This study is simply a proxy for how "conservative" (really: Chamber-of-Commerce-Republican- approved) the state financial policies are. The taxes are obvious, but it's also things like, "does your state have guaranteed-issue health care" --- which is a problem only if the business you want to start is a health insurer.
The health care part of your comment really isn't true. States with "guaranteed issue health care" policies are going to have higher insurance rates. That's undisputed. If Insurance companies can't turn people away for pre-existing conditions than their costs are going to go up and their rates are going to follow
(Remember we aren't debating the morality of such practices or whether it's worth the higher costs we're only looking at the economic impact in our current health care system)
Since businesses are expected to cover a large chunk of their employees' health care under our current system that makes health care policy in a given state relevant to every small business
It doesn't matter what health insurance costs if you can't obtain it. That's the situation with non-guaranteed-issue health care; there are a raft of very common health circumstances that will prevent founders from obtaining family coverage --- at all.
Non-guaranteed-coverage is founder-unfriendly. Guaranteed issue, even if it inevitably raises the cost of premiums, at least levels the playing field between established companies with group plans (which are already effectively guaranteed issue and which already cover the majority of residents in most states) and 2 person startup shops.
We can argue this all day, but the point is: this report is a thinly-veiled advocacy piece for the US CoC's agenda. It's not a real study of any sort.
The analysis is not a prescription for how a state "should" be run. It's a way to measure the cost of labor against the capital you would need to use to start a business.
Guaranteed-issue states have higher health insurance costs.
#1 is South Dakota?? If anything that should be an indication that whatever metrics they used are not very empirically relevant.
Judging from their report, it seems like most of the factors are related to various forms of taxes and healthcare. What about significant factors like talent or mentorship? Size of market and characteristics of the population?
Do you think that is a good metric for how successful a given small business is likely to be, or do you think that's mostly a reflection of the state's size, geography, and history?
I'd say the inverse of what you're saying is true. It's natural for small states that want to attract business to create policies that are friendly to new enterprises.
California is such a mess in large part because it has so many successful companies that are stuck here.
1) These are some weird-looking results and make my somewhat skeptical of the metrics.
2) Accepting them at face value, the conclusion I draw is that the legal and regulatory environment (which is what this is really measuring) doesn't matter nearly as much as people on both sides think it does. Not to say it doesn't matter at all - I'm sure that, especially at the margins, it does. But California and Boston rank pretty poorly, and yet are doing okay for new business (and, at least as far as Boston is concerned, that includes businesses of the "real", not web-startup, variety).
I think it is missing some important metrics, but it's a good starting point for anyone considering entrepreneurship but undecided on a state, because it clearly lays out how the rankings were derived.
