Municipalities should employ one-stop websites that combine the functions of multiple city agencies and lower the barriers to establishing a new business.
The aftermath of the Great Recession left the U.S. economy with 8.75 million lost jobs, and job growth remains an integral part of the current economic recovery. While job growth continues at a tepid pace, small businesses have grown rapidly and have led job gains for seven consecutive months since June 2011. However, municipal, state, and federal bureaucratic barriers weigh more heavily on small businesses than on larger firms. Many of these costs derive from a lack of resources as compared to larger firms, and the most severe costs arise when small businesses are first established and most likely to grow.
In light of these obstacles, New York City Mayor Michael Bloomberg championed NYC Business Express, an e-government project dedicated to creating a one-stop website for new and current business owners. Released in 2005, it created a centralized tool for filing for permits, licenses, and incentive programs for numerous city agencies. Since its inception, 22,000 accounts have been created, and the site has received 500,000 visits. Boston, San Francisco, and Newark have consequently contacted New York City to create similar websites.
Consider an entrepreneur in New York City. She will typically be required to interact with upward of twenty separate city agencies, such as the Business Integrity Commission and the Department of Environmental Protection, which often require the services of a lawyer. Consequently, the cost-per-employee is markedly higher. In 2004, federal regulation cost $7,647 for firms with fewer than 20 employees and $5,282 for firms with more than 500 employees. Part of this disparity in costs can be explained by the economies of scale that larger businesses enjoy. Herein lies the problem. New small businesses do not possess the vast resources that larger firms do, especially in terms of legal services. Consequently, the structural, financial, and time-related barriers faced by smaller entrepreneurs discourage new business establishment.
One-stop websites such as NYC Business Express have accordingly experienced a warm reception from entrepreneurs.11 However, the cost of implementing such a program remains a point of contention. NYC Business Express required $27.4 million to develop.
Additionally, different municipalities have different sets of regulations and agencies related to business creation, so a program like NYC Business Express cannot necessarily be replicated at little expense.
The initial requirements of developing a one-stop site are nevertheless offset by the accounting and time benefits. It has allowed for cuts in administrative hours as more transactions are completed online instead of at brick-and-mortar agencies. The convenience of 24/7 access to permits, regulations, and incentive programs, as well as a more entrepreneur-friendly environment for small businesses, reduce the time-related costs to starting a new business.
Because small businesses are exposed to the bureaucratic costs of establishing a new business, local organizations such as chambers of commerce or small business associations must compel municipal governments to instigate this mutually beneficial initiative. Given the current lukewarm employment situation, streamlining the process of small business formation through the creation of one-stop e-government websites will be a successful venture that municipal governments can employ to reduce the costs entrepreneurs face and allow small businesses to continue creating jobs.