Is Reading Really Open for business?

By Brad Rhen
Reading Eagle, Pa.

WWR Article Summary (tl;dr) A recent study by the personal-finance website WalletHub, scored Reading, Pennsylvania as 742 out of 1,261 in its ranking of best small cities in America to start a business. Despite the lackluster ranking two new small business owners say their experiences with Reading have been positive so far.

Reading Eagle, Pa.

Jessica Weixler could have chosen any number of places to start her business, Wild Sage Coffee and Kitchen. She could have set up shop in her hometown, Bernville. Or perhaps a trendy spot such as West Reading. Or a suburban shopping hub in Spring Township.

Instead, she chose 731 Washington St.

“I think there’s an emerging market here of young people who are moving into the city,” she said. “There seems to be a lot of people who have also been in the city for a while and are looking to build the community that’s here, and kind of change the vibe of what’s happening here.”

Once she settled on Reading, she found city officials easy to work with and an abundance of available spaces and job applicants.

Overall, she said her experience opening a business in Reading was “very positive.”

Weixler’s experience seems at odds with a recent study by the personal-finance website WalletHub, which scored Reading 742 out of 1,261 in its ranking of best small cities in America to start a business. The sub middle-of-the-pack ranking could be worse: Suisun City, Calif., finished last at 1,261.

Reading’s rank, however, may not be as poor as it seems at first blush. Local business leaders note that it was dragged down by the state’s corporate income tax, something the city can do nothing about. And entrepreneurs, like Weixler, say the city is an attractive location because it’s cheaper.

“I think it’s a great place,” said Chris Flowers, a Reading High School grad whose Reading Distilling Guild, will open soon.

What they looked at
WalletHub’s analysts compared 1,261 cities with populations of 25,000 to 100,000 in 16 categories, such as average growth in number of small businesses, number of startups per 100,000 residents, financing accessibility, workforce educational attainment and labor costs.

WalletHub applied data from sources that included the U.S. Census Bureau, the Bureau of Labor Statistics, the Federal Deposit Insurance Corporation, Yelp, U.S. News and World Report, the Tax Foundation and LoopNet.

The comparisons were grouped into three categories: business environment, access to resources and business costs, and each city was given a total score.

Holland, Mich., topped the list with a total score of 50.22: 619 for the business environment category, 71 in access to resources and 38 for business costs.

Suisun City had a total score of 26.21 and was 1,261 in business environment, 1,083 in access to resources and 861 in business costs.

Reading ranked 974 in business environment, 761 in access to resources and 411 for business costs for a total score of 37.94.

Reading was sixth of 17 Pennsylvania cities on the list. Lancaster was tops at 475, and Lebanon lowest at 1229.

WalletHub analyst Jill Gonzalez said Reading’s overall rank was bogged down by several low scores. For example, she said, the city ranked 1,102 in the number of startups, with only 75.61 startups per 100,000 residents, and 1,236 in workforce educational attainment, with only 9.2 percent of the population possessing at least a bachelor’s degree.

Reading’s highest rank was for labor costs — measured by median annual household income — in which it came in 12th best at $26,784.

“Reading is reasonably affordable from a business owner’s point of view, but recruiting well-educated talent might be an issue as your workforce grows,” Gonzalez said. “Local authorities should create programs that provide incentives for new business owners looking to set up shop in Reading.”

More to story?
Ernie Post, director of the Kutztown University Small Business Development Center, said the study’s methodology appeared to be sound. However, he said, it didn’t take into account Reading’s culture, which can’t really be measured for a study like this.

“But I think that would put Reading much higher in terms of being a good place to start a business,” he said. “When you look around, we have a lot of successful women, minority and other entrepreneurs in the tech sector that have started business here and grown it. When you look at some of the research in entrepreneurship, you’re much more likely to start a business if you have family and friends that support the entrepreneur in their quest to start that business.”

In addition, Post said, there are some things in the study Reading has no control over, including the corporate tax rate, which is set by the state. Because of that, Reading, and every other city in Pennsylvania, ranks 1,050 in that category.

Post said the corporate tax rate is probably not that big of a factor in the mind of an entrepreneur, because most entrepreneurs are forming limited liability corporations under a tax structure at the personal tax rate.

“So I don’t know that that’s a valid methodology,” he said. “I understand why it’s in there, but I think it puts all of Pennsylvania communities at a disadvantage.”

Generally speaking, Reading is a good place to start a business, Post said, citing the abundance of lower cost rents, and user friendliness at City Hall as positive factors for people looking to start a new business.

“The entrepreneur who wants to start a business can go in and meet with the zoning officer, the codes officer and get the information that they need to make an informed decision about a piece of property before they sign a lease,” he said.

We reached out to Greater Reading Chamber and Economic Development Corp. President and CEO Randy Peers for comment on the survey, but he declined.

‘Really good start’
Weixler opened Wild Sage on April 5, offering coffee and tea as well as small breakfast and lunch menus. Many of the menu items contain ingredients that are locally sourced or organic.

She bought the building the once housed a doctor’s office in May 2016, and completed extensive renovations. She never ran a business before, and cited the ease with which she worked with city officials as one of the positives she experienced.

“I was new to the whole renovation thing, and they kind of held my hand through the process and answered questions that I had,” she said. “They really helped a lot.”

Kutztown’s Small Business Development Center also helped by doing market research for her.

“Those two organizations, specifically, were really great,” Weixler said. “Just in general, the community of people who are here, there’s been a lot of support.”

Wild Sage has five employees, and Weixler said it was not difficult to find applicants. Most of them live within walking distance of the shop, she said.

“I had so many applicants, it was overwhelming,” she said.

Overall, Weixler said, things have gone very well since she opened, and she has received a great response. Despite what the WalletHub study says, Weixler believes Reading is a good place to start a business.

“A lot of people close by have been walking to us, which is great, but we’ve also gotten people from outside area coming in as well,” she said. “The positive feedback has been way better than what I had hoped for. For a new business, we had a really good start.”

Coming home
Chris Flowers says Reading is a good city in which to start a business. Flowers has lived in a half-dozen cities across the nation since graduating from Reading High School in 1994, including Pittsburgh, New Orleans and Las Vegas.

He moved back specifically to start a business.

Flowers’ Reading Distilling Guild, will be the first craft distillery in Reading. He recently passed his final inspection and planned to start his first batch of spirits last week.

“One of the best things is it’s overlooked,” he said. “People want to start businesses in the area, and they look to the suburbs to do that. One, they’re more expensive, and two, you’re going to get just as much traffic in downtown Reading as you will in those other areas as long as you build a business that people want to come to.”

Other than some questions about how to go about licensing a distillery — since the city had none — city officials were easy to work with, he said.

“I was the first,” he said. “They never dealt with a distillery before. Saying that, though, they were very helpful. The zoning office, we worked together to figure out how to get it done, and they did everything they could to help me throughout the process.”

About the only problem, Flowers said, was finding a suitable location. There were plenty of available spaces, he said, but many would have required a lot of work to get up to code, and some had rents that were way to high.

“There’s not too many regulations on the building for distilling, but a lot of the places that I found, the structure of the building you would have to remodel if not completely gut and put in new wiring and plumbing, so that was one of the problems I ran into,” he said.

Flowers settled on a location at 127 Madison Ave., a narrow street between Fourth and Fifth streets.

“I’m from the city,” he said. I grew up there, went to high school there, and I look at other businesses that aren’t in the city for some reason and won’t come to the city, and I don’t see the reasons why. I feel the city is a vibrant place.

“There’s a lot of myths about the city that I don’t believe are true.”

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