Thursday, April 3, 2014

Best and Worst small business metro areas. Nashville is not in the top ten. Why?

While for the last few years, Nashville has captured the top spot or at least been among the top ten in all kinds of list, everything from best place for live music,  best place to visit, foodie towns, best place for corporate reallocations, most people employed in the arts, most compassionate, to best place for a bachelorette party, Nashville is not among the top ten places to start a small business. We score a respectable 29th position out of the top 101 but we lag behind Los Angeles, New York City, Atlanta, and Washington D.C. While 29th out of 101 is not bad, I have come to expect Nashville to be in the top rank of everything and am disappointed when we are not. (link)

While number 29 may be respectable, it does not give us bragging rights, yet we are ahead of  Knoxville at 79, Chattanooga at 96, and Memphis dead last at 101.

 There were six factors that went into compiling the rating for a city. They are:

  • Concentration of small businesses, expressed as a ratio per 1,000 residents
  • One-year change in concentration, expressed as a percentage
  • One-year change in the total of small businesses
  • Two-year change in population
  • One-year change in private-sector employment
  • Five-year change in private-sector employment
In number one spot and having been in number one for five years is Austin, Texas. I have never been to Austin, but many people compare Nashville to Austin. Both are state capitals, both have a lot of young people, both are towns with a vibrant live music scene, both are hilly with lots of lakes and both are in states without a state income tax, and both are relatively liberal cities in conservative states. There are probably other similarities that cause the cities to often be compared that I am just not aware of. Austin does have a base of technology companies that Nashville does not have. Nashville has more universities than Austin and a lower cost of living.

I don't know Austin, but maybe one reason Nashville scores lower is because of our crony capitalism and price-fixing environment. The way we tried to stamp out an innovative livery service to protect existing luxury limo companies is not an environment that is welcoming to innovation and start-ups. The way the city tried to take Joy Ford's property and destroy a small player in the music business in order to benefit a large corporation is not conducive to a climate that favors small business. We have made strides in streamlining the process for developers to start construction projects but maybe we need to look at the obstacles to new small businesses and see if we are putting unnecessary obstacles in the way.

Maybe one thing inhibiting the growth of small business in Nashville is Tennessee's over regulation of business. I don't know what the requirements are in Texas, but in Tennessee anyone who wants to give manicures or engage in natural hair styling or give shampoos must be licensed. To become a beautician requires completion of 1,500 hours in practice and theory at a school of cosmetology. To just be "shampoo tech" requires 300 hours in the practice and theory of shampooing at a school of cosmetology.  This is ridiculous!  The practice and theory of shampooing? What do they do that requires 300 hours of training before you can wash someone's hair?

Since the State governors office and legislature has been taken over by Republicans we have made strides in improving education and cutting taxes and getting wine in grocery stores. The next thing I wish Republicans would tackle would be regulations.  I think all regulations should have a sunset provision and be reexamined for reasonableness and cost effectiveness every so often. In my view one should not have to be licensed just to wash hair.

When I was first elected to the Council back in 1980, one of the issues we had to gabble with early in my first term was passing a bill to remove the requirement that movie theaters have licensed projectionist operate the equipment that plays the movies. This seemed like common sense to me. At one time in the early days of cinema apparently there were fire hazards associated with showing movies and government wanted trained licensed projectionist.  I don't know when that hazard went away, but by 1980 most movies were the automated equivalents of a DVDs, yet there were still laws on the books requiring that only licensed projectionist could run movies and I think there was supposed to be a projectionist in the booth at all times. The Council changed the law but the unions fought it.  They wanted to preserve the job of licensed projectionist.

The City and the State should look at regulations that prohibit growth and innovation and fix those that need fixing and that no longer serve a useful purpose and we should stop practicing price controls and crony capitalism and unionist favoritism and eminent domain abuse.  I don't know if this would make us competitive with Austin Texas, but it sure wouldn't hurt and it would be the right thing to do. 


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