Birmingham, Ala.—Barriers to Business: How Cities Can Pave a Cheaper, Faster, and Simpler Path to Entrepreneurship reveals the costs, delays, and complexity that cities impose on entrepreneurs seeking to start small businesses. The report contains key takeaways for how Birmingham needlessly complicates entrepreneurship, and provides specific, workable solutions to help Birmingham become an easier place to start a business.
Birmingham entrepreneurs face significant regulatory challenges when starting their businesses. The city lacks a true one-stop shop and does not provide entrepreneurs sufficient online resources and portals to apply for licenses, pay fees, submit supporting documentation, and understand the step-by-step process of starting a business. The new report 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 Birmingham 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 ideas.
“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. Birmingham 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 Birmingham include:
- Birmingham entrepreneurs looking to open a restaurant or barbershop must fill out 15 different forms, most of which must be submitted by mail or in-person.
- Birmingham fails to meet any of the one-stop shop criteria, tying Des Moines for last place on that criterion among the 20 cities in the report.
- Birmingham has nearly 300 business license categories—more than most of the cities in the report.
“Birmingham can do more to support entrepreneurs than simply providing them with workarounds to complicated processes—and they can do so at little to no cost. Birmingham 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 Birmingham 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 the process 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.
Barriers to Business
Too often entrepreneurs struggle with local regulatory burdens, finding themselves trapped by high fees, long wait times, and complex paperwork.