We’ve all heard a story of someone who came to this country with little more than a dollar in his or her pockets. Miraculously, this go-getter was able to parlay that dollar into a successful, thriving business through several instances of luck and savvy. Well, as a recent study shows, wherever that person put up shop probably had the most influence on how far his or her dollar went. In honor of small business week (June 17-21), CardHub released a list of the best and worst cities for small businesses based on the 30 most populous metropolitan areas in the US.
What did they find? Well, your chances of opening a coffee shop are the hottest in Denver, Boston and Minneapolis (#1-3, respectively). But you’re dreams of opening an ice cream parlor are most likely to freeze over in Detroit, Riverside and Sacramento (#30-28).
The study was based on the following ten factors to determine each city’s ranking in the top thirty: number of businesses with under 250 employees per capita, industry variety, net small business job growth, small business vitality, average number of hours worked, average monthly earnings for new hires, unemployment rate, average disposable income, cost of living and stress index ranking. With its broad range, the study’s findings seem fairly reliable, accounting for factors that favor both businesses and employees.
There seems to be some correlation between state and small business success. For instance, three of the cities in the top 10 (Houston # 6, San Antonio #7 and Dallas #8) also happen to be the three most populous cities in Texas. Likewise, three of the largest cities in California (Riverside # 29, Sacramento # 28 and San Diego # 26) rank in the bottom five. As the study pointed out, California has had a very hard time recovering from the Great Recession and Housing Crash, which both started about half a decade ago. Overzealous development coupled with very high state taxes seem to have conspired against the state, even though it boasts the highest GDP. On the other hand, Texas is notorious for limiting personal taxes, making investment and entrepreneurship more desirable in the Lone Star State.
The study also reported that the three fastest growing communities for small businesses were Phoenix (#23 overall), Denver (#1) and Riverside (#29). Denver makes perfect sense, since most employers in Colorado (97%) are businesses with 250 employees or less. Additionally, 90% of Denver’s chamber of commerce is made up of such businesses.
The real noodle scratcher is Riverside, which beats out only the former manufacturing behemoth that was Detroit on the list of shaky areas to join a burgeoning business. As the study explains, however, much of this could be explained by the large number of jobs lost in Riverside during the recession. Essentially, so many jobs were lost that many of them had to be refilled somehow, meaning the small business growth could be a misleading indicator of economic resurgence. Phoenix, also in the bottom ten, may be another example of entrepreneurial fool’s gold—perhaps a bit too appropriate for the Copper State.
It’s also important to remember that the economy will recover, even if it’s a slow going process, which has certainly been the case so far. The interest in small business even in this bad market is a good sign for the economy, as people start to peak their heads out of the sand. For the time being, though, your best bet to start your own business or work for a small employer begins with the top ten cities.
- San Francisco
- San Antonio
- Kansas City