Data collected in this report are current as of November 1, 2021. Local and state government agencies can add, remove, or alter processes, websites, fees, and forms at any time. Agencies should always be consulted as primary sources of information. Nothing in this report should be considered legal or non-legal advice on how to start a business.
City Selection Process
We started with the 115 cities in the United States with a population greater than 200,000 people. We did this to avoid including small cities and municipalities, which are not the focus of the study. At the time of city selection, in February 2020, the largest city was New York City, with a population of 8,601,186, while the smallest city was Grand Prairie, Texas, with a population of 200,699.
From here, we moved our cut off point to 300,000 people. This eliminated 45 cities with fewer than 300,000 people. Five exceptions were made for cities that were the largest in their state. Those cities were: Birmingham, Alabama (210,999); Des Moines, Iowa (217,446); Boise, Idaho (231,773); Newark, New Jersey (283,756); and Anchorage, Alaska (297,832). These were not removed from the list, leaving us with 70 cities.
In our list of 70 cities, 21 cities were in California and Texas. To ensure these states were not overrepresented, we randomly selected two cities each from California and Texas. The cities selected were San Francisco (897,536) and Anaheim (356,308) in California, and San Antonio (1,565,929) and Fort Worth (913,939) in Texas. Eliminating the rest of the California and Texas cities left us with a sample of 53 cities.
We then handpicked our final 20 cities. We did this based on several factors that would allow us to arrive at an optimal and researchable list of cities, including:
Innovation in the entrepreneurship space, where a city shows a focus on supporting entrepreneurs, business owners, and the greater community
Efforts on licensing reform, where a city is currently working on efforts to make it easier to start a business
Opportunities for future grassroots activism
Overall, our goal was to have a diverse selection of cities that came from all major geographic areas of the country, were both large and mid-sized, and had enough grassroots and research opportunities to make meaningful, long-term impacts after the publication of this report. The final 20 cities are:
Des Moines, Iowa
New Orleans, Louisiana
New York City, New York
Newark, New Jersey
Raleigh, North Carolina
San Antonio, Texas
San Francisco, California
St. Louis, Missouri
Originally, Cleveland, Ohio was one of the selected cities, but we soon learned that it would become prohibitively difficult to research due to a lack of information online, in its city code, and over the phone with city staff. We replaced Cleveland with Des Moines to add another smaller-sized mid-western city.
Metrics for Business Start-Up Analysis
Below we describe how we calculated the six primary metrics used to measure the cost, delays, and complexity of starting the five business types featured in the report:
Cost: The total dollar amount of fees an entrepreneur must pay to start a particular business type. This can include the cost of corporate registration (incorporating an LLC), trade name registration, business licenses, food and health permits, building permits (including mechanical, electrical, plumbing, sign, and construction permits), inspections, occupational licenses, zoning permits, street and vending permits, and various other fees.
Number of fees: Each time a fee needed to be paid, it was included in the total number of fees tally.
Number of steps: Steps were totaled by counting up all the actions that an entrepreneur needed to complete to make it through the business start-up process. This included filling out and submitting forms or paperwork, attending meetings with government agency officials, attending public hearings, scheduling and undergoing inspections, and getting documents notarized. We did not include higher-order steps such as making decisions about what type of business structure to choose when incorporating. Our assumptions in our analysis for each business type account for these types of decisions.
Number of forms: Each time a form had to be filled out, it was included in the total number of forms tally. Forms include paper forms that must be printed out and mailed to an agency, PDF or paper forms that must be printed out and filled out or are fillable on a computer that must be emailed to an agency, online-based forms that are completely fillable on a website and are submitted online, and forms that require creating an account with a city website and can be filled out and submitted online.
Minimum number of in-person activities: Any time an entrepreneur must complete a step by physically going to a city agency office, attending a public hearing, getting a document notarized, or being present for an inspection is considered an in-person step. We qualify this metric with the use of “minimum” since it is possible for a variety of reasons that an entrepreneur would need to complete steps in person more frequently than the minimum number of instances we tabulate.
