California has received a grade of F in small business friendliness, according to Thumbtack’s fourth annual Small Business Friendliness Survey, which surveyed over 2,000 small businesses in the state on a broad range of policy factors.

California not only earned an F in overall friendliness, but in ease of starting a business, business regulations, labor regulations, tax regulations, licensing forms and environmental regulations. The state also received a D+ in health and safety regulations and zoning regulations, as well as a C- in training and networking programs and C in ease of hiring.

California is also ranked as the fourth worst for small business climate in the nation, only outranked by Connecticut, Illinois and Rhode Island. California and Rhode Island have been rated in the bottom five every year since the survey’s inception.

The fourth annual Thumbtack.com Small Business Friendliness Survey drew upon nearly 18,000 small business owners in 36 states across the nation to rate their state and city governments across a broad range of policy factors, including ease of starting a business, regulations and licensing.

According to the survey, state and city governments that promote local business training and focus on ease of regulatory compliance are consistently perceived as being friendliest to small businesses.

Other survey findings show that the ease of compliance with licensing rules was more important than tax rates, effective licensing was just as friendly as no licensing, training experience was the top factor in both state and city rankings, and high quality websites matter.

“Small business owners on Thumbtack have consistently told us that they welcome support from their government, but are frequently frustrated by unnecessary bureaucratic obstacles,” said Jon Lieber, chief economist of Thumbtack.com.

“Given that there is a crisis of entrepreneurship in the United States, seen in the broad collapse of self-employment across industries and states, creating the right environment for business start-ups is more important than ever,” continued Lieber.

Despite the failing grade given to the state, Stanislaus Economic Development and Workforce Alliance CEO Dave White said that he believes that the Alliance is doing everything it can to create positive environment where small businesses can succeed.

“A lot of these rankings that come out have to do with regulations and taxes—things that are outside of our local control. These are things that happen in Sacramento,” said White. “So if you compare our regulatory government here with other states in the country, we don’t look too good.

“However, opportunities in California tend to be higher than in other states because of the size of the market and level of entrepreneurial activity, so you also have to take that into consideration,” continued White.

White said at the local level, the Alliance is working with partners, such as chambers of commerce and cities, to become more small business friendly.

“Would it be great if our regulatory environment improved? Absolutely,” said White. “But I think that the cities are still doing a great job and we are making good strides, but we can definitely improve.”  

The Alliance also has a number of programs and initiatives that are designed to support small businesses, according to White, including visits with small businesses to better understand their issues and help them overcome their concerns.

“The small businesses are the ones producing a majority of jobs and opportunity in the country, so they need to be treated with great sensitivity and care,” said White. “Our elected officials here in the county are very sensitive to small businesses. It would be wonderful if all legislators in California were more considerate as well.”

As co-owner of the Farm House, a home décor store in downtown Turlock that opened in April, Kim Jonson said that the process to start the business was very time consuming, but not significantly difficult.

“I don’t think I would have rated the state so low, but I wouldn’t rate it too high either,” said Jonson. “There are a lot of regulations, but I think Turlock was fine. They didn’t make it too hard for us and they were actually pretty helpful.

“There have rules and we understood that,” added Jonson.

Thumbtack also released its monthly Small Business Sentiment Survey, which captured the economic sentiment of more than 10,000 small businesses nationwide.

“Although the economy as seen through the eyes of America's small businesses has improved over the last year, recent trends show that small businesses overall are feeling less optimistic about the future," said Lieber. “Expectations about future economic conditions have been on a five-month decline, and hiring expectations have declined slightly since March.”

The survey showed that small businesses still report a significant improvement in their overall sentiment over the last 12 months, but there has been a steady downtrend in their views of the economy since March.

In the report, 75 percent of small businesses reported that they expect their personal financial situation to be better or significantly better in three months, but less than 50 percent think that the overall economy will be better in three months. Additionally, 28 percent of small businesses reported that they attempted to hire someone within the last three months, and 38 percent of those hiring reported it was difficult of very difficult to bring on new workers.

Top problems reported by California small business owners in August include access to credit, uncertain economic conditions, taxes and competition from big business or overseas. These businesses said that they felt “somewhat positive” in August, placing them 16th nationwide.