Doing (Small) Business in Portland
Keep Portland Weird. It’s a motto that has led to some affectionate, and some less affectionate, mockery of the Northwest’s destination for quirk. But, for all those smirks and chuckles made at the expense of Portland, Oregon’s dedication to the different, that dedication goes more than skin deep. Sure, Portland is weird, but it’s weird in all the right ways. Nowhere is this more apparent than in the Portland small business community, helping to make the city an oasis of innovation. With more than 60,000 small businesses in Portland, it’s hard to say it better than Portland resident Douglas Wolk did in his recent piece for Slate.com.
Every joke you can make about Portland—from its obsession with artisanal coffee and its ludicrous weekend-brunch lines to its touchy-feely local government and preponderance of Etsy stores—is basically true. ‘Portlandia,’ in fact, is a documentary. But the same quirks that open up Portland to ridicule have made it something of a haven for small businesses—a city where an odd little company can thrive for decades.
Small business—when it truly succeeds—is necessarily a reflection of its city or neighborhood. The Portland ethos of making and buying local has created an environment in which the different, the hyper-local, and the sustainable are valued to the extent that to be otherwise can be a barrier to success in the local business economy. The Portland Buy Local movement describes the local business climate as one of unity and mutual support: “Portland is a city of neighborhoods. Where we shop, where we eat and hang out—all of it makes our neighborhood home. … One-of-a-kind, independent businesses are an integral part of what makes Portland a great place to live.”
With a robust transportation infrastructure and over 100 neighborhood and business associations dedicated to fostering small business and supporting local, there isn’t a neighborhood in Portland that doesn’t have its own brand of #LoveLocal.
Portland Small Business
Of course, another contributor to the growth of Portland small business are Portlanders themselves. According to a Business News Daily report on the State of Small Business in Oregon, “incomes rose by 4.3 percent on average from 2014 through 2015 alone; the average Oregonian brought in about $42,974 last year, which was about 90 percent of the national average.” Many of these higher-paying jobs, the increased growth, and local spending have led to a very congenial small business climate.
Local Business Challenges in Portland
However, Portland small business is not without its challenges. Perhaps the three biggest challenges in recent years have been for filling hiring vacancies, the increased cost of commercial real estate, and taxes.
According to a report by the Oregon Small Business Association, more than 65 percent of employers in the state of Oregon have reported challenges with filling vacancies. It’s a familiar refrain for small business owners everywhere: it’s just hard to find good employees, especially those who will stay.
With the growth of the economy in Oregon—much of it in Portland—corporations with headquarters or offices in Portland such as Airbnb, Intel, and Nike have been quick to acquire much of the talent pool, leaving a dearth of potential hires for small and medium-size businesses.
The problem is especially acute for restaurants, aggravated by the fact that the system of tipping results in a “staggering wage imbalance, where servers and other front-of-the-house workers often far out-earn chefs and sous chefs, many of whom have spent years in training.” According to the Portland Business Journal, a “thriving restaurant scene is woven into Portland’s fabric,” and the city’s foodie culture is no less “weird” than its other subcultures. “Diners embrace experimental cuisine and demand sustainable and local ingredients. Portlanders subscribed to farm-to-table long before it became a national phenomenon.” Despite an enthusiastic clientele, several Portland restaurants have had to close locations, some, like Big Ass Sandwiches, permanently or temporarily. Last year, Bollywood Theater closed both its locations for two days because there weren’t enough workers. Owner Troy MacLarty expects to have to do the same this year.
Restaurant owners “have long believed that tip sharing would be an effective way to address the wage imbalance between front-of-the-house and back-of-the-house staff”; unfortunately, tip sharing is banned in Oregon. Some local restaurants tried no-tipping policies, which were a complete disaster for some restaurants, a band-aid for others. Portland restaurants have been trying out some other tweaks, from expanding menus to order-and-pay models, which speed up turnover.
Portland Commercial Real Estate
Alongside the challenge of filling vacancies, many Portland small business owners have become increasingly concerned by the continuing hike in the price of commercial real estate, not only its effect on the ability to start new business ventures but also the affordability of renting commercial space. (Residential rents continue to climb as well, adding to the difficulty in finding employees.) With the increased growth of the Portland population—during just 2014, 40,621 new residents moved to Portland and government projections suggesting the trend will continue—the competition for real estate space is getting tighter and tighter. As leases signed in the relatively-cheaper heyday of the 2000’s come up for renewal, rent increases starting at a minimum of 15 percent are becoming the norm. In many other states, this cost might be diffused by increased sales, but, in Oregon, businesses face a higher tax rate than their counterparts in other metropolitan areas.
