5 Reasons Small-Business Owners Move Out of State

You’ve likely heard thrilling tales of business owners selling their homes and schlepping their possessions a thousand miles to another US state—all seemingly on a whim.

We’ve caught wind of these stories too. And it’s our curiosity that recently led Business.org to speak with over 30 small-business owners that moved their organizations to another US state.

Among the people we talked to, the age-old pursuit of a lower cost of living was abundantly cited. However, there were several other less commonly discussed motivators.

Here are just five of the most intriguing, lesser-known reasons small-business owners decided to head across state lines.

Higher quality leads

Many small-business owners, especially those leading brick-and-mortar entities, relocate to get physically closer to clients. This is especially true for service providers, such as plumbers and real estate firms, which are heavily dependent on in-person interactions.

“I moved just before starting my business for a mix of reasons, including the chance to be closer to family. But I also found that the Dallas area offered a huge variety of businesses, and I couldn't have gotten off the ground without that abundance of leads,” says Devon Fata, CEO of Pixoul. “Even if you're in an all-online field like I am, there is tremendous power in being physically close to where your customers are.”

Quality clients mitigate high prices

This is good news if you’re dreaming of a life in an expensive area. That’s because, for some businesses, closer proximity to quality clients helps offset higher living costs.

Such is the case with Jay Soriano, a professional photographer that moved from famously affordable Nevada to the pricey island of Maui. As the pandemic turned his portrait studio into a ghost town, he had an epiphany.

“Events were canceled, weddings were postponed, and the demand for in-studio photography was non-existent. I had to do something,” Soriano told Business.org. “I asked myself if I could be anywhere, where would I be? I thought of Maui and less than a year later, here I am.”

Soriano further explained how his move to Hawaii boosted his business thanks to scores of tourists and beachgoers looking for an oceanic backdrop. He also brushed up on his gains from fewer COVID-19 pandemic limitations.

“Working in an open-air environment allows for less government restriction, and thus more business. Though the cost of living is higher, and it's certainly not quite as tax-friendly as Nevada, [more] tourism and demand for photography allow for higher prices.”

Improved mental health

Money isn’t everything, and plenty of entrepreneurs relocate primarily to boost their mental health. While some business owners endure reduced revenue in exchange for improved emotional well-being, many still get to have their cake and eat it too.

Such is the case for Jacob Shirar, president and CEO of Rocky Mountain Finishes. Shirar told Business.org that his move from Iowa to Colorado was both “business and personal.”

“While the housing market is booming across the country, high-end and high-dollar [home protective coating] finishes just aren't as common in the heart of the Midwest as they are in ski country," Shirar explained. “The constantly growing and regularly remodeled developments out West provide a much greater opportunity for our team.”

A lake in the foreground with mountains in the background in Colorado, United States of America

Colorado can offer natural beauty to urban-weary business owners. (Credit: Mike Scheid @ Unsplash)

And as for the personal side? Shirar found bliss in the rugged terrain of Colorado, making it a smashing success for his work-life balance.

"As far as personal motivations, I'm a mountain man at heart. My joy is found among the clouds, whether that be hiking, skiing, or biking. I'm happiest in the mountains.”

But Shirar isn’t alone. In fact, among the 31 business owners we spoke to, nearly all cited the quest for greater emotional well-being as a key motivator behind their interstate migration. Indeed, an abundance of scholarly research proves emotional well-being and a healthy work-life balance are correlated with professional performance.1

Differing labor regulations

Small businesses often struggle with tiny budgets and limited staff. These limitations, in turn, can make it challenging to grapple with restrictive—and often costly—state labor laws.

That’s what led Kerri Feazell, CEO of video production agency Concurrent Productions, to jump ship from sunny California to windy Chicago.

“As a small production company that films at client locations only a handful of times each year, we rely heavily on independent contractors, such as lighting and camera experts, for one-day film shoots,” Feazell explained to Business.org.

And when California’s AB-5 law made it an uphill battle to classify workers as contractors vice employees, Feazell saw the writing on the wall.

“While we absolutely support fair labor laws and insurance protection for workers, laws like AB-5 make it challenging for small businesses like ours to grow to the point where we can hire full-time staff. So far, Illinois allows us to hire independent professionals in a way that is less onerous for both parties.”

