Des Moines, Iowa—Christina Moffatt’s Ingersoll bakery, Crème Cupcake + Dessert, is exactly the kind of business Des Moines should want to attract more of. The sleek bakery transforms into a cocktail lounge at night and has even attracted the likes of Food Network’s “Cupcake Wars.” But the process for Christina to get her business up and running was not easy.
Meeting city and state code requirements meant satisfying the demands of two groups that often failed to work together. Christina had to go before Des Moines’ city council to defend her business—an intimidating process that could be insurmountable for those who do not speak English as a first language. According to Christina, if the process to start up were streamlined, more businesses like hers would open.
Barriers to Business: How Cities Can Pave a Cheaper, Faster, and Simpler Path to Entrepreneurship, a new report by the Institute for Justice (IJ), reveals the costs, delays and complexity cities pile on entrepreneurs seeking to start a small business. It contains key takeaways for how Des Moines needlessly complicates entrepreneurship, providing specific, workable solutions to help Des Moines become an easier place to start a business.
“Entrepreneurs often find that while any one license, form, or fee may not impose insurmountable barriers on its own, individual steps and costs often add up to make it difficult or even impossible for them to get their business off the ground,” said Alex Montgomery, a report co-author and IJ city policy associate. “Our study provides in-depth analysis of each studied city’s business start-up regulations, as well as customized reform recommendations that city officials can implement right away.”
The report provides a first-of-its-kind analysis of regulations governing small businesses in 20 U.S. cities, as well as the real-world process of starting five common business types from the entrepreneur’s perspective. In Des Moines, the cost, delays, and complexity imposed by the regulatory process make it difficult—or sometimes even impossible—for entrepreneurs to pursue their small-business aspirations. Key findings for Des Moines include:
·Des Moines’ high fees mean restaurants must pay $2,438 to open. Yet food trucks—restaurants’ modest, mobile counterparts—must pay $3,629 to get started due to high costs for licenses and permits, as well as paying for parking meter hoods during the start-up process.
·Des Moines does not meet any of the report’s five criteria for a true one-stop shop. The city’s website lacks full explanations and upfront guides on starting a small business, making complex processes even more confusing.
·The process for obtaining a building permit is lengthy and opaque, as entrepreneurs endure multiple inspection signoffs and apply for construction and trade permits. This is reflected in the 62 and 64 steps it takes, respectively, to start a restaurant and barbershop.
Barriers to Business calls on Des Moines to reduce fees and remove unnecessary barriers on specific business types like home businesses, which are not allowed to receive clients unless they go through an expensive and time-consuming zoning process. The city should also create a true one-stop shop that allows entrepreneurs to complete all or most of their paperwork in one place. The report further highlights other barriers to entrepreneurship, such as Des Moines’ automatic disqualification for food truck license applicants who owe past-due fees to the city. This may make it particularly difficult for entrepreneurs from at-risk populations, such as returning citizens or low-income residents, to start a mobile business.
“We provide actionable reforms that city officials can use as a roadmap for streamlining rules in their own backyards,” said report co-author and IJ Activism Associate Andrew Meleta. “Cities should make it easier for those trying to earn an honest living and provide for their families to escape poverty, not deter or deny access to opportunity.”
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 their 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.