10 policies

Cities Work

10 Policies to Enable Entrepreneurship

A set of tools, drawn from research and work in three dozen cities, to make it cheaper, faster, and simpler to start a small business.

Every city wants to make it easier for small businesses to start. But in many cases, outdated regulations or confusing requirements may be killing your small businesses with a “death by a thousand cuts.”

And it’s not just entrepreneurs: confusing or redundant processes also consume valuable city staff time, taking away from higher-priority tasks.

While every city is unique, similar regulatory hurdles often create challenges for entrepreneurs and city staff alike. Combining research and work in three dozen cities, the 10 Policies to Enable Entrepreneurship give your city a set of tools to make it cheaper, faster, and simpler to start a small business.

The 10 policies

01

Create a true one-stop shop

02

Allow home-based businesses by-right

03

Welcome vendors and micro-businesses

04

Make startup costs clear and lower

05

Build flexibility into regulatory codes

06

Consolidate permits and licenses

07

Make inspections fair and consistent

08

Modernize the sign code

09

Set clear permit timelines

10

Create a culture of “Yes, and!”

Policy 1

Reduce the need for entrepreneurs to contact city offices by creating a true “one-stop shop” for businesses on your city’s website and simplifying the process for registration.

A one-stop shop is a website or online portal that allows applicants to complete all requirements for starting a business in one place. The one-stop shop should help applicants figure out which permits and licenses are relevant to them, which regulatory steps to complete and requirements with which to comply—and in what order. Many city websites offer disjointed or conflicting information, fail to clearly outline the regulatory processes, and often leave entrepreneurs with more questions than answers.

Cities can often improve their websites by working within the website maintenance contracts they already have, without the need to first get approval from city council for additional expenditures. Thus, website improvements are one of the simplest first steps to create clarity for entrepreneurs.

Recommendations

  • Ensure that your city satisfies the Cities Work one-stop shop criteria:
  • Does your locality’s website connect city requirements with processes from other levels of government?
  • Does your locality’s website allow an entrepreneur to complete forms and registrations through the portal, not through each agency’s own website?
  • Does your locality’s website cover all city requirements, not just requirements for getting a business license?
  • Does your locality’s website provide a single log-in opportunity, so entrepreneurs can organize information and track progress in one location?
  • Does your locality’s website guide entrepreneurs effectively through the process, including the order in which various steps must be completed?
  • For good examples of one-stop shops, see Kansas City, Missouri’s KC BizCare and Miami’s guide to opening a business.
  • Create automatic permit reminders for annual renewals for entrepreneurs, either mailed or online, to reduce the likelihood that entrepreneurs will fall out of compliance. For example, see Philadelphia’s EZ Renewals and automatic reminders through eCLIPSE.
  • Go through your website and ensure all links are up to date. Static PDFs can be outdated, and broken links leave entrepreneurs unsure of where to go.
  • Ensure resources are available in frequently spoken languages other than English, and that you have staff available to help non-English speaking entrepreneurs understand the requirements.

Policy 2

Enable entrepreneurship from home and neighborhood commercial spaces by allowing home occupations and accessory commercial units by-right.

Some of the nation’s largest companies were started out of the home: Harley-Davidson, Google, Apple. Home-based entrepreneurship is a foundational, low-stakes way to start a business. Research from the Institute for Justice shows that, compared to traditional small business owners, home-based business owners are more likely to be female, minority, and renters. 1

These small-scale businesses can also provide essential services to the community and fill in crucial gaps, such as childcare or a grocery store within walking distance.

Unfortunately, zoning, permitting, and other regulatory hurdles can place steep challenges on entrepreneurs looking to start a business with the only capital many of them have: their home.

Recommendations

  • Reduce arbitrary restrictions, like those limiting the number of outside employees and the portion of a home’s square footage that the business may occupy, and replace them with targeted nuisance enforcement, like noise ordinances or traffic ordinances.
  • Allow accessory commercial units, small-scale commercial spaces in residential areas that can provide neighborhood-serving commerce, like a grocery store or small coffee shop.
  • Allow home occupations and accessory commercial units “by-right,” instead of requiring them to obtain special or conditional use permits to operate.
  • Allow home occupations to advertise their business. For an example, see Seattle, Washington’s Bringing Business Home Act.

