INDIANAPOLIS—Beth Rovazzini’s B&W Heating and Cooling has been in the family since the 1960s. But completing the maze of requirements Indianapolis imposes on entrepreneurs to legally operate has proven difficult for her business. A new report by the Institute for Justice (IJ), Barriers to Business: How Cities Can Pave a Cheaper, Faster, and Simpler Path to Entrepreneurship, finds that Indianapolis entrepreneurs like Beth must navigate a complex web of local costs, delays, and steps—put together, a regulatory death by a thousand cuts. The report also presents a path forward by providing specific, workable solutions to help Indianapolis become an easier place to start a business.
Beth notes that one of the biggest challenges is knowing the right person to call—an acute barrier for those who are just starting out and have fewer connections within city government. For trades licenses, B&W must contend not only with duplicative licensure, as some trades require registration at both the state and local level, but also with slow and frustrating approvals from the city. In some cases, Beth found the only way to resolve an issue is to go in person to city headquarters with a blank check. But it need not be this way.
“You shouldn’t need a pile of cash and a law degree to start the mom-and-pop shop 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. Indianapolis 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 Indianapolis include:
- Starting a business in Indianapolis is an expensive endeavor. For example, restaurant entrepreneurs must pay 13 different fees totaling $3,285 to get started in Indianapolis—nearly $800 of which is just in licensing costs—and barbers must pay $2,124.
- Red tape often takes valuable time away from entrepreneurs. For example, getting a conditional use permit involves sending notices to neighbors, conducting public meetings and completing requirements in person—steps that bog down applicants in compliance and delay opening day.
- The process for obtaining a building permit is especially onerous and confusing, in part due to the need for a construction design release from the state. This is reflected in the 69 and 62 steps it takes, respectively, to open a restaurant and barbershop.
“Indianapolis can do more to support entrepreneurs than simply providing them with technical assistance and small business resources. Indianapolis 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 Indianapolis 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 start-up journey,” said Montgomery. “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 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.