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 Nevada's more than 230,000 small business owners about the challenges and opportunities of operating in their state. Here's what they had to say.
Nevada is home to an economy that is undergoing significant changes. Historically, the state's hospitality industry has been extraordinarily large, and it continues to be so today. Aptly named, the Silver State has also traditionally boasted a robust mining industry. However, it appears as though the Nevada economy is now diversifying in ways that both help and hinder small businesses. With an influx of large companies, particularly in the technology industry, professional service firms are doing especially well. However, retail businesses have seemingly suffered over the years as per capita personal income in the state has fallen compared with the national average. And some entrepreneurs are concerned that the future is not for them, but rather for big business.
But small business owners in Nevada are still optimistic that this economy in transition will be a boon in the long run. With a "business-friendly" tax code and plenty of relatively cheap real estate, Nevada seems primed for growth. Already, in northern cities like Reno, residents are seeing startups and entrepreneurial organizations cropping up quickly around big names like Tesla Motors, which made the call to construct a factory in Nevada in 2014. As Nevada's economy changes, it's likely that some small business owners will see success, while others run into new difficulties. Here's what some Nevada entrepreneurs told Business News Daily about the state of small business in this changing landscape.
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Plentiful commercial real estate
With an abundance of land and plenty of unoccupied commercial real estate, small businesses looking for a brick-and-mortar location should have no trouble finding the right place at a reasonable price. While real estate prices continue to rise, much of the increase is focused in the residential housing market, and commercial real estate remains readily available.
"If there is one thing Nevada has, it is land," Steven Neff, owner of a BrightStar Care in-home health care franchise, said. "There is still plenty of capacity in the commercial market. We had no problem finding commercial real estate to open our business."
The demand for commercial space isn't slowing. According to Danielle Steffen, a commercial real estate broker with the firm Cushman & Wakefield/Commerce, listings are being snapped up by entrepreneurs left and right.
"We're selling out of our inventory relatively quickly. As soon as we list we run out very fast. The demand is still there," Steffen said.
Meanwhile, there is a residential housing shortage brewing, particularly in northern Nevada, where several large companies maintain assets. As the tech revolution spreads across California's borders into the Silver State, more and more workers flood in as well. Even so, Steffen said housing costs remain modest, leading to a lower overall cost of living and keeping employee compensation manageable for employers.
Nevadan entrepreneurs all quickly cited the state's tax code, which does not include a personal income tax, as a big benefit to doing business in the state. Because of Nevada's tax structure and it's relatively low cost of living in comparison to the more densely populated areas in neighboring California, small business owners see a much lower overhead.
"We originally looked at California as an option but it would cost us 25 to 30 percent more," Mark Venezia, SVP of North American sales for apparel company Spreadshirt, said. "In California, the tax rates were so much higher."
And with an ever-diversifying economy, Nevada's regulatory framework is quickly adapting to host more than just its old bread and butter of the entertainment and mining industries. Business owners in the tech and health care space, for instance, noted that the state is moving fast to adapt to previously foreign industries.
"Nevada sells itself as a business-friendly state, and I would say in general it is. But the whole state infrastructure and regulatory system is old; it is wrapped around gaming and entertainment," Neff said. "Nevada is growing up quickly, though, when it comes to being friendly to high-tech and other businesses."
Healthy startup environment
Entrepreneurs in Nevada also report a lot of new startups opening throughout the state. Some attributed it to the growth of big business, while others pointed to the diversification of Nevada's economy as the source. Either way, small business owners are eager to see the trend continue.
"We've recently been compared to the Silicon Valley; we're a huge startup hub and there are a lot of people coming in at this time," Cammy Evans, PR director at Reno-based Sierra Virtual, said. "The mood and vibe has shifted. People are choosing smaller businesses and startups to work with because of a more personalized experience."
That wasn't always so, according to Dusty Wunderlich, CEO of alternative lender Bristlecone Holdings. Previously, the small business climate was far more stagnant, but now the tone has changed. He said the startup boom is just as much about a culture shift as it is about big business.
"It's changed a lot over the last two to three years," Wunderlich said. "Nevada is trying to move in a direction from a grassroots perspective to promote a new culture for entrepreneurship, creativity and innovation."