Number of agencies involved: The number of agencies that are involved in the business startup process. Each agency that controls a part of the process was included in this metric. This is not the aggregate number of times an entrepreneur needs to interact with city agencies. Examples include agencies at all levels of government, such as the IRS, a state health department, or a city taxing authority.
Building Permit Process and Analysis
Building permits from city to city are highly variable and depend greatly on the type of construction work being performed. To reasonably estimate the cost and complexity of building permits for each city, we limited their inclusion to the following types of permits. We analyzed the cost, number of steps and agencies, in-person requirements, and forms involved for each type of permit:
General building permits: authorize general construction work and renovations completed by the applicant’s general contractor.
Mechanical/HVAC permits: authorize any type of work related to air conditioning, heating, elevators, dumbwaiters, etc. They are issued to a licensed mechanic who is typically hired by the applicant’s general contractor.
Plumbing permits: authorize any type of plumbing work. They are issued to a licensed plumber who is typically hired by the applicant’s general contractor.
Electrical permits: authorize any type of electrical work. They are issued to a licensed electrician who is typically hired by the applicant’s general contractor.
Sign permits: authorize any type of sign work. They are often only issued to a licensed sign contractor who is typically hired by the applicant’s general contractor. For our analysis, we assume that the sign in question is an unilluminated wall sign.
Plan reviews were incorporated into our analysis when we assumed that alterations and renovations would be substantial enough to require a plan review. Plan reviews generally had a fixed cost and were assessed separately from building permit fees. In some cases, they were part of an overall building permit cost assessment.
Inspections were included whenever final inspections were required as the last step of the building permit process. Other clearly defined inspections were also included. We did not assume additional inspections as part of an applicant’s process of acquiring building permits, but the reader of this study should not assume that our analysis was inclusive of every possible inspection a typical applicant might have to go through. Additionally, fees for inspections were included where fees were assessed, and inspections were considered an “in-person” step in our analysis. Finally, we considered scheduling an inspection and undergoing that inspection as two separate steps.
For the purposes of estimating building permit costs, we researched typical renovation costs for the business types and industries we analyzed in this report.
Most building permit costs in our analysis are determined by the value of work being performed. The value of renovation work was assumed to cost $180,000, based on our research of typical industry renovation costs. For specific permits, we assumed $25,000 of work for mechanical, electrical, and plumbing work.
The restaurant was assumed to be permitted by right, meaning it would not need to obtain additional zoning approvals.
To showcase zoning processes, we assumed our bookstore would need to get a conditional use permit and would open in an area that it cannot open in by right. This means that the bookstore would have to receive special zoning approval from the city to open.
The bookstore would also need a sign permit. No other building permits were included in the bookstore analysis.
No building permits were assumed for the food truck since it is a mobile vending vehicle and does not require such permits. Food truck-specific permits, such as street vending permits, were included in our analysis.
We assumed that the truck would want to vend in a downtown corridor, so we included any special permits that a city might require vendors to obtain to vend in the city center.
We assumed the size of the barbershop was 1,000 square feet.
Business License for bookstore: Birmingham General City Code, Appendix A, NAICS 451 – Schedule 314. Sporting Goods, Hobby, Book, and Music Stores.
Business License for home-based business: Birmingham General City Code, Appendix A, NAICS 611-222 – Educational Services.
Business License for restaurant: Birmingham General City Code, Appendix A, NAICS 722 – Schedule 216. Restaurants, Cafes, Lunch and Sandwich Stands, Including Lunches at Soda Fountains and Food Service Contractors.
City of Boise. Public Works Department. Sewer connection fees usually apply when a restaurant is changing in type or if the use of the structure is changing. For simplicity, our restaurant will be occupying the space of a former restaurant. Boise only distinguishes between fast food and non-fast food restaurants. Retrieved by David Losson on June 29, 2021.
Category designation for a tutoring business with client visits was confirmed by Kevin Hunter at the Department of Planning and Development Services, Division of Development Services on March 10, 2020. Businesses with client visits would immediately fall into the Category 3 designation.
Number of steps and agency interactions required to start a business were calculated using all sources contained in this appendix.