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 Colorado's 563,917 small business owners about the challenges and opportunities of operating in their state. Here's what they had to say.
Entrepreneurs in Colorado are excited about the fast-paced economic environment they've been operating in, and they're largely optimistic about the future of The Centennial State. Of course, such robust economic activity also leads to a rising cost of living, and the price of real estate throughout Colorado has exploded. Still, those are good problems to have when disposable incomes are high and communities are eager to welcome small businesses and support local enterprises. Obtaining access to capital hasn't been so easy for small business owners, but with the way things are going, locals aren't too concerned. Many think investors will catch on soon enough.
The state of the economy backs up the enthusiasm; Colorado is a state in rapid economic ascension. The major metropolitan areas throughout the state have been experiencing unprecedented growth for several years now, creating more economic opportunities for entrepreneurs of all stripes. The same is true for the state's economic activity. In 2014, the growth of Colorado's gross domestic product was more than double that of the rest of the nation, while the unemployment rate steadily declined to more than 1.5 percent lower than the U.S. as a whole, according to the U.S. Census Bureau and Bureau of Labor Statistics, respectively.
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Between the appeal of an outdoor lifestyle and booming economic activity, largely within the tech and cannabis industries, Colorado has become a popular place for those looking to relocate. According to U.S. Census Bureau estimates, Colorado's total population grew by 101,000 people from July 2014 to July 2015, reaching a total of 5,456,574 at that time. Of that group, many are young entrepreneurs, and small business owners in Colorado report no dearth of new startups in the area.
"In Colorado, the small business climate is really robust, not only from the opportunity of finding really creative ways to operate, but Colorado tends to be full of incredible startup communities," Todd Mitchem, co-founder of ION Vape and a serial entrepreneur in the fledgling cannabis industry, told Business News Daily.
"Here in Boulder, it's a very entrepreneurial community for sure," Tim Segraves, co-founder of the real-estate analytics company Revaluate, said. "Tech startups, natural food startups, biotech, aerospace; it runs the gamut in terms of people starting different businesses. You just walk down the main street downtown and you bump into founders of other companies or you hear people talking about raising money."
Collaborative and supportive communities
An active community of entrepreneurs means that business owners find a supportive environment in which to run their businesses. Small business owners told Business News Daily time and again that networking is incredibly easy and there's a palpable sense that everyone wants you to succeed, even your competitors. Local support, they said, is unmatched, and the municipal and state governments do their best to help entrepreneurs succeed and stay in Colorado.
"The amount of interest and interpersonal support is high," Steven Sashen, owner of Xero Shoes, said. "There are a lot of companies that have come out of basements and become giant companies. It's a very conducive environment in terms of assistance from the city or state, as well."
In addition to local support, entrepreneurs have access to a rich community of accelerators, development centers, state programs and co-working spaces to help boost businesses in their early stages. These institutions serve as important networking spaces, as well as places to gain important insights from mentors and forge connections with potential investors.
"I think the main reason I really like to have my business here is that It's just a great place for small business," Niki Lopez, founder of Focus PR and Marketing, said. "There's a lot of support for entrepreneurs as far as associations and networking events. I feel lucky that I started my company here and met so many great entrepreneurs."
Manageable regulations and taxes
Most entrepreneurs didn't even think to bring up regulations when asked about the challenges of doing business in Colorado, but when they did they said state and local governments do not adversely impact them. In fact, many spoke fondly of public efforts to foster a healthy environment for startups and small businesses.
"The regulations and taxation are manageable," Robert Thompson, the CEO of the restaurant chain Punch Bowl Social, said. "We don't feel like it's a hindrance in any way. The city of Denver and the municipalities are great to work with."
Colorado's taxes, which vary on a local basis, are not too steep, either, according to the state's entrepreneurs. Robert Hoban, managing partner of the law firm Hoban and Feola, a serial entrepreneur, and a professor at the University of Denver, said that Colorado might not be one of the states that did away with the income tax, but the rates are reasonable. Currently, Colorado's state income tax stands at a flat 4.63 percent.
"We do have a state income tax, but our tax rates are generally lower across the board," Hoban said. "The local governments are very motivated to provide economic incentives for small businesses to locate there."
Natural beauty and outdoor lifestyle
An ancillary benefit of doing business in Colorado, small business owners said, is living in a state that places great emphasis on its natural beauty, from the Rocky Mountains and canyon depths to the Colorado River and sterling lakes. Entrepreneurs said that not only is living among pristine natural landscapes a great benefit, but it also helps to attract talented employees from all over the U.S. who are seeking an opportunity to enjoy the great outdoors of Colorado.
