As part of our yearlong project As part of our yearlong project "The State of Small Business," Business News Daily plans to report on the small business environment in every state in America. In this installment, we asked a few of Maine's 142,186 small business owners about the challenges and opportunities of operating in their state. Here's what they had to say.
For the entrepreneur, New York offers a stable environment, a large economy, and access to one of the world's busiest regions. Small business owners and professionals in the state don't expect that to change and are largely optimistic about what the future holds. While New York's economy has grown slower than the nation as a whole, it remains the third largest in the country at a GDP of nearly $1.4 trillion in 2014, according to the Bureau of Economic Analysis (BEA). That means plenty of business opportunity, both in New York City and outside, where there are large markets in places like Buffalo, Rochester, and Syracuse. New Yorkers are, on average, wealthier than their national counterparts as well, meaning more money to spend on the goods and services small businesses have to offer.
However, the heightened cost of living can prove difficult to manage. Still, entrepreneurs said that if they can overcome the steep expenses associated with payroll and rent, not to mention a tangled web of taxes and fees, operating in New York is an investment that pays off in the end.
As part of our yearlong project "The State of Small Business," Business News Daily plans to report on the small business environment in every state in America. In this installment, we asked a few of New York's 2,057,959small business owners about the challenges and opportunities of operating in their state. Here's what they had to say.
[See Business News Daily's complete coverage of the State of Small Business in the U.S.]
While New York isn't known for having the lightest tax atmosphere in the U.S., the state has created several tax benefits and incentives to reduce the burden on small businesses. One of the most popular programs is called "Startup New York," which offers selected applicants ten years of tax free operation in specified locations. The program is designed to encourage more entrepreneurship and to attract new businesses to New York.
"Startup New York … allows businesses to operate tax free for 10 years," T. Joshua Wu, an associate at Caplin and Drysdale, said. "New York is moving toward being more tax friendly to small businesses."
Dan Pickett, the CEO of the Clifton Park-based tech company nfrastructure, said since he started operating in the state he's seen a great deal of tax reform. He said the creation of regional economic development councils helped to simplify and enhance what was previously a convoluted mass of disparate programs and policies.
"In the past, there were a lot of fragmented programs and policies that were very difficult to understand," Pickett said. "To his credit, [Gov. Andrew] Cuomo put together regional economic development councils to serve as a focal point and aggregator of those fragmented programs."
Businesses are growing statewide
Startups and business growth are prevalent in New York, with more businesses surviving their first year and less filing for bankruptcy, according to the Small Business Administration. Entrepreneurs, especially those who cater to other businesses, are seeing those effects firsthand on the ground.
Jonathon Wasserstrum, CEO and co-founder of commercial real estate company TheSquareFoot, said demand for space is rising as more and more startups begin looking for a place to call home.
"More people are looking for real estate either to start or grow. Demand is very strong, there are lots of new businesses in New York forming all the time," Wasserstrum said. "All that new business formation leads very well into what we need to be doing."
The growth is evident in small businesses' borrowing habits as well. Money remains cheap, so many entrepreneurs are taking the opportunity to invest in their businesses. David Goldin, President of lending firm Capify, said it seems as if business owners feel secure enough in their investments to take out loans. The trend, he said, is common across much of the country.
"Businesses want to borrow right now, we see that confidence," Goldin said. "Their businesses tend to be growing, especially in the tech field. That growth requires a lot of capital."
Several large markets
Of course, New York City is a prime market in the state, region, nation, and even the world. But the state is much more than just the Big Apple. While a staggering 8.5 million people lived in New York City in 2014, there were also substantial population centers in Buffalo, Rochester, and Syracuse.
"New York is one of the largest markets in the U.S. For a service company, it's the place to be," Jivko Bojinov, co-Founder of ShipBob, said.
With nearly 20 million residents statewide and even more commuters coming into New York daily from out of state, there is plenty of opportunity to expand business to new markets. Naturally, New York City is far and away the most densely populated place in the state, but entrepreneurs don't discount the value found in the other relatively large cities scattered across the state's sprawling geography.
Strong education environment
Small business owners also credited New York's education system for producing highly educated, job ready candidates in spades. The State University of New York (SUNY) system, for example, places well-equipped schools – meaning an educated workforce, valuable research, and business resources – within a short drive from virtually anywhere in the state.
"The SUNY system is an economic development engine for the state; no matter where you go you're never that far away from a SUNY," Pickett, CEO of nfrastructure, said. "That means you've got an important degree of access to the talent in work that's done by professors and the students there."
According to the entrepreneurs we spoke to, the state's investment in higher education visibly pays off. Employers in New York had glowing things to say about the depth and breadth of talent found in the state's workforce, and few reported having difficulty filling their open positions.
"I think one of the main benefits is just the depth of the talent pool in New York. It's amazing," Wassertrum of TheSquareFoot said.
"Nowhere else in the country will you find as many smart, talented, and driven workers," Marc Prosser, co-founder of Fit Small Business and Fit Biz Loans, said. But, he added, such a competitive workforce means you can be sure potential employees are being courted by other companies as well.
