A New Climate: The Best (And Worst) States For Channel-Minded Millennial Entrepreneurs

Devin Henderson, founder and CEO of DH Technologies, a fast-growing solution provider, lives in Maryland. But when he started his company in 2011 he chose Leesburg, Va., as the city in which to base it.

DH Technologies is located in a HUBZone (historically underutilized business zone) in Leesburg, a designation by the U.S. Small Business Administration that gives Henderson's company preferential access to federal procurement opportunities. And that's important for DH Technologies, which focuses on state and federal government IT work.

Henderson notes that many of the IT vendors and distributors that DH Technologies works with have offices on the Virginia side of the Washington D.C. area, forming a business ecosystem for the young solution provider. "It's a proximity thing," Henderson said, adding that doing business "just seems to be more fruitful on the Virginia side."

id
unit-1659132512259
type
Sponsored post

Take a look at CRN's interactive map for research details on each state.

And at 33, Henderson is a millennial, the up-and-coming generation that makes up a growing segment of IT industry workers, managers and entrepreneurs.

In April the U.S. Census Bureau put the number of millennials in the U.S. at 75.4 million, exceeding for the first time the 74.9 million baby boomers who have long made up the biggest part of the U.S. workforce – including owners and top executives at solution provider companies.

Exact definitions of the millennial generation differ, but generally include people born between 1980 and 2000. (The U.S. Census number includes people who were age 18 to 34 in 2015.) That means the youngest millennials are entering college and the oldest have been in the workforce for more than a dozen years. That means some are moving into management positions – or starting their own businesses.

That certainly includes millennials who work in the IT industry who are – or who are thinking about – starting their own solution provider businesses. With that in mind, CRN is focusing this year's Best States project on the millennial generation.

Each year for the last three years CRN researchers and editors have undertaken a detailed analysis of the business climate in all 50 states to offer readers guidance about which states offer solution providers more business opportunities, more innovation and growth potential, better pools of talented workers, lower costs, and less burdensome taxes and regulations.

For our 2016 analysis we've collected and analyzed many of the same data points as in prior years – making our findings just as valuable for solution provider owners and managers as before.

The criteria includes state-by-state data that's important for entrepreneurs starting a solution provider business, everything from the education and experience levels of the available workforce, to corporate income and sales tax rates, to state GDP growth rates and economic climates. Also important is the solution provider competitive saturation, a ranking based on the ratio of potential business customers in a state per solution provider.

Given the growing ranks of millennials in the IT workforce, however, we're putting a millennial spin on the Best States project. For this year's overall state rankings, we've included criteria that's specifically of interest to millennials who may be considering starting their own solution provider business – either right out of school or after paying their dues by working for an IT company or solution provider.

Some millennial factors are business-focused, including startup rates, venture capital availability, average tech industry wages and the number of tech businesses in each state.

We've also included demographic and quality-of-life factors such as data on apartment rents, access to public transportation and the cost of gasoline. We've even included the median age and associated ranking for each state, going with the idea that millennials like to be, well, where the millennials are.

Combining more traditional business and economic statistics with the millennial-specific data has led to some surprising results. Some states that ranked lower in prior years got a boost because they had more to offer millennials, such as a younger population, good public transportation and a more entrepreneurial startup culture.

Take California, whose rankings in earlier Best States analysis were pulled down by its high cost of living and taxes, moved up to No. 4 this year from No. 10 in 2015.

Consequently, some states whose rankings in prior years benefited from their limited taxes, low business and labor costs, and business-friendly regulatory environments didn't fair so well when millennial-specific criteria was added to the mix. Alabama, ranked No. 34 in 2015, dropped to No. 47 this year when its poor millennial factors ranking (No. 45) was added to the mix. Ditto for Iowa, which dropped to No. 41 from No. 29 last year.

Good scores in millennial criteria alone weren't enough to arrest the declining rankings of some states. Colorado, the No. 1 state in last year's analysis, was the top scorer in millennial criteria. But the Centennial State slide to No. 6 overall this year, given its increased cost of living and labor expenses and the large number of Colorado-based solution providers that pushed the state's competitive saturation score to a poor No. 40.

So which states are best for millennials looking to start a solution provider business?