For examples, see reforms in Kansas City, Kansas, to lift special use permit requirements for home occupations 2 , and in Raleigh, North Carolina, to allow “live-work” units by-right in residential areas. 3

State-level restrictions, such as strict cottage food laws, can also create needless hurdles for entrepreneurs hoping to start a business with the only capital they have.

Read more about IJ’s Food Freedom initiative

Policy 3

Remove barriers to sidewalk vendors, mobile vendors, temporary food establishments, pop-ups, and other micro-businesses that enliven downtown corridors.

A vibrant street vending scene benefits everyone. Vending puts people to work, creates opportunities for self-sufficiency, and enriches the communities in which vendors operate. It provides entry-level opportunities, allowing entrepreneurs to test ideas and accumulate capital needed to climb the economic ladder. In addition to generating revenue for the city, research has shown that street vending can create positive safety benefits by inviting “eyes on the street” in vacant or underserved areas.

Further, research has found that the presence of mobile food businesses does not negatively impact neighboring brick-and-mortar restaurants. In fact, some data points to a positive relationship between the number of food trucks and the number of restaurants in the same year, suggesting both sectors can thrive at the same time. 4

Unfortunately, some outdated or protectionist policies can hold back street vendors. Cities must investigate their regulations to ensure that regulations of street vendors are narrowly tailored to protect health and safety, instead of needlessly impeding small businesses.

Recommendations

National Street Vending Initiative

For more information, including model legislation, read about the Institute for Justice’s National Street Vending Initiative.

Read about the National Street Vending Initiative

Policy 4

Reduce costs for entrepreneurs and make it easy to estimate costs before applying for permits or signing a lease.

Research from the Institute for Justice’s Barriers to Business report found that entrepreneurs in 20 major cities paid an average of 13 different fees totaling more than $5,300 to open a restaurant, and that’s before calculating the cost of hiring architects, contractors, or any other outside help.

An unexpected permit or license fee can cost staggering amounts and create major financial challenges for entrepreneurs. Cities must do what they can to lower fees and make them clearer.

Recommendations

Policy 5

Update your zoning code and business requirements to allow for commercial flexibility.

Building, zoning, and health code requirements may unintentionally apply overly restrictive regulations to innovative businesses. Cities must “right-size” their requirements to align with small business risk.

Recommendations

  • Remove minimum lot size requirements for commercial spaces.
  • Create flexibility for grease trap requirements for food establishment businesses. 7
  • Create zoning flexibility to allow more intensive uses to operate in existing zones, such as zones that allow artisan manufacturing in Nashville, Tennessee.
  • Allow neighborhood-serving commercial spaces, like in Seattle, Washington. 8
  • Remove costly minimum parking mandates that can make commercial construction prohibitively costly or spatially impossible. For a map of places that have implemented parking reform, see the Parking Reform Network.
  • Move uses that are conditionally approved to by-right approvals, cutting down on repetitive application review for staff and saving time for the entrepreneur.

Policy 6

Consolidate and simplify permits, licenses, and respective requirements to reduce confusion and duplication.

Redundant applications create additional complexity, friction, and frustration for the entrepreneur, and increase the risk of entrepreneurs submitting incorrect information to city staff. Additional applications can also increase the risk of inter-departmental silos, creating situations where entrepreneurs hear conflicting information from different departments. Where applicable, cities should examine their licenses and permits and consolidate them into streamlined applications to bring clarity to regulatory processes.

Recommendations

  • Examine your various types of licenses—liquor, temporary food establishment, vending, and others—and identify ways in which you can consolidate these and streamline the process, both for small business owners and your city staff. In Washington, D.C., Cities Work partnered with the District to adopt the Business and Entrepreneurship Support to Thrive (BEST) Act, which consolidated 100+ business categories down to 13 and created one flat $99 fee for business licenses. In Chicago, 117 unique business license types were reduced to 49, saving businesses over $2 million and reducing restaurant start-up time by 33%. 9
  • Ensure your codes are not needlessly duplicative of existing ordinances, such as traffic, nuisance, and noise ordinances.
  • Encourage city staff to talk to each other more frequently by establishing weekly check-ins, or some other method to de-silo permitting.

Policy 7

Make inspections fair, consistent, and understandable.

Inspections are critical to get right, as they are often the points where a city can “make or break” an entrepreneur’s deadline for opening their doors. All too often, entrepreneurs are told one thing by one inspector, then months later given conflicting information by a different inspector. Mistakes in inspections can cost entrepreneurs months in delays, thousands of dollars in unnecessary changes or repairs, or can force them to rip out entire portions of the building to rectify an issue that could have been caught earlier.

