Report says Nevada stellar for business

Kevin Rademacher

Wednesday, April 20, 2005 | 10:54 a.m.

Las Vegas is No. 14 on Inc. Magazine's new list of the top 25 places to do business in the United States. Reno grabbed the top spot on the list.

Robert Shriver, executive director of the Nevada Commission on Economic Development, was not surprised by the continued strong showing for Las Vegas, which slipped from No. 3 on the list a year ago.

"I think Las Vegas has always been in that top group," he said.

The news of Las Vegas' success comes as a steady stream of companies move into the valley from California, bringing with them new jobs as they escape rising costs and cumbersome regulatory requirements.

Online shoe retailer Zappos.com, which expects to do $300 million in 2005 sales, moved from San Francisco to Las Vegas a year ago, bringing with it 50 of the company's 80 employees. There are now about 200 employees at the company's Warm Springs Road headquarters. An additional 300 employees work at Zappos' Kentucky distribution center.

Chief Executive Tony Hsieh recently said Las Vegas has proven to be a good fit for Zappos. The company recognized the need to move from California in order to escape high costs for such necessities as office space and workers' compensation insurance.

Additionally, the company found a reliable breed of employees for its call center, a key element in that customer service mission.

"In San Francisco, it was viewed as a temporary job," he said. "Here, it's seen as a career."

Las Vegas was not the only location Zappos explored before settling on Southern Nevada.

"Las Vegas was not the cheapest, but we felt it was what would have made this the best possible move for our (San Francisco) employees," he said, adding that the quality of life was a major selling point.

Somer Hollingsworth, chief executive of the Nevada Development Authority, said the success of companies like Zappos creates momentum for Las Vegas.

"That's very important that the lifestyle here fits into that technology industry lifestyle," he said, adding that in many cases the recruitment of companies can be driven by word of mouth. "When word gets out that we've got a dot-com that left San Francisco for Las Vegas, that's good for us."

Zappos was founded in 1999 and had almost no sales in its early months. It jumped to $1.6 million in 2000 and began a torrid pattern of growth that saw subsequent years hit $8.6 million, $32 million and $70 million. Sales reached $184 million in 2004, and Hseih said the goal is $1 billion in sales by 2010.

Hsieh said Zappos could have 1,000 employees nationwide by the end of the year, including local employment levels of 300 to 400.

The movement of companies like Zappos out of expensive cities like San Francisco came as no surprise to Joel Kotkin, author of the Inc. article.

"So much attention has been paid to companies offshoring jobs to China and India to keep costs low," he said. "But a seismic shift has also occurred domestically. More companies are homeshoring, seeking domestic suppliers in smaller cities in the (United States) that aren't burdened by the exorbitant taxes, housing prices, labor costs and regulatory hurdles seen in many larger cities."

The study pointed to the dramatic tumble of once "high-flying" cities, such as Austin, Texas, (now No. 152 on the Inc. list), San Francisco (No. 188), Boston (No. 203) and San Jose, Calif. (No. 254).

The study also pointed to the ability of the top cities on the new list to grow their own businesses. That's a fact that can get overlooked as the recruitment of new businesses from outside the state grab headlines, Shriver said.

"I think the lure of say a tech company or a marquee company is a solidification that what you are doing is right," he said. "But the real success is small business."

Scott Acton, is the owner of Trevi Manufacturing. The 5-year-old company has 49 employees and makes sculptured pieces for gaming companies and home builders and home owners. He said he expected Las Vegas to be ranked higher.

"It surprises me that it's so low," he said. "My business is tied to the casino market and the housing market. It's been a fantastic five years."

Those years, however, have not been without hurdles.

"It's definitely challenging," Acton said. "Every politician says they're all about small businesses, but when you open a business we're going to look under every rock and make you jump through every fire hoop."

A significant challenge Acton faced was negotiating the sales tax structure.

"It takes a lot of research and an incredible amount of dedication," he said.

Acton, however, emphasized that for an entrepreneur willing to do it right, Las Vegas is a solid choice.

"It's a great place," he said. "There's endless opportunities here."