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 North Carolina's more than 800,000 small business owners about the challenges and opportunities of operating in their state. Here's what they had to say.
North Carolina is a state ascendant. After the initial period of slow economic growth that followed the recession, the economy is now growing by more than 2 percent year over year, which is on par with the national average, according to the U.S. Bureau of Economic Analysis (BEA). Entrepreneurs enjoy manageable tax rates and a growing economy, and they are overwhelmingly optimistic about the future.
However, access to capital remains difficult, and often entrepreneurs need to travel extensively to secure it. The labor market also shows signs of tightening, and there is evidence of a nascent skills gap that's developing between the needs of new industries and the skills of the labor force. To find out what the state of small business is in North Carolina, Business News Daily spoke to local entrepreneurs.
North Carolina's initial lackluster recovery from the recession didn't inspire much confidence among entrepreneurs. However, following a minor contraction in 2012, North Carolina's gross domestic product has grown by an average of 2 percent, which is nearly equal to the national average of 2.2 percent, according to economic data from the St. Louis Federal Reserve Bank.
"The small business climate in North Carolina is strong and thriving," Debra Blue, co-founder and CEO of Blue Moon Estate Sales, told Business News Daily.
"Overall, the benefits of being in the area are vast, with the only deep issue being close access to capital," Corey McCarren, COO of Raleigh-based software company Titanovo, said. "Though small compared to other cities, there is a very supportive and active startup scene here in Raleigh, as exemplified by [support organizations] like HQ Raleigh."
While growth has returned, it's important to note that it is not always equitable or universal. Awamary Khan, executive VP and CFOO of the nonprofit community development financial institution Carolina Small Business Development Fund, told Business News Daily that rural areas and even certain urban regions tended to miss out on much of the post-recession gains.
"While the overall indicators show an improvement, such as a decreasing unemployment rate, they mask considerable disparity between regions and communities," she said. "There are geographic disparities as well; a majority of counties have not recovered from the recession and continue to struggle."
North Carolina's taxes are relatively low across the board. According to the Tax Foundation, the state's individual and corporate income taxes are flat rates of 5.75 percent and 4 percent, respectively. The state's sales tax stands at 4.75 percent. In addition, North Carolina's unemployment insurance tax is the 11th lowest in the U.S.
"To me, [taxation and regulations] seem fairly relaxed, and the state overall seems to have an attitude of wanting to promote business and to make things as noncomplex as possible," Stan Kimer, president of Total Engagement Consulting, said.
The Tax Foundation ranked North Carolina 15th on the organization's Tax Climate Index, which rates each state's overall tax burden on residents and employers.
Often, a good way to get an indication of the small business climate in an area is to gauge the attitudes of those entrepreneurs who are already up and running. In North Carolina, the outlook is positive, according to a survey conducted by First Citizens Bank.
The results of the survey, which included 250 small business owners, show that 67 percent of respondents think that the next two to three years will be positive and believe that North Carolina is a "great place to start a business." Moreover, 76 percent of entrepreneurs surveyed are planning on expanding in the next year.
"[There are] a lot of opportunities here: a vibrant state economy and lots of growth in and around the larger metro areas," Eric Hobbs, CEO of Technology Associates, said. "There seems to be much more activity in the outlying areas as well, with infrastructure projects and private projects springing up left and right."
Access to capital
North Carolinians are no strangers to the challenge of obtaining financing. New lending requirements and bank hesitance have created a stricter lending environment, which means that many entrepreneurs must bootstrap their operations or look to bigger, out-of-state cities for financing.
"If you are looking to raise a round of funding, expect lots of trips to San Francisco and New York City," McCarren said.
The First Citizens Bank survey found that while 76 percent of respondents from North Carolina expected to grow their business within the next year, only 24 percent expected to obtain funding to do so.
"Obtaining a bank loan is much more difficult today than it has been in years past," Khan said. "Banks have significantly decreased their lending to small businesses — those seeking loans [less than] $250,000 — and it is not likely that they will return to previous lending volumes. Businesses in historically underserved communities, such as minorities, women, veterans and rural areas, face even tougher challenges accessing capital, as well as other resources."
Tightening labor market
Though it's not yet a major problem, entrepreneurs have reported seeing signs that the labor market is tightening. In 2016, the state's labor force saw a rapid spike and sudden drop, according to the U.S. Bureau of Labor Statistics. Employment is flat and unemployment remains relatively low at 4.7 percent.
"The decreased unemployment rate does not take into account those who have dropped out of the labor market and stopped looking for work. The unemployment rate would increase significantly if these 'missing workers' were factored into the calculation," Khan said.
"Overall, we have a decent labor market, but I am hearing from some of my larger clients that they are having a difficult time recruiting top talent," Kimer said.
Employers also said that finding skilled labor can be difficult, and that top talent for growing industries is hard to come by.
"Staffing continues to be a challenge for us and our customers," Hobbs said. "Because of the vibrant business economy in the area, [small businesses] are competing for the same talent as MetLife, Cisco, IBM, Red Hat, Citrix, etc."
Khan said that the shortage of top talent was also likely due in part to the state's shift from manufacturing to service-based jobs.
"Unemployed workers have found it difficult to match their skills with the jobs that are growing," she said. "Skills training and development are key to enabling workers to shift into these new jobs."
Still, Khan noted that despite the recent dip in numbers, the labor force has actually grown significantly in the years since 2010, and said that with the right investments, the state's pool of workers has the potential to be one of North Carolina's greatest assets.
Resources for small businesses in North Carolina
If you're a small business owner in North Carolina who is looking for resources to help you move forward, here are a few organizations you might want to learn more about.
North Carolina Score
Score's volunteer business professionals and expert "mentors" give counsel and guidance to entrepreneurs who are looking to start or expand their businesses. The services are entirely free and volunteer-driven. Here are some of the chapters in North Carolina.
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.
North Carolina Small Business and Technology Development Centers
North Carolina hosts a number of development centers for small businesses. Each center 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.
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