Creating clarity and consistency in inspection processes can make entrepreneurs feel more confident in building out their space and creates more trust with the city.

Recommendations

  • Publish inspection checklists so entrepreneurs know what to expect, and ground inspection categories in citable code. Cities Work recently worked directly with the city of Philadelphia to create a Food Safety Inspection Guide, bringing clarity and consistency to food-based entrepreneurs.
  • Allow virtual inspections where appropriate. By allowing entrepreneurs to upload photos or hop on a video call with inspectors, city staff can save time by not having to be present on-site, and entrepreneurs can be more flexible with timing. Cities like Phoenix, Arizona, allow remote video inspections for certain types of residential permits, and Arlington, Virginia, allows all building-related inspections (building, electrical, mechanical, plumbing, and energy) to be considered for virtual inspection.
  • Where appropriate, train inspectors to be able to conduct multiple trade inspections at the same time, or consolidate inspections into one. In Reno, Nevada, electrical, mechanical, and plumbing are combined into one building inspection.

Policy 8

Ensure your sign code is up to date with best practices.

Signs are essential for businesses being able to communicate to the public. Through color and art, they can also bring liveliness to the street. But sign permitting can be a challenge, and many sign codes across the country may be constitutionally questionable.

Recommendations

  • Review IJ’s model sign code act to ensure your sign code does not abridge businesses’ First Amendment rights, and allow citizens to advertise their businesses and speak out about the issues they care about most.
  • Ensure signs for home-based businesses or home occupations are held to the same standards as other signs in residential areas.
  • Ensure low-risk signs, like A-frame signs, do not need a permit, instead focusing regulations on objective standards like ensuring clear pedestrian access. The San Francisco Public Works A-Frame Sign Brochure is a useful model for how cities can allow businesses to display A-frame signs without a permit while still outlining clear safety standards and enforcement mechanisms.

Policy 9

Create clear timelines and permit shot clocks.

Recommendations

  • Timely communicate application status to applicants, and create a permit “pizza tracker” so applicants can know exactly where their permit is in the process, and when they can expect permits to be granted. The Virginia Department of Environmental Quality’s Permitting Enhancement and Evaluation Platform (PEEP) offers a public dashboard of all permits and expected timelines, and Atlanta, Georgia, offers a building permit tracker.
  • Create permit shot clocks. Create a standard for a permit window, and if a permit is not denied by the end of that timeline, the permit is automatically approved or an applicant is refunded. Denver, Colorado, placed limits of 180 days for the city to review a development application. 10
  • Allow conditional permit approval, where appropriate. In Chicago, Illinois, for example, restaurants can obtain conditional approval for a consumption-on-premises or tavern liquor license before construction is finished. This allows applicants to know whether their liquor license will be approved (as long as they meet all of the permit’s requirements) before they begin construction or renovations. Too often, entrepreneurs build out a space with the intention of being able to sell alcohol, only to later have their liquor license denied once they’re ready to open.

Policy 10

Create a city culture of “Yes, and!”

The backbone of a small-business-ready city is a city that focuses on saying yes to innovation and entrepreneurship. Innovation should be celebrated, not stifled. When a business does not fit a preexisting box, the city should work with the entrepreneur to ensure they are able to operate while still complying with relevant health and safety regulations.

Cities can take steps to reexamine their regulations, empower their staff to work with small business owners, and work with entrepreneurs to ensure city policy is working for the small business owner.

Recommendations

  • Empower your departments and staff to take ownership of what can be trimmed back, and implement a Spring Cleaning Ordinance. With the help of Cities Work, Kansas City, Kansas, implemented a local legislative priorities plan to identify and eliminate inefficient, confusing, costly, or unnecessary processes or steps.
  • Create a culture of trust in city departments by going out into the community and interacting with business owners directly and identifying specific challenges that business owners can rectify. Specificity and clarity builds trust with the small business community and ensures regulations are implemented with their specific purpose of protecting health and safety.
  • Read our Barriers to Breakthroughs playbook on how to engage your entrepreneurs through roundtables and consistent feedback to ensure policies remain accessible.
Read the Barriers to Breakthroughs playbook
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Cities Work is an initiative of the Institute of Justice’s Activism team.