The term is an often-used, nevertheless rather ambiguous concept referring to a collection of location factors directly or indirectly expressing the general or governmental attitudes toward business and/or various local qualities or attributes which affect business operations and business representation in local decision-making. This concept is made all the more ambiguous since the location factors and/or local qualities and attributes are often themselves rather non-tangible. Business climate is, however, a key indicator of the ability to start-up operations quickly and continue operations in a successful and relatively uninterrupted fashion.
Business climate indicates how state, regional and local policies, relationships, and communities support business development. The general consensus is that a good business climate allows businesses to operate freely with a minimum of governmental interference, except when their assistance is necessary and appropriate. Permitting and licensing is streamlined and effective with a regulatory climate that is reasonable and non-intrusive. Low operating costs include everything from tax burdens to wage rates; however, the provision of outstanding public services and a flexible and productive workforce can mitigate higher costs. In short, business climate encompasses all those inputs that foster successful business operations from a long-term perspective. Similar to ”quality of life”, the definition of business climate will vary from industry to industry as well as amongst the individual perceptions of key decision-makers. The common theme among all, however, is that a business climate that minimizes risk while maximizing return on investment through proactive support of business enterprise is the optimal business environment.
Some of the key factors used in the measure of business climate include:
Tax burdens
Workforce availability
Population growth
New business startups\failures
Labor-management relations
Energy costs
Market size
Quality of support services
Cost of living
Quality of life
Environmental regulation
Permitting, licensing and various
reporting regulations
Real estate costs and availability
Infrastructure
Access to financing and capital
Incentives