren’t for taxes and regulations, the story goes, Washington wouldn’t have the third-highest failure rate for small businesses. What’s not always mentioned in conjunction with this is that we have the second-highest start-up rate in the nation. If most small businesses shut their doors sooner or later, which the Small Business Administration avers, lots of starts will, not surprisingly, be accompanied by lots of stops.
Still, numbers aside, isn’t it the government’s fault? As former New York Governor Al Smith famously said, “Let’s look at the record.” And for that we turn to a couple of folks who make their livings studying and writing about how and why small businesses succeed, or don’t. According to authors Michael Ames and Gustav Berle, the top 10 major reasons small businesses fail are:
- Lack of experience
- Insufficient capital
- Poor location
- Poor inventory management
- Over-investment in fixed assets
- Poor credit arrangement management
- Personal use of business funds
- Unexpected growth
- Competition
- Low Sales
Not a tax nor regulation to be found. If the echo chamber that accuses government in general, and Washington state in particular, of being THE problem is so far off-base on this one, might they have a credibility gap on other issues as well?
The answer is yes. It’s not as useful for getting people stirred up, but the happy fact is that Washington has time and time again found itself named to this or that “best” list in terms of business climate, tax climate, regulatory climate . . . all the climates that determine whether a state is considered business-friendly.
The studies and articles are out there, and easy to find. To skim across the top, here are a few: According to the conservative-leaning Tax Foundation, Washington has the sixth most business friendly tax climate in the nation. To add a little context, Texas doesn’t make the top 10, Idaho barely makes the top 20, and South Carolina is near the basement, in 37th place.
The most recent State of Entrepreneurship Index prepared by the University of Nebraska ranks Washington at number two in the nation for “entrepreneurship environment” and “growth in business formation.”
And the U.S. Chamber of Commerce — not exactly a hotbed of liberals — put us at number eight in its survey of “Enterprising States,” which comes up with its results by factoring in, among other things, taxes and regulations, entrepreneurship, innovation, and a state’s “talent pipeline.”
Myths die hard, especially when some people are doing their best to keep them alive. But the myth that Washington is anything but a great place to live, work, and do business, is fading fast. Good riddance.