If you are going to start a business, there are few better places than Texas. Everything is bigger in Texas, and if you play your cards right, your company could get to the size you want it to be. As of 2021, Texas ranked as the fourth-best state to operate a business. This means that there are resources and opportunities for you to take advantage of if you have the means.
That being said, even with such a high ranking, there are still hurdles that you will need to vault to get where you want to be. In fact, some of them can be significant, and as you plan your business, you will need to account for them. Here is a guide to some of the benefits and resources to starting a business in Texas, as well as the possible challenges you might face.
Benefit: Low Taxes
Texas provides a convenient tax environment that appeals to many entrepreneurs. Every business is looking to cut costs, and taxes are one way to do that. The state believes that by offering tax incentives, more businesses will start up and employ more people. There is no income tax in Texas, nor is there a business income tax. The date that the average Texan has paid off their yearly taxes tends to come around April 5th, which is one of the best in the country. This means that businesses and employees can enjoy keeping more of their income after filing.
Challenge: Getting Funding
One of the biggest challenges in Texas and many other states is accessing capital. Unless you plan to be a freelancer, that only needs a laptop and an internet connection, you will probably have significant capital costs upfront. Starting a business is not cheap, especially when you need to pay for equipment, inventory, salaries, commercial property, Texas business insurance, and any number of other costs. Insurance is often a surprise to new entrepreneurs, but it is vitally important. You must have property coverage, auto coverage, and liability insurance. Workers’ compensation is not legally required for all businesses, but it might be something you want as protection.
The truth is that banks are not as willing to loan money in the last decade or so, and investors are becoming more conservative as well. Investment capitalists and angel investors hold a lot of power over small businesses and will attempt to attach unfavorable terms to partnerships that almost make it so that it’s not worth it for the small business. There are a lot of investors looking to buy established businesses on the rise, but fewer who are looking to fund one that’s starting.
Challenge: The Labor Market
Texas is a big state in physical size and population. While this does provide a small business with access to a large labor market, it has become tighter in recent years. Even with all of the restrictions based on Covid 19 being lifted, many small businesses are finding it hard to attract talent. There are several possible reasons for this. For one, many people have unfortunately passed away, and while the vast majority were not of working age, there was still a not insignificant number who were. Even with many businesses shuttering and people losing their jobs, workers are being much more selective about where they work after going through difficult times over 2020 and 2021. Therefore, it costs more to bring in great talent than before.
Benefit: Simple Regulation
Texas has worked hard in recent years to create a regulation regime that is simple to understand and avoids red tape for small businesses. There is no need to hire extra lawyers and consultants just to understand how to legally run a business. Even highly regulated businesses, like medical waste removal, for example, have restrictions and requirements, but they are presented in a way so that any business owner can follow them. It makes it easier to grow since there is less red tape, and easier to strategize because of it. If you are looking to deal more with your clients and partners than with the government, then Texas is the place for you.
Benefit: A Growing Market
As mentioned, Texas is big. Plus, it’s just getting bigger. The population in the state continues to grow, especially in urban centers. That growing population also tends to be more diverse, providing more opportunities for small businesses to find their niche. With so many people, and so many packed urban centers like Houston, Dallas, San Antonio, and Austin, a business can find their foothold and even expand to other markets, if they wish. There is a monstrous market to take advantage of.
Benefit: A History of Innovation
For the most part, people think of Silicon Valley and the east coast as the innovation hot spots in the United States. While that is true, Texas also has a rich innovation streak that has developed into a major part of its economy. Austin is particularly known for its fostering of tech startups. It also hosts the annual SXSW conference, which celebrates new technology, media, and innovation. Every year, the brightest minds in the world converge on Austin to present, discuss, and discover new ideas and technologies. In fact, the technology sector has been a driving force behind Texas being the top state for creating new jobs in recent years, and it’s only poised to get better.
Resources for Small Businesses
There are many resources throughout the state by both public and private organizations to provide support to potential startups. The Texas Small Business Development Center provides information, guidance, and support to small businesses. They provide consulting, training, and mentoring to help entrepreneurs bring their dreams to life.
SCORE is a non-profit, volunteer-run organization that also provides mentoring and advice to new entrepreneurs and established ones looking to grow. They have offices at all of the major centers in Texas so they have a large reach.
The Texas Economic Development Corporation is government-run and provides information and assistance with opening a business and strategizing to help it grow. Any one of these entities can provide a new business owner with all of the support and guidance they need.
As you can see, opening a business in Texas is a great choice if you want opportunities to grow in a business-friendly environment. Yes, there are challenges, but if you are able to navigate them, you can find the success you’ve dreamed of and build the best life possible for yourself.
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