Institute for Justice · February 8, 2022

Philadelphia—Entrepreneurs in Philadelphia face significant regulatory challenges to get their businesses off the ground. The hassle sets aspiring entrepreneurs back before they even get started. A 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. 

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 Philadelphia needlessly complicates entrepreneurship, and provides specific, workable solutions to help Philadelphia become an easier place to start a business. 

The report finds that Philadelphia entrepreneurs must navigate a complex web of local feess, delays, and steps—collectively causing 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. Philadelphia 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 Philadelphia include:   

  • Philadelphia’s entrepreneurs face steep costs to start their businesses. For example, a restaurant owner must spend $3,160 and a barbershop must spend $2,757 before doors can open to customers. Home-based businesses cost $402 to start, mostly driven by a $207 zoning application and a $125 application for a special exemption to zoning rules; if an entrepreneur wants to serve customers at home, the costs are even higher. 
  • Restaurants must complete 58 steps to get started in Philadelphia. 
  • Philadelphia’s eCLIPSE portal allows entrepreneurs to have a single log-in but fails to provide a user-friendly experience. Overall, Philadelphia scores three out of five on the one-stop shop rubric used in the report.  

“Philadelphia can do more to support entrepreneurs than simply providing them with workarounds to complicated processes. Philadelphia 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 Philadelphia 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. 

Related Reports

Economic Liberty

Barriers to Business

Too often entrepreneurs struggle with local regulatory burdens, finding themselves trapped by high fees, long wait times, and complex paperwork.