A new ranking of states based on “small business friendliness” was released this week by Thumbtack, in partnership with the Ewing Marion Kauffman Foundation. Thumbtack, an online directory that helps people find local service providers, surveyed over 6,000 small business owners who list their services on its site and, based on their responses, assigned letter grades to each state.

The survey-takers were asked to rate their state across several measures of small business friendliness. Many of the questions dealt with regulations. Business owners were asked how friendly or unfriendly their state is with regard to environmental, labor, health & safety, licensing, and land use regulations.

In the final results, which you can see in this interactive map, states that have more regulations tend to rank low, while those with fewer and looser rules top the list. The five states deemed least friendly to small businesses are Rhode Island, Vermont, Hawaii, California, and New York. The five most friendly are Idaho, Texas, Oklahoma, Utah, and Louisiana.

In a press release, Thumbtack put a point on the findings by quoting the owner of a roofing business in Texas:  “With comparatively few regulations or government oversight on small businesses, Texas is truly a small-business-friendly state.”

The trouble with this analysis, though, is that many of the “unfriendly” states are actually home to much larger numbers of small businesses than the “friendly” states. Continue reading