"When you find the perfect candidate for a position, they're almost certainly interviewing and courting offers at other companies in your field," Prosser said.
Wide array of taxes
New York's taxes aren't especially high for the region, but there certainly are a lot of them. The vast web of taxes and fees might prove difficult to navigate for some small business owners and the state isn't shy about making sure it collects its due.
"From a tax standpoint, New York can be one of the more challenging [states,]" Wu, the associate at Caplin and Drysdale, said. "New York has a fairly robust enforcement presence. The Department of Taxation and Finance is very well-funded and educated."
Some industries, particularly involving alcohol and tobacco, are subject to excise taxes in addition to all other applicable taxes. For Randy Biehl, owner of Eveningside Vineyards, the excise tax comes on top of the sales tax for every bottle of wine he sells. That, he said, is an inconvenience for both his business and his customers.
"There's an excise tax [on alcohol] that I deal with every month," Biehl said. "It's not a transparent tax. The customers also pay sales tax on top of that. I think we pay too much."
Still, even with the wide array of taxes, New York State's tax rates aren't much higher than the norm in the northeast, Wusaid. In addition, some entrepreneurs reported a forgiving environment when mistakes are made on both the regulatory and taxation fronts.
"The state [is] always available to help with business reporting," Andrew Horn, a business consultant who helped launch The Intrigue Agency, said. "They have even been lenient on me while failing to report certain things in our first year of business."
Naturally, in a populous state, and especially in New York City, there is a lot of competition in virtually every industry. Even though most entrepreneurs mentioned their competition as a challenge, they also spoke of the fast-paced environment fondly. Some even said it constantly pushed them to improve more than they thought possible.
"It hasn't been an issue to compete with the big chains. I think I'm moving in the right direction, learning as much as possible and trying to be better," Eyal Hen, founder of Chickpea restaurants, said. "We just try to be the best in ingredients and in service."
In 2014, New York State was home to more than two million small businesses and accounted for 51.1 percent of all private sector employment, according to the Small Business Administration. And despite all of the competition, there is a relatively low business turnover rate. From 2013 through 2014, out of the 40,765 establishments that opened, more than 80 percent survived.
Laurie Towers, owner of Physical Advantage and The Bridal Body Shop, said part of what she enjoys about entrepreneurship is keeping an eye on the competition. Not only does it force her to innovate and change, but it keeps business exciting, she said.
"I don't look at competition as anything cutthroat," Towers said. "I think its friendly and it keeps the game fun."
High cost of living
Many business owners, especially those in New York City, reported high costs of living, which cut into their profits. Between an elevated cost of property, taxation, and the need to pay higher wages and salaries, New York's cost of living exemplifies the difficulties of living in the metropolitan northeast.
"The biggest challenge is cost. I believe many of the costs are higher than in other areas, including labor cost, and office rent," Kathy Zhang, owner of jewelry vendor Benique, said.
Rent was among the top issues raised by small business owners. Some entrepreneurs, like Ed Pollio of 5050 Skatepark, said the cost of rent drastically impacts their ability to turn a profit.
"The hardest thing we find running an indoor skatepark is the expensive rent," Pollio said. "Our rent is way too high to make a profit. If you don't own the building you are just making your landlord rich."
Add in the heightened payroll expense and the cost of operating in New York can add up quickly.
"The high cost of living means you need to pay employees more than you would elsewhere," Prosser, co-founder of Fit Small Business and Fit Biz Loans, said. "When rent prices start at around $1,000 per person, there's going to be a much higher baseline than in areas where people can find housing for $500 a month or lower."
Resources for small businesses in New York
If you're a small business owner in New York looking for resources to help you move forward, here are a few organizations you might want to learn more about.
New York SCORE
SCORE's volunteer business professionals and expert "mentors" give counsel and guidance to entrepreneurs looking to start or expand their businesses. The services are entirely free and volunteer-driven. Follow the link to locate one of the more than two dozen SCORE centers near you.
Empire State Development's Small Business Division
The state government's resource center for entrepreneurs offers a number of resources, from technical assistance in starting or expanding a business to financial assistance programs for qualified businesses. The office exists to connect small business owners with programs and information they might not be aware they can take advantage of.
Empire State Development
U.S. Small Business Administration (SBA) District Offices
The U.S. SBA offers financing and grants, as well as consultations and counseling services. There are also opportunities to apply for federal government contracts through the SBA and avenues for obtaining assistance in the wake of natural disasters.
U.S. SBA District Office for New York
New York Small Business Development Centers
New York hosts two dozen development centers for small business. Each is dedicated to supporting the development and retention of small business, helping entrepreneurs do everything from craft business plans to navigate the state's tax code. You can find your region's small business development center at the link below.
How to Start a Business in New York
This guide can tell you the basics of how to start a business in New York, detailing the incorporation process for all the different legal entities you can choose from. It also provides easy access to the state-specific legal forms you'll require to move forward with the creation of your business. Read more about starting up a business in the Empire State at the link below.