Is Texas a Good Place for Entrepreneurs to Invest Money in Small Business?

Successful entrepreneurs follow their instincts, relying on intuition informed by research and sound reasoning. Among the proven guidelines influencing their approach to self-employment, effective small business founders heed the familiar mantra: location, location, location. Texas strikes the right balance for many expanding US businesses and startups, offering vital resources required to achieve commercial success.

As business ideas develop in to bonafide commercial ventures, founders must make location decisions. Physical facilities are an important consideration; businesses have diverse real estate needs, occupying prime retail space, as well as requiring operations offices, manufacturing facilities, and distribution centers. While weighing the pros and cons of various US territories, business visionaries not only consider the physical space required to conduct business, but they also examine human resources, access to capital, and other important commercial concerns. As 2020 kicks off, established entrepreneurs and capital investors are attuned to the regional benefits of Texas business opportunities.

Texas is Ready to Support Your Small Business

Texas entrepreneurs and business analysts agree on the advantages of doing business in the Lone Star State. WalletHub acknowledged the strong Texas business climate in its 2019 report, Best and Worst States to Start a Business. Using 26 metrics to compare 50 US states, the report ranked Texas in the number-one position, identifying the state as the best place to launch and grow a successful startup. Texas also ranked in the top 5 for average growth in the number of new small businesses.

It is known small businesses fail at a consistent rate. At least one-fifth of all startups fold within the first year, failing to make it to their one-year anniversaries. Surviving ventures are faced with grim statistics, illustrating one-half of small businesses go under before reaching the five-year milestone. Although businesses falter for various reasons, it is thought poor locations may be to blame for some commercial struggles. Texas owner-operators are eager to buck the trend, establishing viable ventures in one of the best US states for small businesses.

2019’s analysis, ranking Texas at the top of the list for startup states, looked at several variables influencing new US businesses. The study focused on areas such as

• business environment,
• access to resources such as commercial capital,
• cost of doing business in each state

Considering specific factors like human capital, labor costs, business funding, corporate taxes, and other related issues, the review highlighted a robust commercial climate in 2019. The good news for business entrepreneurs and investors: current year analysis again favors Texas as one of the best places to launch and grow a US small business in 2020.

Texas Ranks Among the Best States for Entrepreneurs in 2020

Overall, the US small business community continues flourishing, with nearly 80 percent of operators reporting profitability. Confidence and happiness levels are also high, and approval rates are on the rise for entrepreneurs seeking commercial capital. The generally optimistic business climate experienced in 2019 remains upbeat heading in to the new year.

A recent Forbes article featured results of a business study showcasing some of the benefits and disadvantages of locating commercial ventures in various US regions. According to The Best and Worst States for Entrepreneurs in 2020, Texas lands in the top five best states, ranking number three for entrepreneurs in 2020.

The study looked at more than 20 commercial factors, using the metrics to evaluate the entrepreneurial climate in all 50 states. To rank the best and worst places to start a business, 2020’s forecast considered data such as:

• 5-year increase in working age population
• Unemployment rate
• Rate of entrepreneurship
• Business tax climate, including personal and corporate taxes
• GDP growth and other economic statistics
• Number of businesses started due to regional opportunity
• 1- and 5-year startup survival rates
• Additional socioeconomic and business-focused metrics

Upon review, Texas outpaced Colorado, California, and North Carolina to reach third on the “best” list. Only Utah and Florida finished higher than the Lone Star State for entrepreneurial opportunity in 2020.

As one might expect from high achievers, members of the best list saw high levels of venture capital investment. California, for example, saw more than $77 billion invested in 2018 startups, funding twenty-eight hundred sixty-nine individual businesses launches during that year. Further supporting robust business climates in the favored regions, entrepreneurs were active in states like Florida, California, and Wyoming, which each saw .45 percent or more of state residents starting businesses in 2018, and Texas, experiencing a .43 percent rate of new entrepreneurs.

A few of the strong categories propelling Texas to third place in the rankings include strong GDP growth, a rapidly growing working-age population, and an affordable cost of living in the state.

Up-and-coming Reasons to Do Business in Texas

With startups on the rise and more first-time entrepreneurs testing the waters in Texas, business analysts have identified some of the reasons Texas has become a hotbed for entrepreneurial activity.

Texas offers a talent-rich environment – It takes a diverse talent pool to staff a new venture. From various specialized departments, to the visionaries driving big picture organizational development, Texas human resources continue attracting investment and expansion within the state’s small business startup economy.

Texas and California are active regions among baby boomer and millennial entrepreneurs, capitalizing on the states’ large populations to nurture deep labor resources. In addition to producing a large quantity of job candidates, Texas also develops quality talent. The state’s strong university culture contributes to regional entrepreneurial success, graduating top-tier professionals and providing a skilled work force for diverse lone star ventures. City hotspots, Austin, San Antonio, Houston, and Dallas are particularly rich with skilled professionals, boosting startup success across the state.

Texas welcomes innovation – Technology and innovation continually raise the bar for entrepreneurs; Texas embraces advances. A strong regional commitment to Texas tech advances proves the East and West Coast are not the only fertile grounds for US innovation. A diverse economy, supported by travel infrastructure, draws top technology conferences and events such as Austin’s annual South by Southwest gathering. Strong job growth in Texas reflects growing technology industries in the state, including:

• Aerospace and Aviation
• Defense
• Petroleum Refining
• Information Technology
• Energy
• Biotechnology
• Advanced Manufacturing Tech

Tax Benefits Attract Texas Businesses – States such as Delaware and Nevada have gained reputations for business-friendly tax laws; Nevada residents and organizations don’t pay corporate or personal income tax. Texas tax law also plays a role recruiting startup entrepreneurs to the state. The Tax Foundation’s Tax Climate Index compared various conditions across states, ranking performance in a number of different tax-related categories. Although Texas didn’t fare well across the board, the state did earn an overall ranking of 15 – among the top one-third of US states.

Business-friendly Climate Draws Texas Capital Investment -Thumbtack surveys small business professionals for feedback about business friendliness in various regions. The annual survey polls US owner-operators, focusing on factors that make certain regions more or less attractive for startup investment. The Small Business Friendliness Survey evaluates factors such as:

• Ease of hiring within the state
• Tax code
• Availability of training and education
• Business regulatory environment

Using participants’ responses, Thumbtack has assigned Texas a 2019 business friendliness grade of A, continuing the state’s years-long run near the top of the friendliness scale.

Entrepreneurs face intimidating odds, without guaranteed success. The best business founders can do is make informed decisions and hope their products and services are well-received by consumers. Among the advantages working in their favor, progressive entrepreneurs continue embracing the businesses-friendly benefits of Texas commerce.