Re­gion scores low for small firms

Tax rates, cor­po­rate head­quar­ters cited; oth­ers say area is ideal

Northwest Arkansas Democrat-Gazette - - FRONT PAGE - DAN HOLTMEYER

North­west Arkansas in re­cent years re­peat­edly has landed top spots in rank­ings of the best, most af­ford­able and fastest-grow­ing places to live in the coun­try.

Realtor.com just last week named Fayet­teville the sev­enth-best place in the coun­try for re­cent col­lege grad­u­ates to launch a ca­reer. The real es­tate web­site states North­west Arkansas has a low cost of liv­ing and of­fers cul­tural op­tions for young pro­fes­sion­als.

Cut­ting against the grain of top billings is an­other rank­ing that pegs the re­gion as one of the tough­est for small busi­nesses.

The Fayet­teville-Spring­dale-Rogers met­ro­pol­i­tan area ranked 180th out of 200 met­ros in friend­li­ness to small busi­nesses in a Fe­bru­ary re­port from a com­pany called ValuePen­guin, which an­a­lyzes and com­pares fi­nan­cial and in­sur­ance ser­vices. The rank­ings are based on cost of liv­ing, lo­cal taxes and sev­eral other mea­sures of the busi­ness cli­mate.

North­west Arkansas’ high lo­cal tax rates and its num­ber of head­quar­ters for large cor­po­ra­tions, which can be dif­fi­cult for a small busi­nesses to com­pete with, helped drag down its rank­ing to be­tween Al­bu­querque, N.M., and Wi­chita, Kan., ac­cord­ing to the re­port. Low cost of liv­ing and a healthy econ­omy counted in the re­gion’s fa­vor.

“We fo­cused on ar­eas of data that would help a small busi­ness be sus­tain­able, but also flour­ish based on the eco­nomic traits of the city,” the com­pany wrote.

Lo­cal busi­ness own­ers and ex­perts, how­ever, said the list leaves out much of what makes the area ideal for busi­nesses of any size.

Jeff Amer­ine, whose Startup Junkie Con­sult­ing spends ev­ery day as­sist­ing bud­ding busi­nesses through­out North­west Arkansas for free, said there’s al­ways room for im­prove­ment to the legal process for start­ing a busi­ness or in the ease of find­ing in­vestors. But he said the re­gion’s qual­ity of life, the univer­sity, cus­tomer base, groups like his and other ben­e­fits make up for those needs.

“This place ought to be in the top 10 on ev­ery list, be­cause it’s that good,” Amer­ine said.

How easy it is to grow new busi­nesses can have wide­spread im­por­tance. Al­most one-third of North­west Arkansas’ em­ploy­ees are work­ing at busi­nesses with fewer than 100 em­ploy­ees, ac­cord­ing to 2014 data from the U.S. Small Busi­ness Ad­min­is­tra­tion.

The ad­min­is­tra­tion de­fines a small busi­ness as an in­de­pen­dently owned and op­er­ated com­pany that is lim­ited in size and in rev­enue de­pend­ing on the in­dus­try. Size runs the gamut from 10 peo­ple work­ing in a lo­cal bak­ery to a man­u­fac­turer with fewer than 500 peo­ple.

That pro­por­tion lo­cally and across the coun­try has been drop­ping in the past two decades, with larger cor­po­ra­tions em­ploy­ing a big­ger share of peo­ple and pay­ing a big­ger share of all of the re­gion’s pay­checks. North­west Arkansas also has fewer new busi­ness es­tab­lish­ments than sim­i­lar cities such as Austin, Texas, though the num­ber has been im­prov­ing, ac­cord­ing to the 2016 state of the re­gion re­port from the Univer­sity of Arkansas Cen­ter for Busi­ness and Eco­nomic Re­search.

Wal-Mart Stores Inc. and other pow­er­houses are im­por­tant, sta­ble and typ­i­cally pay more per em­ployee, but new eco­nomic growth and in­no­va­tion is more likely to come from busi­nesses that start as a shop on the cor­ner, said Mervin Je­baraj, the univer­sity cen­ter’s in­terim di­rec­tor.

“We haven’t had one of those suc­cess sto­ries in a while,” he said. “The chal­lenge for North­west Arkansas is to make sure the en­trepreneur­ship ef­fort that we have in all its forms is sup­ported and in­creased to make sure that we do have the next small busi­ness startup that grows into a suc­cess­ful large com­pany.”

A MIXED PIC­TURE

Omar Kasim grad­u­ated from the univer­sity in 2015, opened his first busi­ness early last year and typ­i­fies some of the strengths and weak­nesses of the re­gion’s small busi­ness en­vi­ron­ment.

Start­ing a busi­ness is hardly easy no mat­ter the cir­cum­stances — Kasim re­called work­ing more than 100 hours a week to get Con Que­sos Fu­sion Tacos run­ning on Martin Luther King Jr. Boule­vard in Fayet­teville. He pointed to some is­sues that could make the process more chal­leng­ing.

Pri­vate and com­mer­cial lenders “wouldn’t touch me,” he said, and he even­tu­ally had to go to Texas to find an in­vestor. Fayet­teville also has a com­plex per­mit­ting process for new busi­nesses, Kasim said. The city has ac­knowl­edged this per­cep­tion and made stream­lin­ing the process a pri­or­ity in its Fayet­teville First de­vel­op­ment plan.

Amer­ine echoed the need for more pri­vate in­vest­ment in nascent com­pa­nies, sug­gest­ing the state raise its tax credit to get cap­i­tal “off the side­line.”