Florida came out on top this year, thanks to its No. 1 ranking for its business-friendly taxes and regulatory environment (the state's corporate income tax is 5.5 percent), No. 2 ranking for innovation and growth (GDP growth was 3.5 percent in 2016, No. 7 among all 50 states), and an enviable No. 4 for its overall economy.

Utah, which has consistently been in the top three states in the CRN Best States analysis, ranked No. 2 this year, as has Virginia, which took the No. 3 spot this year.

Rounding out this year's top five Best States are California at No. 4 and North Carolina at No. 5.

As for the states that are not so attractive for starting a solution provider business, the states at the bottom of the 2016 ranking are Nevada at No. 46, Alabama at No. 47, Wyoming at No. 48, Rhode Island at No. 49 and West Virginia at No. 50

An interactive map with more research details on each state is available, as is a "Worst to First" slide show with all 50 states in their ranked order.

Given this year's focus on millennials, it might surprise many that Florida, with its large number of aging retirees, would top this year's Best States analysis. (Indeed, the Sunshine State's median age of 42 ranks it No. 46 among all 50 states.)

Florida, however, ranked No. 9 for 2015 startup activity (350 per 100,000 adults). With 30,168 technology businesses, it's third behind only California and Texas and the state ranks No. 4 for tech industry employment. And the state has no personal income tax.

Florida certainly isn't millennial paradise, by some measures. It's in the middle of the pack for personal cost of living (No. 24) and quality of life (No. 26). And a two-bedroom apartment costs $1,400 per month – ranked No. 40 (with No. 50 the most expensive).

And for entrepreneurs, the state's solution provider saturation ranking of No. 38 means that competition for a startup solution provider would be tough.

Ryan Clarke, co-founder and CEO of IT professional services company SiteReady, touts the advantages of Tampa where the company is based. "It's an up-and-coming city," he said, adding that it's easier for an entrepreneur "to make a splash" in Tampa.

SiteReady works with other IT service providers, serving as a general contractor and architect for designing workspaces around IT systems including telecommunications, wireless and audio-visual systems. Clarke helped start SiteReady as an operation within a bigger company he worked for, then bought it out as a separate company in 2014.

While the company is based in Florida, it does only a small percentage of its business within the state: Many of its customers are in major cities – and even technology hubs – like San Francisco, Boston and New York. Much of the work is managed remotely with some employees on site overseeing local contractors.

Clarke, 30, was born and raised in Florida. He cites local business organizations like the Tampa Hillsborough Economic Development Corp. that works to attract new businesses to the Tampa Bay area and mentors startups like his. "That's been important to me in helping to take my business to the next level," he said.

Clarke is also an investor in another Tampa startup, Site Tech Services, that provides IT and managed services to auto dealerships.

Clifton Steele, 33, is CEO and co-owner of Techtronics, a Deerfield Beach, Fla.-based solution provider that's focused on managed security and secure audio/visual systems. (Steele, who was originally from New England and moved to Florida for family reasons, was not among Techtronics' original founders.)

Techtronics provides IT services to customers across the country and throughout the Caribbean and in Central and South America. "I don't think there is any other [state where] it's so easy to develop an international business," he said.

Both Clarke and Steele said that while Florida has a large pool of potential labor, worker education and experience levels aren't high. (Florida ranked No. 25 in our analysis in workforce experience and education and No. 35 in the percent of adults 25 and up with a bachelor's degree.)

"We kind of have to grow our own talent," Clarke said. But he added that labor costs tend to be lower in his region than in other major cities: An experienced employee that would cost $130,000 or more in annual salary in some cities averages around $80,000 in the Tampa area.

And millennials who prize public transportation might be disappointed with Florida. "You kind of have to have a car here," Steele acknowledges.

In contrast to Florida, Utah has the youngest median age (31) of all states. That and other high scores in the Millennial criteria (including No. 13 for quality of life, low apartment rents and high venture capital awards) pushed its overall Millennial rating to No. 7. Combined with other favorable scores (No. 10 for innovation and growth, for example, and No. 6 for business opportunity) pushed Utah to No. 2 on this year's Best States ranking.

"We have a younger population. I think we have a very educated workforce [and] I think we have a state that's supportive of entrepreneurs. That makes for a very fertile ground for an entrepreneur," said Ryan Westwood, CEO of Simplus, a Provo, Utah-based solution provider that offers implementation, administration and development services around Salesforce.com's Quote-to-Cash cloud applications.