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Ravell Call, Deseret News
Utah has ranked No. 1 in Forbes' list of best states for business three times in the past four years. Local experts say the state's growth is due to a business-friendly environment built over years of investment.

SALT LAKE CITY — As a young newlywed and beginning entrepreneur, Jason Fullmer's ambition was high. But moving to a new state and starting a business was a walk through unknown territory.

Now, three years later, doubts of choosing Utah as the right place to do business have all but vanished.

"We didn't expect to like Salt Lake City as much as we do, but the growth of the city has just been phenomenal," Fullmer said. "We love where we live. There's a value that we can get here for far less than major metropolitan areas, like New York City or San Francisco."

More entrepreneurs like Fullmer are choosing to come to the Beehive State, which has now topped the ranks on Forbes' list of best states for business three times in the past four years. The rating is based on six main areas — business cost, labor supply, regulatory environment, growth prospects and quality of life.

This year's report, released earlier this week and reported in the Deseret News, didn't rank Utah as the highest in any particular category, but it was the only state to score in the top 10 of all categories except one, ranking 16th in quality of life.

The report also cites energy costs 26 percent below the national average and an economy expanding by 2.4 percent each year for the past five years as further indications of a pro-business climate in the state.

Kimberly Henrie, deputy director and chief operating officer of the Utah Governor's Office of Economic Development, said the office's Economic Development Tax Increment Financing program is also a draw for large companies, offering a post-performance tax rebate of up to 30 percent of taxes paid over 20 years.

What's the secret to Utah's success? Startup businesses reveal some clues.

While Utah is not alone in drawing startup businesses, the longevity of new businesses' survival in the state is outpacing other business powerhouses like California, Arizona and New York. During the past 10 years, Utah's net growth in new businesses averaged 6.3 percent while the national average was 3.9 percent, according to the U.S. Census Bureau.

"It's not that we just create a lot of businesses and then a lot of businesses die, but many of them remain alive," said Michael Sullivan, spokesman for the Utah Governor's Office of Economic Development.

Entrepreneurial ecosystem

A foundational component of businesses success in the state has to do with an increasingly diverse and well-educated population. Add the fact that 130 different languages are spoken daily in commerce in Utah, and having several universities along the Wasatch Front makes for a qualified workforce, according to Gary Rhoads, Steven Mack Covey professor of marketing entrepreneurship at BYU.

"It's an entrepreneurial ecosystem. You've got a lot of universities in the same area putting out a lot of talented people," Rhoads said. "I think it has a lot to do with the culture in the area, the work ethic of the students. They tend to be bright, they tend to be more mature, they've been on missions. They're go-getters."

Sullivan said the Utah Legislature has examined more than 2,000 business regulations in the past two years and updated 385 that were either out of date or no longer necessary. Such actions have helped put the state in ninth place overall on Forbes' list for regulatory environments.

On a smaller scale, growth among startup businesses only facilitates additional growth, creating a support network for new entrepreneurs like Fullmer.

"Because (Utah) does have this environment of a lot of startups and entrepreneurs, the availability for help has been really impressive," he said. "From people that have just started to businesses that have hundreds of thousands or millions in revenue, there seems to be that camaraderie where, 'We've been there; let's help you out.'"

Tech hub

Natalie Gochnour, associate dean of the David Eccles School of Business at the University of Utah, said Utah's quality of life has helped make the state a hub for large technology companies like Adobe, eBay and Google.

"We know that technology talent can locate anywhere. They typically choose places with a great quality of life," Gochnour said. "They like that we have a lot of engineers and a history of tech, but they love that they can mountain bike and ski and backpack. That's an attractive thing about our state."

In addition to recreational opportunities offered by the Wasatch Mountains, software and IT companies form about one-third of cluster industry development by the Governor's Office of Economic Development. Other clusters include financial services, life sciences, aerospace and defense, natural resources, and outdoor recreation.

State leaders are also seeking to bring all production elements of those clusters to the state to facilitate large companies that move to Utah or expand their operations here, according to Henrie.

"We're not only bringing in the companies themselves, we're looking up and down the supply chain and we're asking (those companies), 'What other businesses do we need to bring here to make this a conducive environment for you?'" she said.

Future growth

While government programs and existing market expansion contribute to business growth in the state, Gochnour says that most of the state's success as a host for businesses stems from strategic decisions that were made more than a decade ago.

"I don't think this growth is happening because we have an economic development engine that gives tax incentives. I think it's growing because we've managed our state so well for so long and invested in things that make us a more productive economy that it pays off and we're seeing that," she said. "I would say that things that were happening around the 2002 Olympic Winter Games are still paying dividends."

Economic growth boils down to investment and productivity, according to Gochnour. Investments can include physical capital, such as TRAX lines built by the Utah Transit Authority, or rebuilding I-15 in Salt Lake County near the turn of the century. Investments can also include human capital, such as an initiative several years back to graduate more engineers in the state, she said.

Another example of human investment is taking place at the University of Utah, which broke ground last month on the Lassonde Entrepreneur Institute, an unconventional student housing facility. U. president David Pershing described the project at a forum sponsored by the university's business school, the Deseret News and the Salt Lake Chamber this week.

The upper floors will house students while the ground floor, called "the garage," will be a dedicated area for first-generation college students to brainstorm ideas and create their own companies with help from the university, Pershing said.

"Part of our job at the University of Utah is to help grow the economy in the state," Pershing said in a panel discussion with the presidents of BYU-Idaho, Arizona State and Salt Lake Community College. "And we believe this kind of an activity is exactly what will help with our first-generation students."

While physical and human investments both contribute to the productivity Utah is now experiencing, Gochnour argues that education is the investment that brings the most sure and long-lasting returns, especially when it comes to bringing business to the state.

"I think there's a considerable amount of evidence that suggests we're underinvesting in education," she said. "There's a call to action here (now) that the Great Recession's over. We got through it in a big way. Now it's time to make the hard decisions that keep us prosperous over the long-term."

Email: mjacobsen@deseretnews.com, Twitter: MorganEJacobsen