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The State of Small Business: Delaware

The State of Small Business: Delaware

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 Delaware's roughly 75,000 small business owners about the challenges and opportunities of operating in their state. Here's what they had to say.

Delaware recently suffered a few dreary years when the state's economy contracted slightly from 2011 through 2013. However, in 2014, real gross domestic product strongly rebounded, growing by 4.3 percent. And while growth leveled off last year, it remained above 2 percent.

The feeling that the worst is over is apparent among Delaware entrepreneurs, who tend be enthusiastic when describing the future of business in their state. With a multibillion-dollar tourism industry, a relatively low tax burden and renewed economic growth, small business owners have found opportunity in the First State.

The drawbacks of doing business in Delaware stem from a heightened cost of living and generally small markets within the state. However, the cost of living is ameliorated to some extent by the lowered tax burden, and entrepreneurs often seek large markets just outside of Delaware's narrow borders. All in all, the small business owners who spoke with Business News Daily say operating in Delaware has been anything but a hindrance to their success.

The tourism industry represents a relatively large sector of Delaware's economy, bringing in about $3 billion per year. Not only does this offer business for hotels, restaurants, retail and owners of investment properties, but in the off-season, a large number of contractors get busy preparing for next year's influx of tourists.

"Since Delaware borders the Atlantic Ocean coastline … the towns along the seaboard are bustling for about 12 weeks out of the year," Chrissy Mayhew,of interior renovator Beach House Miracles, said. "Many of the entrepreneurs take advantage of those 12 weeks and make all their money for the entire year during that time.  Early spring and fall are slower, but still typically money-making months."

"For contractors, fall and winter are the 'bread-and-butter' months," Mayhewadded. "When all the renters are gone, that's when we go into action. Carpenters, plumbers, electricians, drywall and flooring contractors are in high demand." 

Delaware's corporate and personal income tax rates aren't particularly low, with a flat 8.7 percent rate on corporations and a six-bracketed personal income tax system that tops out at 6.6 percent. However, the overall tax burden is considerably lowered by the fact that the state does not impose a sales tax or a personal property tax. Some municipalities or counties do levy a real-estate property tax, but the impact is comparatively minimal.

"Delaware has the second lowest effective tax rates for private citizens in the nation, which gives private citizens more disposable income," Alex Bar, vice president of marketing and sales for Megapolis Movers, said. "For business taxes, Delaware ranks 14th among other states."

After the state's economy shrank from 2011 through 2013, Delaware experienced a whopping growth of 4.3 percent in 2014. From 2014 to 2015, the economic growth continued at a more modest 2 percent, which is slightly lower than the U.S.'s growth as a whole. Still, two consecutive years of respectable growth have helped Delaware's GDP hit new heights, offering renewed hope for the state's entrepreneurs.

"The state economy seems strong from our perspective," said Mike Rasmussen, the "still charmer" at craft distillery Painted Stave Distilling. "People seem to have more expendable income."

The cost of living is slightly above average in Delaware, according to Sperling's Best Places, which ranks expenses as 10 percent higher in the state than the U.S. at large. Moreover, per- capita personal income is even with the national average, meaning Delaware residents contend with higher costs at average income levels.

"The small business climate seems to be steady, but the rent, general operating expenses, staff pay and taxes continue to rise, which forces us to continually find creative ways to give value to our families when increasing tuition to make ends meet," saidValerie Gooding, the artistic director of the New Castle Dance & Music Academy.

However, the lack of sales and property taxes tends to make up for this discrepancy; because of the lower tax burden, small business owners said the cost of living is still reasonably met.

"With low property taxes and a stable price mark, Delaware fares well regarding real estate costs in comparison to other neighboring states," Jacqueline J. Lieske, president of home health care company Shorecare, said. "The low property taxes and no sales tax helps to maintain Delaware's lower cost of living."

Delaware is a tiny state. With a population of less than 1 million living inside just 2,500 square miles, entrepreneurs seeking large markets will have to look beyond Delaware's borders. The largest city center in the state ─ Wilmington ─ has a population of only about 70,000, as of the 2010 Census, according to the U.S. Census Bureau. Overall, Delaware ranks 45th in population  in the U.S.

"Compared to other states, Delaware has a great deal of catching up to do since the state doesn't have the appeal of commerce and high-grade talent as surrounding areas, like Philly, Baltimore, [or] New Jersey," said Timothy Frie, co-founder of real estate company Norman & Page.

Still, Frie added, taking the backseat to those more high-octane markets isn't all bad.

"Because of this, there's still a 'small-town charm' that I actually sought out, and it's the reason I returned [to Delaware]," he said. "It's a slower-paced state and because of it, you generally don't have quite as much competition regardless of your industry."

If you're a small business owner in Delaware looking for resources to help you move forward, here are a few organizations you might want to learn more about.

Delaware 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 free and volunteer-driven. Here are some of the chapters in Delaware. 

Delaware SCORE (Main Office)

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 after natural disasters.

U.S. SBA District Office - Wilmington

Delaware Small Business Development Centers

Delaware 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 navigating the state's tax code. You can find your region's small business development center at the link below.

Delaware SBDC Network

Are you an entrepreneurial organization or resource for small business owners, but are not listed here? Let us know. Contact the author at auzialko@purch.com.

Adam C. Uzialko

Adam C. Uzialko, a New Jersey native, graduated from Rutgers University in 2014 with a degree in Political Science and Journalism & Media Studies. In addition to his full-time position at Business News Daily and Business.com, Adam freelances for a variety of outlets. An indispensable ally of the feline race, Adam is owned by four lovely cats.