Why Oregon for Entrepreneurship?

Sep 3, 2019

IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities.  Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family owned businesses. The following blog article has been provided by Eric Moore of Accounting Solution Partners (www.asp-nw.com):

Why Oregon for Entrepreneurship?

Is Oregon the right place for your business? Many Americans dream of starting a business, and the number of new ventures has continued to reach new heights. If you’re thinking about launching a company, where you do so matters.

Entrepreneurs are increasingly choosing to call Oregon their home base. The state’s economy is strong, and many local communities are committed to the success of small businesses. Oregon is not only a thriving business environment in many respects but also an attractive place to live. Despite its many opportunities, the state also has a few challenges.

Opportunities for Businesses in Oregon

If Oregon is on your shortlist for a new business venture, there are plenty of reasons to keep it there. Here are some of the pros of doing business in this state.

Healthy Economy

Oregon continues to have one of the strongest economies in the nation. In terms of economic growth since 2001, it ranks six among all U.S. states. Its overall economy has expanded by about 75% over the past two decades.

According to Business Oregon, a state agency, Oregon’s GDP growth is some of the highest in the nation. It also ranks high nationally in these other key areas:

  • Employment Growth (3rd)
  • % of Electricity from Renewables (5th)
  • Patents Issued (6th)
  • Lowest Workers’ Comp Costs (7th)
  • R&D Spending (8th)
  • Population Growth (9th)

Those stats are impressive, but Oregon is also diverse when it comes to supporting businesses. It’s become a tech magnet, has one of the world’s largest salmon-fishing industries, and Portland has the largest number of breweries of any city in the world.

Booming Tourism Industry

According to Travel Oregon, the state’s thriving tourism industry accounts for $12.3 billion in visitor spending annually, $539 million in state and local tax revenue, and provides 115,400 jobs. And these are all figures that have been steadily increasing over the past decade.

Travel accounts for one of Oregon’s top three export-oriented industries in rural counties behind logging/wood products and agriculture/food processing. This sector is represented primarily by service and retail firms, including restaurants, lodging establishments, retail stores, fuel service stations, tour agencies, and other businesses that sell services and products to travelers.

“Buy Local” Movement

One of the biggest benefits of starting and operating a business in Oregon is the overwhelming support that the state’s residents give to local businesses. There is a growing trend among consumers to want to know who is growing their food, making their clothing, and providing other critical services.

This gives small businesses in a state like Oregon an edge. For example, Nadeau, a handcrafted furniture store, tries to give each of its locations a local or boutique feel. One recent study found that Portlanders could eat “entirely local” if they wished, which isn’t the case for many other cities.

Financial Incentives

Beyond the desire to keep spending close to where you live, Oregon is also home to a myriad of development organizations that promote startups throughout the state. They might offer mentorships as well as financing opportunities for new entrepreneurs. A few examples are Business Oregon and Oregon Entrepreneurs Network.

In addition, there are a growing number of incentives available that benefit startups and small businesses. Some of these include:

  • Enterprise Zones – Businesses receive an exemption from certain taxes in exchange for investing and hiring in an enterprise zone. These incentives can last for multiple years.
  • Strategic Investment Program (SIP) – Available statewide, this program provides a 15-year property tax exemption on portions of large capital investments.
  • Food Processing Machinery and Equipment (M&E) – If certified by the Oregon Department of Agriculture, a business could receive a 5-year tax exemption on newly operational M&E.
  • Oregon Investment Advantage – This program has the potential to nearly eliminate state income taxes for several years for a new business that relocates or opens in certain counties.
  • Business Expansion Programs – Several types of programs like this offer cash-based forgivable loans for small businesses to use for expansion.

You may also be able to achieve additional incentives on the local level. If there is a particular community that you are interested in for your business, approach the appropriate agency to inquire about assistance.

The Happiness Factor

Even with some of its challenges, which we’ll detail below, people who live and work in Oregon seem to be incredibly happy. There are countless stories of businesses that have relocated to Oregon for better conditions or others that refuse to leave for so-called “greener pastures.”
Luke Kanies, founder of Puppet Labs, moved his company from Nashville to Portland, stating that the new city, “feels like home.” He also indicated that he found top-notch investors and employees in Oregon.

But, other businesses discovered the wonder and benefits of Oregon years ago, and these are highly-recognized names. These include Nike (near Beaverton), Intel (near Portland), Precision Castparts (Portland), and FLIR Systems (Wilsonville).

And let’s not forget Columbia Sportswear, which is a company that epitomizes the Oregon experience. CEO Tim Boyle tells a story about attempts to lure the company away from its Portland headquarters.
The mayor of Dallas sent a bouquet of flowers to his assistant and then an iPhone loaded with his personal cell phone number to the CEO. According to Boyle, “We’re not ready to move.” Why? Boyle states that “the people who work here, love it here.”

Challenges Associated With Doing Business in Oregon

While plenty of businesses are flocking to The Beaver State, some have left, and quite a few are vocal about the state’s challenges. If you’re thinking about doing business in Oregon, here are few of the unwelcome issues that you may need to face.

High Taxes

The biggest gripe among existing businesses in this state relates to its tax environment. While there are no sales taxes in Oregon, its income taxes and property taxes are considered moderately high.
Oregon maintains a two-bracket corporate income tax structure, where corporations pay 6.6% on the first $10 million in income and 7.6% on the remainder (don’t forget those incentives we listed above). There are four brackets used for the personal income tax system ranging from 5% to 9.9%.

Property taxes vary by district in Oregon, and there are other considerations. Some taxes impact specifics businesses. For example, there is a state lodging tax, which drops to 1.5% in 2020, which affects the hospitality industry.

Soaring Real Estate Costs

Due to a flood in job growth and a rising population, many parts of Oregon have seen home prices skyrocket in recent years. According to real estate website Zillow, the median home value in Oregon is now $345,800 compared to $547,500 in California.

The state has been struggling with an appropriate response to this, with the goal of “not becoming another California.” This is something that the state is going to continue to deal with as it passes things like rent control laws and affordable housing mandates.

Tight Labor Market

A strong economy is excellent news on the one hand, but will you be able to find the skilled help you need for your business? According to Oregon’s Office of Public Policy, the state’s unemployment rate is at a near-historic low at 4.1%.

But, when you do get those workers on board, the numbers show that you’ll be pleased with the results. Worker productivity in Oregon, or economic output per worker, is well above the national average at a rate of 35% vs. 21% nationally.

The state’s employment department recommends that employers with hard-to-fill vacancies compete by enhancing benefits, increasing their recruitment intensity, offering additional training, and raising wages.

Strong Environmental Regulations

Oregon has some of the strongest environmental protection laws in the nation. When President Donald Trump took office, he quickly rolled back some of the previous administration’s environmental protections.

Several states, including Oregon, have put laws in place that uphold those stronger standards. If you plan to do business in Oregon, you can expect to meet more stringent requirements for things like air quality, clean water, and pollution prevention.

If you have questions relating to the content of this article, Eric Moore of Accounting Solutions Partners would welcome the opportunity to answer them.  Mr. Moore can be reached at (425) 492-1901 or moore@asp-nw.com.

IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, and real estate communities on subjects relevant to the purchase & sale of privately held companies and family owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.