Local leaders react to low Pa. business ranking

Pennsylvania Gov. Tom Wolf, left, and Penn State President Eric Barron engage in conversation before the governor’s February speech at Happy Valley LaunchBox. LaunchBox is one of several programs in the area to help provide resources and mentoring for startups and new business owners.
Pennsylvania Gov. Tom Wolf, left, and Penn State President Eric Barron engage in conversation before the governor’s February speech at Happy Valley LaunchBox. LaunchBox is one of several programs in the area to help provide resources and mentoring for startups and new business owners. Centre Daily Times, file

A theme emerged when community leaders learned Pennsylvania was named the sixth worst state in which to start a business, a retort that maybe economic analysts shouldn’t paint with such a broad brush.

Every community is different — the economic climates of Philadelphia and Pittsburgh can’t compare to Bellefonte or the Moshannon Valley.

And no matter where a new business booms or busts, it’s not supposed to be easy.

“Starting a business can be daunting regardless of geography,” said Vern Squier, Chamber of Business and Industry of Centre County President and CEO. “Centre County is fortunate to have a supportive ecosystem for early-stage businesses looking to get off the ground. Beyond the startup phase, we need a similar robust support network along the economic development continuum.”

There will be challenges to overcome and opportunities to succeed, Squier said, though basic necessities such as facility needs, access to capital and the demand for skilled talent remains the same.

WalletHub’s analysis

The study that concluded Pennsylvania is one of the worst states in which to start a business was conducted by professors and WalletHub analysts.

The unenviable status was a result of the state being ranked No. 30 or lower in all but six of seven categories — labor costs, average growth in the number of small businesses, office-space affordability, average length of a work week, cost of living and industry variety.

WalletHub’s Jill Gonzalez defended the results.

“This study was developed in conjunction with academic experts, and the data used was collected from mostly government sources such as the Census Bureau, Bureau of Labor Statistics, U.S. Bureau of Economic Analysis and the National Venture Capital Association,” Gonzalez said. “Therefore, they are completely objective and 100 percent reliable.”

Gonzalez said there should be a trident approach across the state to improve new business success.

“Pennsylvania should focus on improving its ranking in the total effective state and local tax rates on mature corporate headquarters, a rank of 49th at 23.1 percent tax, in the number of startup firms metric, 42nd with only 97.5 new startups per 100,000 residents, and in the five-year business survival rate metric, 44th with only 47.3 percent,” she said.

WalletHub also released a study on the best and worst small cities to start a business. The lone local community to make the list was State College, which landed in the bottom 10th percentile. The examination of State College led to a finding that the area is 11th worst out of 1,261 cities in business environment, but 70th best in access to resources.

Centre County Commissioner Mark Higgins also noted an apparent contradiction in North Dakota being named the best state to start a new business on the same day that a separate WalletHub study found North Dakota to have the ninth worst state economy.

“Is North Dakota a fabulous state to start a new business or does North Dakota have an overall bad economy?” Higgins said. “I don’t know if it can be both.”

The average difference between the WalletHub study rankings per state was about 16 spots.

Local resources

If there is one thing everyone can agree on, it’s that there is a strong support system available to new business owners in Centre County.

“I look at it from a perspective of what is available in the regional network or ecosystem,” Bellefonte borough Manager Ralph Stewart said. “We have a great network of support available for people interested in starting a business.”

Central PA SCORE offers free, confidential business mentoring and workshops in Centre, Clearfield, Huntingdon and Mifflin counties. Ben Franklin Technology Partners, a technology-based economic development program, invests thousands of dollars into local new businesses. And the Penn State Small Business Development Center also provides no-cost consulting services and seminars for small businesses and those who want to start a business.

“We are very fortunate to have Penn State here in this area,” said Stan LaFuria, executive director of Moshannon Valley Economic Development Partnership. “Since the start of my tenure here in December 1990, we have had 19 businesses locate to our area because of some connection to Penn State. ... Penn State should be commended for the efforts that they have made the past five years to stimulate new entrepreneurial development.”

Penn State President Eric Barron said more people are noticing the university’s and region’s efforts to spur entrepreneurship.

“I think you’re going to see more people take notice when the awards start to really come,” he said. “How does the world not pay attention to what’s happening then?”

The prospect of the county’s economic growth leans heavily on a network of entities working together. The Centre County Economic Development Partnership, consisting of local governments, Penn State and private businesses, has supported 3B33, the CBICC’s goal of a private sector that generates $3 billion in annual economic output by 2033.

Squier’s approach to economic growth for the region includes a focus on “business retention and expansion assistance, business recruitment and entrepreneurial development” to “restore balance to and strengthen Centre County’s private-sector economy.”

The means to success, LaFuria said, relies on management, market and money.

“For any new business startup, the people involved must have the right skills and abilities in what they are getting into,” LaFuria said. “Then, there must be a market for their product or idea. If those are in place, the management and a place in the market, then the money will usually work out.”

The future

Communities across Centre County have evolved and adapted to grow economically.

The downtown State College landscape will likely have at least four buildings exceeding 140 feet in height by 2019. Bellefonte’s government invested in a $6 million waterfront project to revitalize part of the community and has witnessed about 20 new businesses open in the past 18 months. And recently opened or planned incubators are meant to bring entrepreneurs to Bellefonte, Philipsburg and Penns Valley.

Community leaders pointed to Philipsburg’s Diamondback Truck Covers, State College’s KCF Technologies and Benner’s Restek, all companies founded more than 10 years ago, as success stories. And there are more — Videon Central, TMMData and Homeland Manufacturing Services — the list could go on.

Those companies were started at a time when entrepreneurial efforts were not hitting a pitch fever, but that’s what community leaders, outside of business and job retention, appear to be largely focused on.

“We need to put most of our effort into startups, because that’s how you get new jobs,” Higgins said. “We need to assist and mentor and have more angel capital to fund new businesses. We need to promote the advantages of our region.”

Communities outside of the Centre Region will likely have lower overhead costs, a lower cost of living and all of the same amenities within a 20-minute drive.

There are also advantages specific to locations within the Centre Region. Niche ranked Houserville the No. 3 place to live in America and Lemont No. 11, and College Township No. 7 and Ferguson Township No. 12. The disadvantages can’t be ignored either — the economy in the Centre Region is cyclical due to the Penn State.

About 93 percent of employment in the county is directly or indirectly tied to the university’s existence, according to Higgins. In 2016, the university employed more than 27,000 people, about half of them full time. The next 30 companies with the highest employment figures in the county combined to have 16,183 full-time and part-time jobs filled.

The region’s economy has to be more diversified, according to community leaders, who said that the fortune of any new business in the region won’t be based on a ranking.

“Businesses that succeed please their customers,” Stewart said. “If your customers keep coming back, you are doing something right.”

Lori Falce contributed to this story.