Feazell’s operation is just one example of a business gaining from diverse labor laws nationwide. But if their example sounds relatable, it’s worth considering the potential monetary advantages available across state lines. Don’t forget to analyze how such a move could affect your customer base and revenue flow, though.

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More funding opportunities

At Business.org, we’re constantly analyzing ways to fund your entrepreneurial dreams. And while traditional loans and crowdfunding are tried-and-true strategies, some business owners uproot to qualify for unique chances at cold hard cash.

Such is the case for Kalyan Gautham, co-founder and CEO of the charity and activism platform WATT. Gautham’s nearly 2,000-mile move from Los Angeles to rural Missouri brought a bounty of unconventional money and growth.

“We had primarily moved because we got awarded the 1ST50K award by Codefi, which focuses on rural economic development,” says Gautham.

Missouri is just one potential place to find rural development grants for small businesses. (Credit: Michael Gattorna from Pexels)

This award delivered WATT a $50,000 injection of cash and a treasure trove of support from Codefi. But this was granted only on the condition that WATT operated out of the small town of Cape Girardeau, Missouri.

This cross-country migration was about more than just money to Gautham, though. It was a pursuit of passion for creating value in often overlooked, low-density areas of the United States.

“We are an impact-led tech company, and everything that we do is intended for social and environmental impact,” Gautham explained to Business.org. “However, the partnership with Codefi to generate economic impact in the rural locations of Missouri gives our organization a whole new meaning. Our presence in the location [...] is highly impactful by generating new-age tech job opportunities in the region.”

Certainly, Gautham’s willingness to embrace a rural setting was a crucial element that not every business owner could stomach. Still, it’s worth exploring funding opportunities that are only available in certain states or regions. Many potential awards might thoroughly justify a move across state lines, especially for newer small businesses shut out from other funding sources.

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Substantial tax savings

You’ve likely heard of numerous high-profile corporate relocations across state borders. Certainly, big names like Tesla, AT&T, and Oracle have gained fame for their respective relocations, with Texas frequently on the receiving end. A common motivator behind these moves is the reduction of business taxes, which can save companies millions of dollars annually.

While small businesses might not endure seven- or eight-figure tax bills, little entities can still reap the benefits of reduced taxes. And the reward of smaller levies from Uncle Sam sometimes starts with a particularly inspirational vacation.

“I started my company in Virginia, just outside Washington, DC. Several years ago, I decided it was time for a change and started looking for places to relocate,” says Steve Oliverez, CEO of InsanelyCheapFlights.com. "I visited Austin, Texas one weekend, ate the tacos, and fell in love. I was already in contact with a local realtor by the time I flew home. The quality of life, lower cost of living, and tax savings convinced me it was the right move.”

Some states do mess with Texas

Texas certainly rakes in plenty of mainstream attention for its perceived business-friendly environment. However, many other states, like Montana and Nevada, actually offer better tax environments than the Lone Star State.

According to The Tax Foundation, a Washington, DC-based taxation research organization, Texas is the eleventh most tax-friendly state in the union as of October 2020. Wyoming, South Dakota, and Alaska scored the top three spots. Meanwhile, New Jersey, California, and New York were the least tax-friendly for businesses.2

These data-driven rankings clearly illustrate the need to carefully research laws, rather than impulsively chase big corporations across state boundaries.

“For those looking to move to another state for business, it's important to learn the differences in tax structure and other laws in your new state,” Oliverez asserts. “Finding a good, local CPA can help tremendously.”

Related reading:

Disclaimer

At Business.org, our research is meant to offer general product and service recommendations. We don't guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.

Sources:

  1. Gragnano, Andrea; Simbula, Silvia; Miglioretti, Massimo. "Work–Life Balance: Weighing the Importance of Work–Family and Work–Health Balance." February 1, 2020. Accessed October 6, 2021.
  2. The Tax Foundation. “2021 State Business Tax Climate Index.” October 20, 2020. Accessed October 8, 2021.
Ian Agar
Written by
Ian Agar
Ian covers human resource administration at Business.org. His expertise stems from his four years as a military HR generalist in the U.S. Coast Guard, where he held the title of yeoman and became an Oracle Peoplesoft maestro. Ian also owned an ecommerce small business for over three years and holds a bachelor’s degree in psychology. He was previously a venture capital reporter at PitchBook Data, and his work can be seen on Seeking Alpha, The Motley Fool, and Yahoo! Finance.
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