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Georgia Entrepreneurs In A Great Position

If you are a small business owner in Georgia, you are in good company.  Even in the midst of an exceptionally painful recession, new businesses continue to spring up all across the State, and particularly in Metro Atlanta.  According to the most recent edition of the Kaufmann Index of Entrepreneurial Activity 1, published in April of 2009, Georgia led all states with an average of 590 per 100,000 adults creating a new business each month during 2008.  The national average for all states was 320 per 100,000 adults.  Metro Atlanta was far ahead of all other Metropolitan Statistical Areas with an average of 740 per 100,000 adults creating a new business each month.

What is so special about Georgia?  The answer begins with Metro Atlanta.  According to Entrepreneur Magazine’s August 2009 issue, “There’s a simple formula that defines the Atlanta small-business scene:  Big growth equals big opportunities.  Service and retail businesses are in constant demand all across the metro area to serve the city’s expanding boundaries, and…combined with a low cost of living, makes Atlanta prime real estate for entrepreneurs…” 

The relatively low cost of living and significant growth potential undoubtedly make Metro Atlanta attractive to entrepreneurs.  However, the culture and characteristics common to the Metro Atlanta population may have more to do with what truly sets it apart.  According to U.S. Census Data, from 1990 to 2000, the population of the 20-county Metropolitan Atlanta area grew by 38.9 percent from just under 3 million to over 4.1 million people. 2  As of 2009, the population is estimated at more than 5 million people.  Many of these new residents moved to Georgia from other regions of the country seeking greater economic opportunities.  A cursory assessment could be that persons who are willing to transplant their lives and families to another region might also be more likely to have a greater proportion of entrepreneurial personality traits such as personal initiative, independence, risk-tolerance, persistence and flexibility.  That may be a partial answer, but there other factors as well that help set Georgia apart.

On pages 52-53 of his 2007 work, Entrepreneurship in the United States: The Future Is Now, Paul Davidson Reynolds 3 describes the following special characteristics of geographical areas in the U.S. which tend to be particularly conducive to births of new businesses: 
- “Increases in demand, reflected in human population growth and greater levels of income”
- “More highly educated population of young adults”
- “Larger proportion of small firms in the business population”
- “More volatile economic sectors; greater sector diversity”
- “Flexible policies regarding the hiring and firing of employees”
(Interestingly, and counterintuitive as it may be, Reynolds’ statistical analysis indicated that a higher  unemployment rate does not tend to be a factor resulting in a net increase in new business formations in the United States.)

What does all of this mean for the entrepreneurial future of Georgia?  If those five factors listed by Reynolds are correct, the future for small business start-ups in Georgia is bright and it should remain that way for quite a while.  Human population growth…  “Check.”  Highly educated population of young adults…  “Check.”  Larger proportion of small firms in the business population…  “Check.”  Greater economic sector diversity…  “Check.” (This means that the economy does not rely on a select few key sectors such as agriculture or coal mining or automobile manufacturing, etc.  Rather, there are many economic sectors, particularly a broad service industry sector, in which demand for certain services can ebb and flow and sectors can become obsolete.)  Flexible policies regarding the hiring and firing of employees…  “Check.” (Georgia is widely recognized as an extremely employer-friendly state that provides little protection for employees when compared to many other states.)  So, based on Reynolds’ criteria, Georgia is an entrepreneur-friendly State.

Georgia entrepreneurs are uniquely positioned to play an important role in the economic recovery over the next few years.  One major reason is that Georgia needs new jobs.  A highly popular political and economic sound bite at present is that small businesses will be the “major engine of job creation and economic growth” as the national economy moves out of the current recession.  On March 16, 2009, President Barack Obama spoke to this point as he addressed small business owners, calling them “the heart of the American economy.”  He also declared that “they’re responsible for half of all private sector jobs and they create roughly 70 percent of all new jobs in the past decade. So small businesses are not only job generators, they’re also at the heart of the American dream.” 4 If this is true, and it is this author’s personal belief that it is, Georgia’s entrepreneurs are poised to make a vastly significant contribution in the coming years to the economic recovery of Georgia, the southeast, and the nation.

In summary, if you have seriously contemplated starting a Georgia business, this may be a good time to evaluate your options.  It may seem risky to start a business in a down economy, but that is often the best time to do it.  Google, Microsoft, Apple, Cisco and Starbucks, among many others, all started during economic downturns.  In an economy such as this, although there are significant challenges in raising capital, many other costs for a new business owner are lower than usual (such as office space, highly qualified employees, and technology).  Many employees work harder, there is generally less turnover, and potential customers are feeling economic discomfort which can lead them to seek out new suppliers and service providers.
Any potential entrepreneur should obtain professional advice and carefully weigh the potential risks and rewards prior to starting a new business.  Notwithstanding the inherent risks, the opportunity cost for many entrepreneurially-inclined Georgians may presently be at a low point for a number of reasons.  If you decide to make the leap, you will be in for a challenge, but at least you can be assured that as a Georgia entrepreneur, you will also be in good company.

1  The 2008 Kaufmann Index of Entrepreneurial Activity was published in April of 2009 by the Ewing Marion Kaufmann Foundation.  The study was conducted by Robert W. Fairlie, Professor of Economics and the Director of the Master’s Program in Applied Economics and Finance at the University of California, Santa Cruz.  The complete study may be found at http://www.kauffman.org/uploadedFiles/kiea_042709.pdf (accessed August 24, 2009).

2  U.S. Census Bureau, Census 2000 PHC-T-3,  Ranking Tables for Metropolitan Areas: 1990 and 2000

3  Paul Davidson Reynolds is a professor at Florida International University and the recipient of the 2004 International Award for Entrepreneurship and Small Business Research provided by Swedish Foundation for Small Business Research and the Swedish Business Development Agency (the “Swedish Prize”).

4  Barack Obama, “Remarks by the President to Small Business Owners, Community Leaders and Members of Congress” (White House, Washington, DC, March 16, 2009), available at www.whitehouse.gov/the_press_office/Remarks-by-the-President-to-small-business-owners (accessed August 24, 2009).