Oregon Income Tax
For a visitor to Oregon, of whom there are many, and who bring in more than $10.8 billion in tourism, being a customer is great because there’s no sales tax. Portland small business, however, pays taxes in the form of an unusually high state income tax. The tax man takes 6.6 percent of corporate income from small businesses that make under $10 million dollars per year (so pretty much all of ‘em). On the one hand, this is a substantial amount of money for a small business already operating within a narrow profit margin. On the other hand, it can relieve local business from the burden of collecting sales tax, which increases the complexity of bookkeeping. Still, love it or hate it, it’s a high cost for doing business in Portland.
Portland Minimum Wage
Like a number of other states this year, Oregon passed a bill to raise the minimum wage—and inside Portland’s urban growth boundary, it’ll be the highest in the nation, at $14.75, by 2022. One consideration was the fact that the average Oregonian employee earning the minimum wage is a 35-year-old woman, according to a report from the University of Oregon’s Labor Education and Research Center.
Reception has been mixed, with the state almost evenly split between proponents and critics of a minimum wage hike. For small businesses, the question can be more nuanced and personal. Business owners may support a minimum wage hike for the good of their employees while being seriously concerned about how such a policy would affect their ability to stay in business.
“When wages go up, prices have to go up. There’s no margin to absorb that cost,” argued Jessie Burke, owner of Portland small business Posies Bakery & Cafe, in The Guardian in March 2016. Still, if commercial districts, employees and the Portland community share the burden, she says she’s “thrilled to see my staff receive higher wages.”
Katrina Scotto di Carlo, a member of Supportland, a rewards-sharing network of local indie businesses, noted, “Small businesses generally lack the resources to protect themselves through [an incremental wage increase].” Like local businesses everywhere, Portland small business owners are concerned that their neighboring big companies are big enough to adapt while local businesses, which, in aggregate, employ more people and contribute more to the local economy, won’t be able to adjust to a significant wage increase.
Portland Pot Tax
The minimum wage increase is old news, however, compared to the possibility of a 3 percent tax on recreational marijuana sales in Portland. The City Council votes July 20, 2016, on the proposal. According to its creator, Commissioner Amanda Fritz, the tax would “yield around $3 million per year” and be used to fund addiction treatment and education programs, investments in public safety…and small business support. Fritz has suggested that such support would “focus especially on women- and minority-owned businesses, but could also include funds for job training opportunities or business incubators.”
The Oregon Legislature voted last year to cut the state tax on recreational marijuana from 25 percent to 17 percent, so even if Fritz’s proposal passes, there will still be an overall reduction in marijuana taxes.
Portland Small Business Opportunities
Although the city is home to a burgeoning tech and freelance community, Portland continues to be a popular location for those of independent and perhaps whimsical spirit. The influx of those people means more local business opportunities—and locals are working to that true for a greater diversity of entrepreneurs. Stephen Green, an economist and small business owner, has organized Pitch Black, an annual event at which seven African-American entrepreneurs pitch their business ideas in front of a live audience. That audience will then vote to determine three winners, who will share the proceeds from the event. This year’s Pitch Black will happen later this summer.
Green was inspired to host the event after talking with Mark Grimes, of Nedspace, who hosted a similar benefit for women entrepreneurs. The idea is to create more visibility for women, minority, and LGBTQ-owned business. Grimes hosted an LGBTQ pitch event in September 2015. Green has also expressed interest in “doing a Latino pitch event.”
What will continue to differentiate and drive local business in Portland, Oregon, are the communities of local residents and fellow business owners that are part and parcel of the buy local movement. If Portland is to avoid the pitfalls of larger cities like New York City and San Francisco, where cost of living and rising real estate prices are forcing many small business to shutter, Portland will have to hold to the Local First ethos, which according to Michelle Long, executive director of the Business Alliance for Local Living Economies (BALLE):
“Local First … remind[s] us that our purchases impact other human beings. That there is the possibility of a relationship and real care in our exchanges. If policymakers are serious about fostering an economy that works for more people, they can’t forget that ‘middle class economics’ starts on Main Street with local independent business.”
Resources for Portland Small Business
City of Portland Development Services, information for local businesses
Craft3, a local Community Development Financial Institution providing loans for businesses and communities
Mercy Corps Northwest, small business financing and education
Oregon Entrepreneurs Network, networking and training
Portland Area Business Association, serving the local LGBTQ business community
Portland Development Commission, business finance programs
Portland SCORE, counseling and workshops from experienced business-owner volunteers
Supportland, an online marketplace and rewards-sharing network for local businesses