Newark, N.J.—Barriers to Business: How Cities Can Pave a Cheaper, Faster, and Simpler Path to Entrepreneurship reveals the costs, delays and complexity imposed by cities on entrepreneurs seeking to start small businesses. The report contains key takeaways for how Newark needlessly complicates entrepreneurship, and provides specific, workable solutions to help Newark become an easier place to start a business.
Newark entrepreneurs face significant regulatory challenges when starting their businesses. While the city provides a helpful online portal to help applicants navigate business licensing requirements, the regulatory process makes it difficult—or sometimes even impossible—for entrepreneurs to start the ventures of their dreams. The new report, published by the Institute for Justice (IJ), details solutions and reforms that can fix these problems and make it cheaper, faster and simpler for entrepreneurs to start their businesses.
The report finds that Newark entrepreneurs must navigate a web of high fees, long wait times and complex paperwork—collectively creating something akin to death by a thousand cuts—before reaching opening day, and before they have made a dime or had the chance to test the viability of their idea.
“You shouldn’t need a pile of cash and a law degree to start the small business of your dreams,” said IJ City Policy Associate Alex Montgomery, one of the report’s co-authors. “These high price tags and burdens most harm those with the fewest resources at their disposal. Newark officials should make it cheaper, faster and simpler to get up and running so that all entrepreneurs have the opportunity to earn an honest living—especially during these challenging economic times.”
The report provides a first-of-its-kind, in-depth analysis of regulations governing small businesses in 20 U.S. cities and the real-world process of starting five common business types from the entrepreneur’s perspective. Key findings for Newark include:
- Home-based businesses are heavily restricted by Newark’s zoning rules, which prohibit client visits and nonresident employees.
- Newark’s licensing rules are inflexible. For example, a restaurant license is valid from Feb. 1 to Jan. 31, regardless of when it is issued.
- Some applicants for business licenses in Newark must request background checks from state police, deterring citizens returning from incarceration.
“Newark can do more to support entrepreneurs than simply providing them with workarounds to complicated processes. Newark must invest in small businesses by removing barriers that are already on the books,” said IJ Activism Associate Andrew Meleta, the report’s other co-author. “When thinking about easing the cost of doing business for entrepreneurs, many policymakers focus on federal and state-level reform efforts. But by pursuing our targeted recommendations for local reform and following best practices from across the country, city officials can make a truly impactful difference for Newark entrepreneurs.”
Two years into the COVID-19 pandemic, America’s downtowns and small-business corridors continue to struggle with reduced hours and vacant storefronts. “It is hard enough turning an innovative idea into a successful small business, but local regulatory hurdles further complicate an entrepreneur’s startup journey,” Montgomery said. “This forces many aspiring small business owners to choose between operating in the informal economy or giving up altogether.”
By removing the legal and regulatory obstacles that make it challenging for small businesses to open and operate, officials can bolster—rather than hinder—entrepreneurs who are seeking to revitalize beloved city blocks and neighborhoods. This report provides specific guidance to cities seeking to better support their entrepreneur communities by pinpointing specific barriers to small-business ownership and identifying best practices and policy solutions to lower the cost of doing business, cut down on regulatory delays, and streamline requirements for license and permit applicants.
The release of this study marks the launch of Cities Work, an initiative dedicated to making it cheaper, faster and simpler to start a small business in cities across the country. The initiative builds on years of IJ’s work in Washington, D.C., and Chicago, collaborating with city officials to enact regulatory reforms that support aspiring small-business owners. The Cities Work team will expand the lessons learned to cities and towns nationwide, organizing entrepreneurs at the grassroots level and pursuing needed policy and legislative change.