Data 101: What can we learn by tracking business license data?
Posted on November 29, 2017 by Dr. Reid Cummings, Jana Stupavsky, and Emma Fairbanks
What is a business license? A business license is a government-issued document that authorizes a business to engage in an industry or profession. Local governments most commonly issue business licenses, and issuance rules vary. In some cases, it is for a particular industry type (e.g. trucking), in others, it is to sell or provide a specific product or service (e.g. beer or legal services), and in others still, license approval considers expected annual sales (e.g. contractors). If a federal regulatory agency, such as United States Department of Agriculture or Environmental Protection Agency, monitors the industry in which one wants to do business, a federal permit is required. Generally, when applying for a new business license or altering an existing one, the owner must indicate the type of business, products or services offered, and specific locations from which it will operate.
What do we track?
- Total number of licenses, new and renewals, issued annually on a county level
- Total number of new licenses, new and renewals, issued per zip code annually on a county level
What does this data reveal? Business license data indicate how much business activity is entering or exiting a particular market. New business license issuance data are especially important because over time, increases or decreases point to how fast a region’s economy is growing or declining. This data can indicate areas of large commercial growth, which often leads to an increased need for housing and public services.
Local governments can use business license analysis to glean an understanding of where new property tax revenue will be coming from and where infrastructure, public education, and public safety improvement investments might be necessary. Businesses that supply materials to other businesses can also get an indication of where and what kind of services will be needed in growing areas. Similarly, non-renewals of business licenses can also tell an important story, pointing to possible disruptions in existing supply chains, or signaling future population shifts and tax base reductions.