Especially in the southern part of the state, small businesses are very susceptible to changes in the volume of tourism. As more people visit Las Vegas and the surrounding areas, more entrepreneurs experience success. Conversely, when tourism is low, so are profits. Planning around the seasonal economy is a must.
"Sometimes I feel the seasonality of our business is affected more by tourism, large events, and conventions in town more so than weather or what is actually happening in our national economy," Tom Delaney, owner of a 1-800-GOT-JUNK? franchise in Las Vegas, said. "With so much of our economy reliant on tourism, it can feel a bit boom or bust."
There are signs that the state's reliance on tourism is waning. In December 2015, for example, Faraday Futures announced it would create a $1 billion, 300 square-foot automobile factory in North Las Vegas. Entrepreneurs are hopeful that the new manufacturing operations mean more money in the economy for small businesses.
"What I think is important in Las Vegas is to not really rely on tourism," Amy Ogden, of Cushman & Wakefield/Commerce, said. "With Tesla going to Reno and this Faraday Futures deal coming here, we're getting on the map for manufacturing. We're just trying to diversify what would drive our economy."
Big business focus
While the state offers some attractive tax incentives, a lot of entrepreneurs reported they feel as though much of the benefits are geared toward larger companies. The most frequently cited example was the $1.3 billion tax break offered to Tesla Motors when they established a factory in Nevada in 2014.
According to Wunderlich, not only is it harder for small businesses to access capital and credit, but large corporations are the chief beneficiaries of tax benefits and public subsidies.
"Looking at it from a regulatory and political perspective, there's a lot of talk about small business … but little actual budgeting going to small business," Wunderlich said. "Instead, there are subsidies and tax breaks going to large corporations."
For much of its history, Nevada has celebrated mining and entertainment as its major cash cows. With Sin City in the south and a seemingly endless supply of land and mountains throughout the whole state, it seems like an obvious match. But now, things are changing. New businesses are appearing in Nevada, much of them prompted by the exploding tech industry. With new economic hotspots come new opportunities, but the transition can often be challenging for existing small businesses to navigate.
"We've really stepped up," Evans said. "Everyone experienced the crash in 2008, but now we have big companies coming in – Tesla and Amazon – driving a ton of business in Reno. We've really seen an improvement here in the economy."
That diversification is certainly welcome, but it means there will be winners and losers in the market. New companies that adapt to the emerging market will be rewarded, while those who can't keep up will fall behind. The transitioning economy becomes a challenge that requires strategic planning from Nevada's entrepreneurs who want to be prepared for the future.
There are definite benefits to adding more layers to the economy as a whole. Neff said it's already evident that the Nevada economy was buoyed by other industries as commodity prices fell, hurting the mining industry, which is a longtime staple in the state.
"From a business standpoint I think the state is wide open and there is good growth," Neff said. "One thing Nevada has been hurt by is a lot of minerals here were impacted by the drop in commodity prices, but we're diversified enough to overcome that drop.
Resources for small businesses
If you're a small business owner in Nevada 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 Nevada.
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.
Nevada Small Business Development Centers
Nevada 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.
Economic Development Authority of Western Nevada
"The Economic Development Authority of Western Nevada (EDAWN) is a private/public partnership established in 1983, committed to adding quality jobs to the region by recruiting new companies, supporting the success of existing companies, and assisting newly forming companies, to diversify the economy and have a positive impact on the quality of life in Greater Reno-Sparks."
Bosma Business Center
The Bosma Business Center is a 27,000 square-foot office building and co-working space that brings entrepreneurs and business consultants together. Located in downtown Reno near start-up row, the Center is located in a hub for business networking opportunities. In addition to the Center's operations, it is also the location for the talk radio show "Bosma on Business," which features collaboration between business owners and advisors.
The Reno Collective
The Reno Collective is a collaborative workspace that seeks to bring entrepreneurs together across various fields in order to learn from and grow with one another. The Reno Collective is a membership community that's been home to companies like Filament and Easy Keeper has helped small businesses across a number of industries successfully launch and grow.
Are you an entrepreneurial organization or resource for small business owners, but are not listed here? Let us know. Contact the author at email@example.com.