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 Oklahoma's roughly 350,000 small business owners about the challenges and opportunities of operating in their state. Here's what they had to say.
Entrepreneurs in Oklahoma are enthusiastic about the prospects for their state's future. While the energy-centric state economy has taken a hit due to the drop in oil prices, most small business owners remain unconcerned. In fact, they see a silver lining in the improved labor market after energy sector layoffs; Oklahoma's unemployment rate is still low, but more people are looking for work and local small businesses are eager to offer it to them. One of the largest advantages to owning and operating a small business in Oklahoma is the state's extremely low cost of living. In addition, state-level taxation is particularly manageable, leaving entrepreneurs with more money to reinvest in their companies.
The downside is that, although the labor market has improved, the hit to the energy sector has dinged Oklahoma's economy. Entrepreneurs are far from in crisis mode, but there is slight concern that in the short term, there will be less money to go around. Moreover, accessing capital to finance startups and expansions is much harder than in more active markets on the coasts. Small business owners reported that it is possible for a company to access capital, but only after rigorously searching.
Low cost of living
By far the most cited benefit of doing business in Oklahoma is the low cost of living. Overhead expenses are dramatically reduced, and employee compensation is extremely affordable, particularly because of the low housing costs. According to Sperling's Best Places, the average cost of living in Oklahoma is 84 percent that of the national average, with housing as the largest contributor to its low cost. On Sperling's list, national averages are equal to 100, and Oklahoma's housing costs ranked 63.
"[One] thing that has been great for our company is the low cost of living and affordable real estate costs," Kelly Edwards, co-founder and CEO of Lawton Marketing Group, said. "Your dollar goes father here, so you can live on less and reinvest more back into the business."
"One of the comments we hear from our team members at ConsumerAffairs who have relocated from other states is the shock over how low the cost of real estate and cost of living are," Zac Carman, CEO of Consumer Affairs, said.
Access to labor
Oklahoma boasts a relatively low unemployment rate of 4.4 percent, which is on the rise primarily due to layoffs in the oil and gas industry. However, most entrepreneurs who spoke to Business News Daily said the layoffs have freed up much-needed labor and hiring has now become easier.
"In recent years, Oklahoma has had one of the lowest unemployment rates in the country," Mark Sinatra, CEO of human resources company StaffOne HR, said. "The labor market is moving toward more of a healthy equilibrium, given some recent layoffs in the oil and gas market."
Low taxes and simple regulations
Another benefit of operating in Oklahoma is the straightforward regulations. Entrepreneurs in the Sooner State reported easy-to-navigate regulations that made setting up a new business or expanding an existing one a simple process.
"I always like to point out that one can do all the paperwork necessary to register your business with the necessary authorities in a day," Mat Smith, president and co-founder of WeGoLook, said. "It's a very painless process."
In addition to the friendly regulatory framework, Oklahomans enjoy modest tax rates. The state's corporate income tax stands at six percent, while the sales tax is 4.5 percent of a business's gross receipts. The personal income tax rate in Oklahoma has a top marginal rate of 5.25 percent, and there is no capital gains tax. All in all, Oklahoma's tax policy is not particularly burdensome for most small business owners.
"We have thrived here in Oklahoma, and it's definitely a pro-business state with policies and opportunities to help companies succeed," Edwards said.
Access to capital
Small businesses in Oklahoma will notice an increased degree of difficulty to attaining capital compared with more active markets. While it's not entirely impossible to secure financing, entrepreneurs said capital isn't as commonly lent as it is in places like Silicon Valley.
"Access to Capital is lower than average due to a lack of a formal investment network; this is not the San Francisco Bay Area," Carman said. "However, if a business shows promise, capital is available. It's just not as readily available."
"There is not a great deal of venture capital available in Oklahoma," Smith said. "Entrepreneurs still need to look to New York, Silicon Valley, Chicago, Boston and a few other cities to find equity financing."
The oil and gas industry represents roughly 10 percent of Oklahoma's annual gross domestic product. As the price of oil has dropped in recent months, this industry has experienced some downsizing, which has led to a bit of a hiccup in the state economy. While entrepreneurs were happy to see the benefits to the labor market as a result, there is also some concern that the reduction in oil and gas jobs will lead to less disposable income for many denizens of Oklahoma. That, in turn, could potentially harm small business profits.
"I know a lot of other local businesses are being impacted by falling oil prices," Edwards said. "No matter how you want to look at it, Oklahoma is an energy-centric state, so that's a legitimate concern for many."
Resources for small businesses in Oklahoma
If you're a small business owner in Oklahoma 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 Oklahoma.
U.S. Small Business Administration District Offices
The U.S. Small Business Administration (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.
Oklahoma Small Business Development Centers
Oklahoma hosts a number of development centers for small business. Each is dedicated to supporting the development and retention of small businesses, helping entrepreneurs do everything from crafting business plans to navigate the state's tax code. You can find your region's small business development center at the link below.
Tulsa's Young Professionals is an organization based in Oklahoma's second largest city. The group, founded in April 2005, is dedicated to connecting young professionals with members of the local community, as well as business and government leaders to help establish and grow their ideas.
Center for Emerging Technology and Entrepreneurial Studies
CETES is an incubator located in Southwest Oklahoma that offers co-working spaces and support services to encourage growth and innovation. The incubator at CETES provides mentorship, assistance in accessing capital, and networking opportunities.
Innovation to Enterprise
I2E is a private non-profit corporation dedicated to investing in technological entrepreneurs with the aim of building more successful, high-growth companies within Oklahoma. I2E partners with entrepreneurs, researchers, and other companies to help small businesses better monetize their technologies and spur further innovation.
Oklahoma Venture Forum
The Oklahoma Venture Forum is a non-profit organization that connects investors and entrepreneurs with one another. The group seeks to encourage the business community to "exchange experiences and ideas through discussions and studies of venture investing and the growth of new and existing small businesses."
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.