Storytelling plays a vital role in voicing the concerns of small businesses; however, on its own, it is not sufficient to drive policy change. Rigorous research is essential to inform evidence-based policies that genuinely improve the small business landscape.

Bryan Zhao, Founder and President of Youth Voice for Small Business (YVSB), has developed the Actionable Small Business Friendliness Index (ASBFI), a novel tool designed to evaluate how effectively regional governments support small businesses. The findings from this research aim to guide evidence-based policymaking and strengthen the local small business environment.

This research will be presented as an oral presentation at an international conference in January 2026, and an abstract of the study can be found below and on the Social Science Research Network (SSRN).

Measuring What Matters: The Actionable Small Business Friendliness Index for Evidence-Based Policy

Bryan Zhao¹, Henry Huang, Ph.D. LL.M²

¹The Awty International School, Houston; ² Department of Accounting, Sy Syms School of Business, Yeshiva University, New York, United States

Small businesses constitute over 99% of all firms in the United States and collectively employ almost half of the private sector workforce. Their role extends beyond generating employment and economic output; they also serve as anchors of local communities by providing essential goods and services. Thus, it is critical to understand the business environment in which small businesses operate and to develop policies that enhance their long-term sustainability.

However, there is limited research on small business friendliness. To the best of our knowledge, the few existing indices primarily rely on sentiment-based data, focus on a broad, non-local level, or incorporate factors outside the control of local jurisdictions. To address this gap, this study develops an Actionable Small Business Friendliness Index (ASBFI), a tool designed to evaluate the extent to which regional governments support small businesses. Unlike prior measures, ASBFI emphasizes factors that local governments can directly influence through policy actions, grant programs, procurement practice, incentives, partnership, and advocacy efforts. Specifically, the index assesses a host of factors including economic conditions, the regulatory environment, resources and support, workforce quality, and infrastructure. The results will inform evidence-based policy making to improve the small business environment at the local level.

This study analyzes 20 counties in South Texas, United States, using ten business-related factors that local governments can influence, such as permitting processes, taxation, access to capital, and infrastructure. Publicly available data were systematically scored across both binary and continuous variables, based on their impact on business and underlying data distribution. These scores were then aggregated to generate a composite index for each county. The ASBFI was validated through a two-step regression that revealed a strong and statistically significant association between the index and small business density (p < 0.05, R² = 0.97).

Results primarily rank the counties for their business friendliness, with an interesting finding that stricter permitting processes in top-ranked counties did not appear to hinder the overall small business environment, suggesting that other interacting factors were more salient. However, access to capital and infrastructure remains an area for improvement in several counties.

These findings provide policymakers and economic planners with a practical framework for identifying strengths and gaps in the small business environment and implementing targeted improvements. Moreover, the ASBFI offers a transparent, replicable, and accessible tool for local governments to assess their support for small businesses. Future iterations of the index could incorporate additional socioeconomic factors as data availability improves, broadening its applicability and impact.

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