As part of its yearlong project "The State of Small Business," Business News Daily will report on the small business environment in every state in America. In this edition, we asked a few of Georgia's nearly 1 million small business owners to tell us about the challenges and opportunities of doing business in their state. Here's what they had to say.
Entrepreneurs in Georgia expressed mixed reviews about operating in the Peach State. The economy, they said, is stable and growing, but not necessarily at the pace they would prefer. According to the U.S. Bureau of Economic Analysis (BEA), Georgia's compound annual growth rate from 2004 through 2014 was an anemic 0.9 percent, trailing the nation's already sluggish 1.3 percent through that period.
Moreover, Georgia's per capita personal income has significantly fallen compared to the nation as a whole through the same decade, according to BEA data. But there is reason to be cautiously optimistic; through 2014, Georgia's growth outpaced that of the United States at large, and the preliminary data for 2015 suggests that the state is maintaining a steady course. The entrepreneurs we interviewed have certainly picked up on that, unanimously stating they feel as though they are recovering from the 2008 financial crisis.
Small business owners in Georgia called it a "business-friendly state" with reasonable taxes and relatively straightforward regulations. And though access to capital remains challenging, as it does for small businesses and startups elsewhere, Georgia's labor market is healthy and people are looking for work. Unfortunately, wages have dipped a bit, as the market is heavy with prospective employees, and companies' profit margins are narrower than in the past. Still, the general outlook is that the worst is over and that Georgians are now chugging along on a healthy path. Small business owners said there is plenty of opportunity right now in this corner of the Deep South.
[See Business News Daily's complete coverage of the State of Small Business in the U.S.]
Fair regulations and taxes
"In general, I'd say regulations and taxes are pretty fair," Ryan Keeton, co-founder of the online used auto dealer Carvana, told Business News Daily. "We deal with a lot of government agencies … but we went through the process smoothly, and it was a positive experience. In general, as far as the transaction of these cars and the sales tax goes, Georgia deals pretty fairly."
Carvana, which maintains its headquarters in Phoenix, Arizona but operates in Georgia, now sells in 41 different states, and Keeton said the company is satisfied with the regulatory and tax environment in Georgia. Georgia levies a 6 percent personal income tax and a similar corporate tax rate for C Corps. In addition, there is the state's sales tax, which stands at a rate of 4 percent, plus the local sales tax; total rates vary depending on which of the state's 162 counties a small business operates within.
Of course, there are always bumps in the road despite the moderate rates. Andrew Poulos, owner of Poulos Accounting and Consulting and a serial entrepreneur, said it can be a hassle to file sales-tax information with the state, which is required on a monthly basis.
"It could be very simple, or it could get complex, depending on the type of business the owner is running and whether they have to charge and collect in one county or multiple counties," Poulos said. "It becomes more complex [when a company does business in multiple counties], because they have to track each sale in each county, and it becomes burdensome to report it all each month."
One big boost to small business is Georgia's local and regional support for entrepreneurial endeavors. Many small business owners cited the loyalty of their clientele as a big reason why they love doing business in the Peach State.
"One of the benefits we deal with is the southern hospitality. That breeds a certain amount of loyalty," Jeremy Kwaterski, CEO of the Smart Spark vape company, said. "It's different doing business here, where most people have lived for generations. When you win a customer's loyalty, it stays with you, and that's one of the things that attracted us to this area."
There are also strong networking organizations available, which help connect entrepreneurs to mentors, accelerators and incubators, and potential sources of funding. Tonya Lanthier, founder of the dental jobs board DentalPost, said Entrepreneurs' Organization (EO) has been a crucial pillar of support for her as her company grows.
"EO is a global network, and we have a chapter here in Atlanta," Lanthier said. "It's almost like your own board for your company. They also have an incubator and accelerator, where if you're around $200,000 or $250,000 [in revenue], they will help connect you with mentors to help you get to $1 million. I'm very grateful for the support network."
Lanthier added that StartupChicks, an incubator designed to support women entrepreneurs who are starting out, was also key in giving her a leg up when she first launched.
Healthy labor market
In Georgia, people are looking for work and doing a pretty good job of finding it. The unemployment rate dropped from a peak of 10.5 percent in 2010 to 5.5 percent by the end of 2015, according to the U.S. Bureau of Labor Statistics. Meanwhile, the state's labor force still has not returned to its peak levels of more than 4.9 million people, but is climbing back toward that benchmark, totaling 4.76 million people in 2015.
"The labor market is pretty constant at this point," Poulos said. "Our unemployment numbers have gone down drastically over the last 24 months. It's doing as well as expected considering the national economy."
While the labor market is strong, that also means hiring is very competitive. Some entrepreneurs report that prospective employees often accept positions at other companies, especially when courted by one of the many big businesses based in Georgia.
"It's harder to hire good, quality people right now," Kwaterski said. "It makes it harder to obtain qualified people when they can get a job elsewhere at $15 per hour."
Atlanta's large, diverse market
Several entrepreneurs we spoke to operate in or near Atlanta, and said there is no lack of opportunity in Georgia's largest city. With about 5.5 million people in the Atlanta metro area, the cityis a large market that small business owners said is notable for its diversity and fledgling technology sector. That brings a relatively affluent base of tech-sector employees in a growing industry, which helps raise demand for other goods and services, spreading the wealth to other entrepreneurs in the area.
