Business Licensing as a municipal function goes back to the 18th century and before that back to England and its regulations. Initially setup as a way to manage the growth of ‘sin industries’ like pubs within a locale, business licensing now performs a variety of functions. Within a progressive community, business licensing can take on a role that helps encourage business growth that’s desired by its residents:
Many municipal leaders want to understand the overall business health within their community: what kind of businesses open in our community? How long do they last? Requiring registration versus relying on visual identification and/or Chamber of Commerce participation allows for a more complete picture. This is especially important with home-based businesses, which are not usually visible otherwise.
One common aspect of many licensing programs were in response to door-to-door salespersons (peddlers). Without a way to register and track them, persons would come into town, say they were with a legitimate company, take orders and money, and never return. Requiring registration, getting contact information, and confirming affiliation cut down on this significantly. This is often extended trades licensed by the state, such as residential home improvement. The municipality will confirm state licensure before allowing the permission to perform the desired trade. Municipalities will also use registration as an opportunity to conduct inspections (occupancy and fire safety) that were not performed if the business was moving into an existing space without upfit.
Businesses are an important piece of the vibrancy of the community and the municipality wants to encourage businesses to be started and maintained. Since licensing is often the gateway touch-point for a business, some municipalities take advantage of that opportunity, and staff help guide the business through the start-up process.
Businesses bring additional cost to the municipality in terms of public safety, street wear-and-tear, and infrastructure needs. While some of those costs may be offset with employee/owner property or occupation taxes, many employees will be from out of town and not contribute to the tax base, or the business burdens municipal services to a greater extent than the funds recouped purely from property taxes. Business Licenses allow municipalities to recoup those costs.
Finally, Business License fees can be user to incentivize a new business to locate to a municipality. The reduction or elimination of fees for a specific industry, period of time, economically depressed area, and/or under a certain amount of revenue can be useful tool for a municipality to influence business placement.
What are the essential goals for you Business License department? In our next post we’ll look at the metrics that are tied to each of our five goals. Then in Part 3, we take a look at what reports you need to support these metrics.
Do you need help improving your Business License Department? Reach out to us for a free process check-up and get a report with suggestions on improving your business process.