Despite the attention small businesses seem to receive, they’re actually failing in droves. Across the nation, the number of small businesses that fail surpasses the number of new openings.
This is especially true throughout the state of California. California has some of the most stringent and nonsensical rules for occupational licensing in the U.S., making it exponentially difficult for those who want to open their own businesses.
These occupational regulations present immense challenges for people to secure employment, much less start their own companies. Among the millions affected are veterans, military spouses, former criminal offenders, and those who have undergone training for their vocations outside California or the United States. This means that many experienced, trained professionals find it nearly impossible to find or create their own employment when coming from another state.
California workers have to jump through hoops to get their hard-earned money. A recent report from The Little Hoover Commission found that one in five workers here needs permission from the state to even pick up a paycheck. Even though California is one of the most expensive states in the union, our workers have less earning power because of these rules. For example, a Sacramento-based manicurist has to go through (and pay for) 400 hours of training, but a tattoo artist in Florida simply needs to pay a $25 fee in order to operate his business. And because the supply of many occupations is restricted, the demand causes prices to be higher for consumers.
Aside from high taxes and fees, small businesses are burdened with indirect costs from governmental mandates.California also has particularly hostile legal conditions for small businesses. These businesses often don’t have the resources necessary to understand and satisfy both state and federal regulations. Many employees have lost benefits and businesses have been forced to close their doors as a result of lawsuit settlements brought over something as inconsequential as missing punctuation in legal documents. The American Tort Reform Association has ranked the state of California as the number one “Judicial Hell Hole” for the last several years, and it’s easy to see why.
Because of the unfavorable environment, most California small businesses rarely obtain IPO status. In today’s market, IPOs most often include successful internet-based businesses or social media companies. The top-performing businesses from this sector include Etsy, Shopify, and Fitbit, all of which opened up 50% or higher from their originally indicated prices. But because many businesses here are operating without venture capital, gross domestic product shrinks as a result.
Most problematic is the fact that these concerns are falling on deaf ears. Sacramento politicians don’t seem to care about the enormous challenges these businesses face because of these regulations. Experts are highlighting the need for Sacramento legislature reform. It’s necessary for the city to implement policies that help local small businesses in lieu of passing impossible mandates that have an adverse effect on the economy of Sacramento.