Why business owners are setting up shop in Michigan
Why business owners are setting up shop in Michigan
After five years in Colorado, John and Emily Petrovich, both 31, said goodbye to the mountains and relocated their digital marketing business to Traverse City, Michigan.
The Petrovichs run their business out of their home, and in 2014—two years after they relocated—they bought a 2100-square-foot home on 1.5 acres, 22 miles outside of the city, for $145,000. A similar house in their old neighborhood in Colorado could have sold for as much as $300,000, Emily said. As for the business environment, the couple has been able to generate work strictly through word-of-mouth marketing.
The Petrovichs are part of a trend of business owners who are deciding to launch or re-launch their companies in Michigan. Once known primarily for its bankrupt auto industry, which has since rebounded, the state’s business climate has changed radically in the past few years. Now, it’s attracting a host of new companies, and many existing companies are expanding. Since 2010, roughly 400,000 new jobs have been created from these businesses, according to the Bureau of Labor Statistics. “I have been in the advocacy business for 30 years and I can’t see a single state that’s made the kind of turnaround that Michigan has made,” says Rob Fowler, president and CEO of the Small Business Association of Michigan.
Governor Rick Snyder, who was elected in 2010, made lowering the cost of doing business in the state a priority. An effort he led through the Office of Regulatory Reform eliminated nearly 2,000 regulations that many businesses found restrictive. In 2011, the legislature repealed the Michigan Business Tax — a provision that had forced business owners to pay taxes on their profits twice, once as an owner and again as an individual. And in 2014, Gov. Snyder axed the Personal Property Tax, which taxed manufacturers based on the value of their machinery. “That’s a huge benefit to our manufacturers in installing new equipment,” says MEDC CEO Steve Arwood, whom Gov. Snyder appointed as director of the Michigan Department of Licensing and Regulatory Affairs.
Milan P. Gandhi, vice president of Med-Share, a mobile diagnostic imaging company headquartered in Southfield, says Michigan provides “an ecosystem you don’t find elsewhere.” Gandhi’s father founded the business in Michigan in 1981. He’s projecting 100 percent growth within the next five years, due in part to a new facility opening in 2016. Gandhi has kept his business in Michigan partly because of a predictable regulatory environment as well as access to a talented and highly skilled workforce from major universities. A reasonable cost of living, including housing that’s far less than other metropolitan areas, is another selling point, he says. According to the National Association of Realtors, the median single-family home price in Grand Rapids during the fourth quarter of 2014 was $136,900, versus $314,000 in Denver and $411,800 in the New York-Nassau-Suffolk metro area.
Joanna Parzakonis and her husband chose to move from Brooklyn, New York to Kalamazoo to launch Bookbug, an independent bookstore, in 2008. She says the supportive environment of the town has allowed the bookstore to grow exponentially. It expanded into an adjacent building in 2011 and has experienced 20-percent annual growth since. “The capital required to maintain and sustain a business in Michigan is far less than other cultural centers,” she says. Parzakonis has lived in Chicago, Washington, D.C., and Brooklyn, and she says Kalamazoo has a distinct sense of community. “The main difference for me versus every other place I’ve lived is that people feel a connection and commitment to each other here,” she says.
The auto industry still dominates in Michigan. The state’s motor vehicle production was up 124 percent in 2015 compared to 2009. The manufacturing sector is the leading employer, with health care and social assistance close behind.
There’s also plenty to do after business hours. Bradley Matson, a Traverse City native, moved back from Arizona with his wife in 2013 to launch a mobile app development firm. “Our office is right on Boardman River, where we keep our boat, so we can hop right on it and be out enjoying Grand Traverse Bay within minutes,” he says. Michigan has more than 36,000 miles of streams, more than 11,000 lakes and ponds, and the largest freshwater coastline in the United States. Last year, Michigan hosted nearly 32 million out-of-state and international visitors.
The revitalization of Michigan’s largest city, Detroit, is altering perceptions of the state among entrepreneurs. Detroit is becoming more appealing to young people and retaining graduates who once flocked to other vibrant cities. According to a 2013 Regional Chamber/MEDC report, 63 percent of recent college graduates remained in the state, a 12-percent increase over a comparable group in 2007. Much of Detroit’s rejuvenation has been fueled by Rock Ventures, the umbrella entity for Quicken Loans founder Dan Gilbert’s diverse portfolio of business and real estate investments. Since moving the family of companies to downtown Detroit in 2010, Rock Ventures has invested more than $1.7 billion in the city.