Where in the U.S. are small businesses most likely to thrive? Writer G. Scott Thomas reported exclusively on the best cities in America for small business for The Business Journals earlier this year—and the findings may surprise you. Thomas’s article was based on a study conducted by The Business Journals.
First, Thomas says, the state that best weathered the recent recession was Texas. (I don’t know about you, but that was my first surprise.) And leading the way in Texas is its capital, Austin, long viewed by many as a thriving hub of culture, education and hipness. (The lowest in the rankings, by the way, was Modesto, CA.) The publications group used a six-part formula to rank the 102 major metropolitan areas in the U.S. for their small business vitality, or in other words, how well they do in helping to create and develop small business.
The study defined small business as any private sector employer with 99 or fewer employees. Using small business, employment and population statistics from the U.S. Census Bureau, U.S Bureau of Labor Statistics, TBJ used the six-part formula to analyze each metro’s number of small businesses per 1,000 residents, the one-year change in that concentration, one-year growth rates for small businesses and private-sector employment, an five-year rates for population and employment.
Top-ranked Austin was found to have 23.30 small businesses per 1,000 people and a one-year increase in private-sector job growth of 4.57%. Rounding out the top 10:
- Oklahoma City
- Denver
- Raleigh
- Salt Lake City
- Durham, N.C.
- Seattle
- Houston
- New York City
- San Jose
Read the entire list here.
As you would expect, the metro areas with the highest scores have prosperous economies, are expanding rapidly and are densely packed with small businesses. Thomas points out that Austin’s #1 ranking is no fluke: It has come in first for the last four consecutive years. The reasons? Consistent outstanding performance in the three categories most important to entrepreneurs:
- Small business growth
- Employment growth (during the 2007-2012 recession, no less!)
- Population growth (now 1.8 million)
And, he says, runner-up Oklahoma City has been booming for years and is often ranked #1 in broad measures of economic strength. Denver, Raleigh and Salt Lake City are all strong in population growth (8+ percent during the past five years) and private-sector employment (up 2+ percent in the last year). Regionally, the South and West lead in favorability toward entrepreneurs.
What can entrepreneurs and other cities learn from Austin, who’s obviously doing a lot right? The editor of the Austin Business Journal, Colin Pope, has some interesting things to say about why Austin is a small business superpower. While he acknowledges some expected factors like quality of life, strong workforce and low cost of doing business, Pope says there is a “matrix” in Austin, an unseen “network of networkers” that includes lawyers, accountants, business development experts, entrepreneurs, investors and all kinds of other professions who are willing and able to be your mentors, business partners, rainmaker or whatever else your business needs.
Pope stresses that the matrix isn’t an organized or formal thing but is just out there—all around, all the time, constantly working. There are lots of circles, he says, and business owners need only to find the entry points to plug in and navigate it. One outgrowth of the matrix is the annual RISE Austin event every May. Hundreds of professionals from entrepreneurs to social media mavens share their advice, success and horror stories at dozens of venues around the city–not surprisingly, all free of charge to the thousands who show up.
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