"We have a huge, thriving tech community," Lanthier said. "I have a lot of resources at my fingertips. A lot of young people are moving here and there is kind of that Silicon Valley feel."
Other entrepreneurs, like Keeton, said Atlanta serves as a sort of proving ground, where companies can launch, test and tweak their ideas until they are ready to deploy in other markets around the country. The diversity of the city makes it a nice bellwether as to the viability of a particular business venture.
"I think, in general, Atlanta is a very appealing market. We're very happy that we launched here instead of being more of a Silicon Valley-type startup," Keeton said. "Atlanta is a diverse market, very tech savvy, and those things were benefits of launching here."
Access to capital
Georgian entrepreneurs, like many others throughout the United States, said it can be very difficult to obtain loans and other forms of financing in their state. New startups have an especially difficult time without significant collateral, and finding funding for existing small businesses looking to expand is not guaranteed.
"Access to capital as a new business owner, in Georgia or other states, is not going to be very easy these days," Poulos said. "People got used to it in the early 2000s, but those days are gone. Unless [the new business owner] has some sort of collateral, it's going to be challenging to get funding because of the new lending guidelines and the credit crunch."
Kwaterski said that without collateral and a few years of profitability under its belt, a small business, especially a new startup, is unlikely to get a loan from a bank.
"You have to have a 401(k) of a significant size or a house and property to even think about getting a loan, and then [you have to be] operating in the black for about three years to get a bank loan," Kwaterski said. "And if that's the case, you probably don't need a loan. So a lot of people just bootstrap it themselves."
Even though it can be highly difficult to obtain financing, Bob Stoll, owner of Cheeseburger Bobby's, said the Small Business Administration (SBA) is gradually expanding the availability of loans to entrepreneurs. It's not widely available, but pursuing an SBA loan is probably a small business owner's best bet for financing, he said.
"The thing I've seen the most improvement on is SBA lending," Stoll said. "They've started to ramp it up. It's always been a challenge, but it's available out there."
Poulos added that he has also been successful gathering SBA loans for some of his clients, mostly existing small businesses looking to expand.
Modest economic recovery
Entrepreneurs said Georgia's economy is stable and growing again, but that it's definitely been a grinding recovery. Several small business owners contrasted doing business in Georgia with doing so in other states that have experienced robust recoveries, bemoaning the Peach State's long slog back to a healthy economy.
"I feel that this market is very slow. The economy is dragging," Molly Dye, creator and owner of CareZips pants, said.
"It's a tough environment," Brooke Hawkins, owner of two Monkey Joe's franchises and creator of the Airstreem Pillow, said. "Everybody is trying to one-up the next person in terms of the latest and greatest concepts. It's been very difficult."
They're right to note that the recovery has been a marathon here. Georgia's GDP is the 10th highest in the United States, totaling $474.4 billion in 2014, but its rate of growth leaves much to be desired. Through the 10-year period from 2004 to 2014, Georgia's economy grew at only 0.9 percent, according to the BEA.
The good news, though, is that the economic growth is picking up. In 2014, real GDP grew by 2.7 percent, and preliminary data suggests a similar rate of growth for 2015. If Georgia can stay on track, entrepreneurs expect the economic recovery should start to seem more apparent, they said. Some said they are already seeing some improvement.
"The last two years, we've been growing at double digits, so that's been very positive," Stoll said of Cheeseburger Bobby's.
Low discretionary incomes
Georgia's per capita discretionary income is significantly lower than the national average. In 2014, Georgia ranked 40th in the United States for discretionary dollars per person, averaging just $38,980, according to the Bureau of Economic Analysis. That's a significant decline from the state's position a decade earlier, when it ranked 31st in the nation; Georgia's compound annual growth of per capita discretionary income during that period was 2.1 percent for the state, while the nation's grew by 3 percent. Entrepreneurs in Georgia said they are still feeling the sting.
"There's a lack of discretionary dollars, and things are highly competitive," Hawkins said. "People choose their activities wisely. It's tough. If you're not the greatest, people will go to that next spot. I think we're starting to see a little bit of a break, but it's still been a struggle since the recession."
But, of course, lower incomes also mean entrepreneurs are able to hire workers for lower wages and salaries. While many Georgians are careful about how they spend their extra money, some small business owners reported the modest median incomes helped their recruitment efforts without hurting their bottom lines.
"The median income is a little lower here, which allowed us to hire people at a lower wage than in central Florida," where Kwaterski has previously operated, he said, adding that the lower incomes helped Georgia businesses affordably attract talent in a competitive job market.
Resources for small businesses in Georgia
If you're a small business owner in Georgia 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. Here are some of the chapters in Georgia.
The Entrepreneurs' Organization (EO) in Atlanta is a local chapter of a global network made up of more than 11,000 business owners. The organization, founded in 1987, is present in 48 different countries and maintains 153 active chapters. EO can help small business owners access capital and mentorship, and connect with other members of their industry.
Since 2002, the annual nonprofit event Venture Atlanta has helped companies raise more than $1.3 billion in funding. Focused on tech businesses, Venture Atlanta is hosted every October with the goal of connecting entrepreneurs with high-level investors.
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.
Georgia Small Business Development Centers (SBDC)
Georgia hosts more than a dozen development centers for small businesses. Each is dedicated to supporting the development and retention of small businesses, 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.