332: Why business-friendly areas don’t always present the best opportunities

There’s a common misconception that there are bad places to launch your business. People constantly talk about business-friendly and business-unfriendly areas, and how you only want to operate in the former. The truth, in my eyes, is that there is no bad place in America to be in the home services business. Whether you’re building, cleaning, maintaining, or providing any other service, there is a shortage of people willing to do this work and do it well. There is no bad location.

My company does business across the Southeast, Northeast, Rust Belt, and Midwest. We hear often that operating in a business-friendly state is an advantage because you’ll come across low regulations, a lot of affordable labor, and a pro-development government. But I still think there’s no better place to make money than a difficult business environment–there’s opportunity in those high-friction areas. Because all the reasons that people don’t want to do business in an area are all the reasons you should want to operate there.

Speaking from experience, it’s much harder to find a contractor to do work in our facility in Ithaca, NY than in Asheville, NC. But that can be your moat! If you’re a great hirer or sourcer, a tough labor market accentuates your competitive edge. This will make it that much harder for competitors to launch or operate in the same location.

As people move south, there are a ton of workers and business-friendly governments. It’s easy to do business, which looks like a tremendous opportunity. But that also means there’s more competition with fewer barriers to entry, you’ll have a harder time competing for the market.

People say they won’t want to do business in expensive cities because the labor market is expensive and it’s hard to find good workers. But that means it’s hard for everybody. There are people to work, and it’s your job to find them and bust your ass and treat them well.

Expensive cities, hard markets, have a people problem. Establishing a quality set of staff that you can afford will be harder than it is in a cheap city. But cheaper cities have a customer problem, you have great labor but are competing for a smaller market. There’s nuance and pros and cons to each, but don’t rule out the hard cities.

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I started the Sweaty Startup in December of 2018 because I believe the Shark Tank and Tech Crunch culture is ruining the real spirit of low-risk entrepreneurship.