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 West Virginia's more than 115,000 small business owners about the challenges and opportunities of operating in their state. Here's what they had to say.
West Virginia has felt the effects of a rough economy in the past few years, and small business owners in that state are feeling the squeeze. In 2012, West Virginia's state gross domestic product shrank by 3.4 percent and, in the following few years, experienced just modest growth. Unemployment is on the rise, the demand for labor is down, and the state is highly reliant on the coal and natural gas industries, which have experienced layoffs as prices have dropped. But entrepreneurs are looking to their businesses for a way out of these rocky times; the number of new businesses has increased as employees who were laid off have looked to create a new livelihood for themselves and, in turn, help spur on the state's economy.
Low cost of living
One big plus of living and working in West Virginia is the low cost of living. According to Sperling's Best Places, the cost of living in West Virginia is just 86 percent of the national average, and housing costs are particularly low. This is good news if you're looking to move to West Virginia from a higher-income area, because your dollar will go farther and will help you get your startup off the ground with less capital required.
However, West Virginians' future earnings are also projected to be smaller than those of the rest of the nation. See the section on per capita personal income below for more information.
Finding opportunity in a dismal economy
Despite the state's economic downturn, entrepreneurs in West Virginia remain undaunted. Many have even launched their businesses after being laid off. While commerce might be tumultuous, especially in the energy industries, the entrepreneurial spirit has not been extinguished in the state.
"Unprecedented unemployment has created a great desire for success among the disenfranchised," said John Belcastro, founder and owner of Third Millennium Marketing. "In an effort to combat rampant unemployment, a large number of people who see themselves as possible entrepreneurs have begun to enter the business community."
After contracting from 2011 through 2012, West Virginia's economy has grown slowly. However, that growth has been marginal; since 2013, West Virginia's real gross domestic product has not grown by more than 1.43 percent. In 2014 and 2015, the state's economy grew just 0.65 and 0.09 percent, respectively. In those years, the state's real gross domestic product plateaued at $67.3 billion, according to the Federal Reserve Bank of St. Louis.
The authors of West Virginia University's 2016 Economic Outlook noted their concern about the flagging growth rate and the slow gains in employment, especially in the coal, oil and gas industries, which account for about 14 percent of West Virginia's economy.
"West Virginia has struggled to gain any economic momentum over the past few years due, in large part, to a steep multiyear decline in the state's coal industry," the authors wrote. "Even as payroll employment nationally has expanded at an average annual rate of 1.8 percent during the past two years, total employment within the state has declined at an average annual rate of nearly 0.6 percent — or a cumulative loss of more than 8,000 jobs over that same time period."
Low per capita personal income
According to the U.S. Bureau of Economic Analysis (BEA), per capita personal income (PCPI) in West Virginia is about $37,000, which is less than 78 percent of the national average. So although the cost of living is particularly low in West Virginia, the per capita personal income level remains one of the lowest in the nation. For local West Virginians looking to start a business, this means capital might be harder to come by. For existing businesses, on the other hand, the concern is that a low PCPI means less spending by a cautious consumer base, threatening to drive down sales.
Although wage growth has increased in West Virginia, according to the WVU Economic Outlook report, the rate of growth still lags behind the national rate. West Virginia still has a lot of catching up to do if the state hopes to avoid losing further ground in comparison with the U.S. as a whole.
Another concern for West Virginia's economic recovery efforts is the state's decreasing population, which now stands at roughly 1.85 million people. Moreover, with a median age of 42, West Virginia's residents are the second-oldest in the nation. West Virginia also experiences higher-than-average death rates, meaning the aging population is even more of a concern than it might be otherwise.
At the core of economic growth are labor and business, both of which are driven by human activity. With fewer people and an aging population, West Virginia's productive capacity declines, making it harder to generate the production needed to turn the economy around.
Resources for small businesses in West Virginia
If you're a small business owner in West Virginia looking for resources to help you move forward, here are a few organizations you might want to learn more about.
West Virginia 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 entirely free and volunteer-driven. Here are some of the chapters in West Virginia.
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.
West Virginia Small Business Development Centers
West Virginia hosts a number of development centers for small businesses. Each is dedicated to supporting the development and retention of small businesses, helping entrepreneurs with everything from crafting business plans to navigating the state's tax code. You can find your region's small business development center via the link below.
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.