Here's something I ran into sort of by accident today. It shows how long it takes between filing a new business application and actually starting up:
This is for retail stores. The time it takes to get the doors open has increased from 18 weeks to 30 weeks in only fifteen years.
This same increase is seen in other business sectors too, but retail is the worst.
I don't really know how to interpret this. Is it purely red tape? Or is there more to it? Does it have something to do with the increased domination of chain and franchise retail compared to mom-and-pop stores? Have retail outlets gotten bigger and more complex over time? I wonder what's going on?
Note that the line starts moving noticeably upward following the 2008-10 recession. So one possibility: state and local governments (where almost all this stuff happens) slashed the number of staff in the various agencies who process applications, permits, and inspections for new businesses, leading to more backlogs and wait-times. So rules and regulations are kept in place, but with far fewer people to do the work over time.
Yeah. Plus the proliferation of single-fault inspections - where they find a fault, they leave and don' continue the inspection.
This is because the departments are basically funded by inspection fees. And liability.
Interesting question. In addition to what you and jte21 have mentioned, I have to wonder about a supply factor-- this can only happen if the start-up capital is there to finance that prep period, ie waiting 67% longer for revenues to start coming in.
For me the bigger context would be a world so awash in capital that people have had a hard time finding a return on it, especially when interest rates have been so low for so long. It would be a question whether higher rates affect this start-up time.
To clarify for my simple head, is the time between filing a new business application and actually starting up mean the time to process the application? Or when the business opens?
Just trying to understand if the delay is exclusively app processing or activities the business is performing prior to start (i.e. staffing).
Possibly related to the slow long-term decrease in the number of big suburban malls. No more ‘Scotch Tape’ outlets.
That line is suspiciously straight. It doesn’t look like there’s any shock or event behind any of it. That said, I’m not sure what would cause such a steady increase over such a long period of time.
Having opened three small businesses (medium sized beauty salons) with my daughter in Colorado, I must say there were zero issues with red tape. In fact, it was such a non-issue that this never even occurred to me. Yes, you must form corporations and submit various forms, like tax forms, to the federal and state governments. You have to get Workmen’s comp insurance too. But these are all just background activities to opening businesses. The real work is in finding good locations, signing leases, remodeling the places, hiring and training staff, marketing, and so on. Yes, this takes months. But it has nothing to do with government red tape. (Maybe some other business types do have red tape, I can’t say.)
The biggest government burdens on our businesses are federal payroll taxes. And my daughter, as the owner-manager, has to pay double payroll taxes. But oh well, Social Security and Medicare are important and essential programs.
None of the things you mentioned are counted in this time.
How do you conclude that? Kevin doesn't state that, and he gives no link. I just did a quick web search on Census Bureau stats, and didn't find much.
That was what I suspect — a lot of new businesses have to remodel a location before they open and that alone takes a lot of time. It happens all the time where I live.
Is this a national average or is it dominated by the worst places? In the SF Bay Area we have lots of issues. From what I read in the SF Chronicle there are lots of permitting issues. Some people give up after a few years of trying.
The other issue PG&E. For unknown reasons PG&E is incredibly slow to respond. Once the workers get there they work quickly and do a good job. It took 9 months for them to come out and disconnect the gas line to the house so we could demolish it and build a new one. The actual job took about 4 hours. After we were done it took about 18 months to come back and hook up power again. The contractor put the request in a year early and we still had wait. We heard horror stories from the electrician about people who built a house or a remodel and waited till the end to contact PG&E. A city official told me they also had to wait five months to get PG&E to hook up power to a city garage.
These are just anecdotes, not data. I’ll bet it good areas you can open a small business easily. In SF or some other areas permitting and other issues with supplies or utilities may slow down the project.
Yeah, though locally it's not PG&E, it's the red tape. Environmental impact studies on signs having their text changed, removed, stilly things like that.
It is clearly national average of course, and as is the mathematical nature of average (presumably simple average) outliers can very well drive significant mean and mode deviation, particulalry if as I would think likely a large portion are in a relatively restricted range but there are a group of outliers that are pushing to the upside (more than there are outliers on the lower value bounds).
Here sub-national and as well variation range is needed to understand the data more to be able to have proper guesses.
Insofar as this segment is a very local activity - and given USA's non-centralisation and the fact such things in USA are formed/incorporated at sub-national (state) levels with sub-national law and regulation rather than national regulation dominannt, I would rather suspect that national aggregates are not going to enable real insights.
Variation at the sub-national level could start to suggest factors and paths to insights as rather likely given your governance models, there are important deviations at States level (and if there is an overall trend then perhaps you have something in US federal, like banking rules or similar that has driven a change).
That is what I am thinking: it is unlikely to be "red tape" as most of this is local. However, it could be a change in what retail businesses are being opened: like more restaurants than, say hardware stores.
There are some good ideas upthread. Let me offer another idea. Perhaps IT installs are more complex now and thus take more time. Computer stuff is not exactly fast to put together. A simple POS (point of sale, what did you think I meant?) might be easy enough, but if you have to tie to all the corporate databases, maybe it's not so easy? And you know they are a lot more complex nowdays.
My guess, as someone who once opened a store, is that nowadays it's done with loans where in the past it was with family capital. Good sides to that (more people can potentially do it) and bad (time loss, stress, greater likelihood of failure).
The number of new business starts has doubled in the last ten years.
Also more of the businesses are in the tech sector than before.