Arkansas has un­usu­ally high lo­cal sales tax rates, ac­cord­ing to the ValuePen­guin re­port and the non­profit Tax Foun­da­tion. The av­er­age com­bined city, county and state sales taxes in Arkansas is about 8.5 per­cent, higher than all but three other states. Tax rates in Wash­ing­ton and Ben­ton coun­ties vary but on av­er­age to­tal nearly 10 per­cent and go to roads, law enforcement, tourism, parks and other pub­lic ser­vices.

On the other hand, Kasim had the help of Startup Junkie and the univer­sity’s Small Busi­ness and Tech­nol­ogy De­vel­op­ment Cen­ter to plan his first busi­ness at no cost. Now he’s on to his next ven­ture: an or­ganic, cold-press juice and smoothie shop in up­town Fayet­teville he hopes to open this fall. A lo­cal bank pro­vided a Small Busi­ness Ad­min­is­tra­tion-backed loan.

“It felt like they were ac­tu­ally root­ing for me,” Kasim said, adding he plans to work with the univer­sity to give en­trepreneur­ship stu­dents hands-on ex­pe­ri­ence at a cam­pus lo­ca­tion for his shop next year. “My mes­sage has been, no mat­ter what, you can do it. It’s not easy, but it can be done.”

Other rank­ings of North­west Arkansas’ small busi­ness en­vi­ron­ment re­flect a mix of pos­i­tives and neg­a­tives.

A Wal­letHub rat­ing this year of the four ma­jor cities in the area put them roughly in the mid­dle out of more than 1,200 small cities, ding­ing Fayet­teville for its star­tups’ fi­nan­cial suc­cess and fault­ing Spring­dale for ac­cess to fi­nanc­ing and other re­sources. But Forbes last year named Fayet­teville the 24th best place for busi­ness and ca­reers thanks to its job growth.

PUTTING DOWN ROOTS

Lo­cal lead­ers have long said the re­gion has much to of­fer prospec­tive busi­nesses. Startup Junkie is part­ner­ing with Wal-Mart and lo­cal or­ga­ni­za­tions for a sim­i­lar ser­vice in Ben­tonville called Ex­change. Crystal Bridges Mu­seum of Amer­i­can Art, the Ra­zor­back Green­way and other ameni­ties can make the place more at­trac­tive for res­i­dents.

Even the higher taxes might be a good sign in some ways, though lower taxes can mean busi­nesses can in­vest more in them­selves and the rest of the com­mu­nity, said Dana Davis, pres­i­dent and CEO of the Greater Ben­tonville Area Cham­ber of Com­merce. The cham­ber helps busi­nesses find lo­ca­tions and con­nect with other re­sources.

“We want to have the best here. I think our cit­i­zens have been will­ing to step up to the ta­ble and say we need to make sure we have great trans­porta­tion sys­tems, we need to have great school sys­tems,” Davis said. “This is a place peo­ple want to live and want to start a busi­ness.”

Derek McEn­roe, who coowns New Prov­ince Brew­ing Co. in Rogers with his wife, Me­gan, said he thought about go­ing else­where for the busi­ness, per­haps re­turn­ing to his na­tive Ari­zona. But the small­town at­mos­phere with big­town ameni­ties here eas­ily won out, and the com­pany’s doors opened in early 2016.

“We def­i­nitely wanted to plant roots here,” he said, adding the net­work of lo­cal brew­ers and restau­rants have sup­ported the fam­ily’s ven­ture. “The com­mu­nity was very help­ful, par­tic­u­larly in our first year.”

The area’s of­fer­ings a decade ago at­tracted a com­pany called CaseS­tack, which man­ages ship­ments for thou­sands of con­sumer prod­ucts in­ter­na­tion­ally and em­ploys about 150 in Fayet­teville. Dan Sanker, the com­pany’s founder and CEO, said the nec­es­sary ex­per­tise is con­cen­trated in North­west Arkansas.

“We’re find­ing the kind of peo­ple we like to work with here,” he said, adding he ex­pects com­pany and civic lead­ers and groups will in­creas­ingly share in­for­ma­tion and be­come in­volved in the com­mu­nity. “That’s when you start to get great ideas.”

Sanker said CaseS­tack plans to spin off an­other, en­tirely tech­nol­ogy-fo­cused com­pany in Fayet­teville that could em­ploy 85 peo­ple by next year. He praised the city school district and cham­ber of com­merce for their as­sis­tance and will­ing­ness to make in­tro­duc­tions and set up an in­tern­ship pro­gram, for ex­am­ple. Those re­la­tion­ships con­vinced him to put the new com­pany, Sup­plyPike, here in­stead of in Cal­i­for­nia or else­where.

NWA Demo­crat-Gazette/J.T. WAMPLER

Tap­ten­der Hannah Gil­liam serves a sam­ple flight of beers to a cus­tomer Sun­day at New Prov­ince Brew­ing Co. in Rogers. A re­port from ear­lier this year ranked North­west Arkansas 180th out of the 200 best met­ro­pol­i­tan ar­eas for small busi­ness.

NWA Demo­crat-Gazette/J.T. WAMPLER

Six-packs of beer are avail­able for sale Sun­day at New Prov­ince Brew­ing Co. in Rogers. Co-owner Derek McEn­roe said he con­sid­ered open­ing the busi­ness else­where, but the small-town at­mos­phere with big-town ameni­ties won out, with the com­pany open­ing in 2016.

NWA Demo­crat-Gazette/J.T. WAMPLER

Tap­ten­der Hannah Gil­liam pulls a beer while talk­ing to a cus­tomer Sun­day at New Prov­ince Brew­ing Co. in Rogers. A re­port from ear­lier this year ranked North­west Arkansas 180th out of the 200 best met­ro­pol­i­tan ar­eas for small busi­ness.

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