"Colorado is very active in general. There's always so much to do," Alexandra Weissner, co-founder of the social group bRUNch Running, said. "The community here is so active that we're able to continue doing what we do. We're selling out events, and there's tons of options; there's an event for everyone every single weekend."
And the state is willing to help entrepreneurs take advantage of the business opportunities offered by the robust sporting and outdoor environment. As one business owner said, the state works to "export the brand of Colorado" to the rest of the country; and an integral part of that brand is the natural environment and the active lifestyle it promotes.
"The state started a new program called COActive Colorado, which is a new division of the state specifically designed to cater to outdoor activity companies in Colorado," Lanny Goldwasser, co-founder of Phunkshun Wear, said. "That's very new, but they're having more and more meetings and the structure is definitely getting there to where it will be beneficial."
Rising costs of living
As a byproduct of the state's economic growth, the cost of living is increasing, making it more expensive to hire and retain employees. However, business is doing well enough that most entrepreneurs find the shift manageable. It's simply, many said, the other side of the coin when it comes to a burgeoning economy.
"The biggest obstacle we've experienced is that the costs involved were significantly more than we had budgeted for," Jamie Gulden, co-founder of Feisty Spirits distillery, said. "That can always set you back a little bit. It's getting much more expensive to live in the state, especially in our area, so the cost to hire people at a reasonable rate goes up."
Several entrepreneurs reported they haven't quite yet felt the impact of the rising cost of living. Those who cannot afford to increase salaries in anticipation though, like PJ Hoberman, co-owner at the event planning company Two Parts, said they're happy to supplement wages and salaries with benefits like unlimited paid time off and flexible hours.
"As far as rising costs, it hasn't been too big of a struggle just yet," Hoberman said. "We don't have the funds to pay everyone a crazy salary, but we try to make up for it with some awesome benefits. We do unlimited PTO, for example. There's no accrual; the basic policy is 'get your work done and then go have fun.' As long as it doesn't affect your work, then take the time off."
High demand for commercial space
Another byproduct of the economy churning at such a clip is the rising costs of real estate, both residential and commercial. For example, due to the boom in cannabis-related operations, warehouse space can be virtually impossible to find, according to local business owners. The result is that many entrepreneurs are moving their companies to the suburbs or to slightly less desirable areas in order to keep costs down.
"The biggest challenge in Boulder was finding commercial space," Sashen, of Xero Shoes, said. "Boulder and much of Colorado has restrictions on growth, so with more people moving in and more businesses starting there's only so many places you can put them."
"The one downside of the cannabis industry is that it has amplified and accelerated the upward slope of values for real estate," Mitchem, of ION Vape, said. "What used to be $12 a square foot in 2008 is now something like $100 per square foot. However, the other side of that is lots of developers have come in and built really nice incubator spaces, small office rental environments."
Finding startup capital
Colorado is no different than so many other states when it comes to finding startup funding. Banks are still relatively hesitant to lend, though access to capital has been steadily improving since the recession. Still, many entrepreneurs report low levels of venture capitalist activity and some difficulty obtaining traditional financing through a bank.
"Raising enough money was the most challenging thing," Jason Stengl, co-founder of Cannonball Creek Brewing Co., said. "We did it in the form of an SBA loan, partially, and then just used private investors. It was very challenging to convince the banks and SBA to lend us the money, but we managed to get it done."
Segraves, of Revaluate, said because Colorado's growth is more recent, investors have yet to catch on in large numbers. Also, since there are so many startups and small businesses, it can be difficult to stand out from the crowd when you're looking for that much needed capital.
"If you're a tech startup, per capita there's a whole lot less VC money here in the Front Range as compared to Silicon Valley or even New York," Segraves said. "That's definitely been a little bit of a challenge, trying to look outside the box."
But most entrepreneurs, like Mitchem, are optimistic that things will get easier.
"I think when people hear what a stable startup environment Colorado is, more investors will come in," Mitchem said.
Resources for small businesses in Colorado
If you're a small business owner in Colorado looking for resources to help you move forward, here are a few organizations you might want to learn more about.
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. They can also help connect you with virtually any other resource you might be in need of. Here are some of the chapters in Colorado.
Boomtown offers a 12-week accelerator program that has helped launch dozens of startups and build the foundation they need to succeed. Based in Boulder, Boomtown offers a legion of mentors with a wide variety of experience to help your business grow. To find out more about the application process, visit the link below.
Techstars is a nationwide accelerator with the flagship division based in Boulder. It offers a three-month, mentor-driven accelerator program in the technology industry. It boasts a network of more than 400 companies. To find out more about Techstars, follow the link below.
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 after natural disasters.
Colorado Small Business Development Centers
Colorado hosts more than a 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.