The Sunshine State is home to the fourth largest economy in the nation. Its growth in 2018 significantly outpaced the U.S. at large at a rate of 3.5% to 2.9%. Small businesses are an essential part of the economic landscape in Florida, making up 99.8% of all businesses and employing 3.3 million employees, more than 42% of the state’s workforce.
Currently, Florida’s unemployment rate stands at a low 3.4%, which is lower than the national average of 3.6%. The top five industries for small business in Florida are accommodation and food services; healthcare and social assistance; professional, scientific, and technical services; construction; and retail.
These economic indicators are encouraging for the state, but only tell part of the story. To really understand the opportunities and challenges facing entrepreneurs in Florida, it requires a look into the seasonal dynamics facing many businesses across the state, which falls in the subtropical to tropical temperature zone.
Low taxes
Florida is generally known as a state with an overall low tax burden. It is one of seven states in the U.S. that doesn’t have a personal income tax, making it a highly attractive state for pass-through entities, such as LLCs. The state sales tax is middle of the road on taxes for rented or purchased goods at 6%. That excludes such necessities as groceries and medicines. Corporations in Florida must file a corporate income tax return, but at a low top rate of 5.5%.
“Florida doesn’t have a state income tax or some of the other nuisance business taxes found in other states,” said Robert Livingstone, president and founder of IdealCost.com.
Some business owners are uprooting their businesses to move into Florida due to the tax advantages. Daniel DiGiaimo, CEO of Baker Street Funding, is in the process of relocating the company from New York City to Florida specifically to reduce their tax burden.
“[One reason we’re moving to Florida] is because of the tax benefit,” said DiGiaimo. “Moving from a city with one of the highest tax rates in the country to a state with no state tax is a huge savings both personally and professionally.”
Access to capital
Entrepreneurs also report sufficient access to capital for starting and growing their business in Florida. In addition to more the 150 banks across the state, Florida is home to significant amounts of investment capital from venture capitalists and angel investors, some business owners report.
“The idea that you have to be in huge metropolitan areas like New York or Silicon Valley for access to capital is overblown,” said Andy Latimer, founder and CEO of Bluewater Media. “The stable business environment in Florida makes business here ripe for investment. Also, the walls of access to large markets have been broken down by technology.”
It wasn’t always the case that Florida attracted private investment capital. In recent years, however, investors have turned their eyes to the Sunshine State. Today, Florida is home to several economic hubs considered to be incubators of innovation and startups.
“Whereas Florida used to be a state largely excluded from the startup and VC scene, things have changed considerably between over the last five years,” said Zohar Pinhasi, CEO of MonsterCloud. “I now see it as a promising and cost-effective location for buzzworthy startups.”
Cost of living
The cost of living in Florida is slightly higher than the U.S. average across the board, but it remains more affordable than other major economic hubs in the country. This means entrepreneurs can plug into a humming business landscape at a reasonable cost, though housing and transportation costs are somewhat pronounced.
“The cost of living and operating a business is still generally significantly lower than in New York, Chicago, D.C., San Francisco or L.A.,” said Pinhasi.
There is significant fluctuation of prices based on locality, of course. For example, Miami tends to be more expensive than other major metropolitan areas in the state, such as Jacksonville or Tampa Bay. For businesses with physical locations, real estate costs, in particular, vary widely, so it’s important to research local markets.
Florida’s current minimum wage rate is $8.46, as of January 2019. Florida labor laws do not say anything about overtime payment requirements. There are no Florida laws requiring employers to provide employees with severance pay if someone is let go. There are also no state laws requiring employers to provide employees with vacation benefits or sick leave, either paid or unpaid.
Seasonal economy
Florida is widely known as a tourist state, and with that reputation comes a significant seasonality to business. In spring and summer, when the weather is nicer in the northern states, fewer tourists and snowbirds spend their time and money in Florida. That means business slows significantly for the entrepreneurs that operate in Florida year-round. Running a business in Florida means you must prepare for the lean months by keeping operations efficient and wisely allocating your revenue from the busy season, typically regarded as the time between Thanksgiving and Easter.
“If you own a corner store or restaurant or daily staples business dependent on foot traffic, your small Florida business from Thanksgiving to Easter will be packed with snowbirds clamoring for everything [they] forgot back in Jersey or ‘the City,'” said Baron Christopher Hanson, lead consultant and owner of RedBaron Consulting. “If you are looking to open an aging healthcare or routine medical practice, be prepared to be busy from November to May, yet very slow in the summer and hurricane months.”
Beyond the seasonal downturns, hurricane season also poses a threat to businesses. Not only do customers regularly evacuate to avoid hurricanes, but the storms also represent a disaster risk, which could result in significant damage to brick-and-mortar businesses.
“Hurricane season brings a lot of uncertainty to the market,” said Livingstone. “When we need to reach current and prospective clients during this time, we aren’t always successful on our first and second attempt. South Florida has escaped mostly unscathed during the last few years, but often we see people prepare and evacuate due to past experience.”
Competitive labor market
The low unemployment rate in Florida is an indicator of its strong economic performance but unfortunately comes with a drawback: Recruiting new employees is a competitive and costly process. Moreover, in an employee’s labor market, it can be difficult to retain existing talent, as companies are prepared to offer lucrative compensation packages to lure in the best candidates.
While there are several top universities in Florida from which businesses can easily recruit, high salaries and wages, attractive benefits packages, and perks like work-from-home policies are becoming standard tools for attracting workers. Businesses should be prepared to compete to secure the most skilled or experienced employees in their industry.
What do I need to start or buy a business in Florida?
By Adam C. Uzialko
https://www.businessnewsdaily.com/8811-doing-business-in-florida.html
