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Best Places for New Small Businesses

New entrepreneurs in certain places may have a better shot at success than others. LendingTree researchers analyzed metro areas across the U.S. to determine the places with the most favorable conditions for new small businesses. Each area’s rate of new, small and profitable firms determined its ranking in our study.

Key findings

  • Seattle took the top spot as the best metro area for new small businesses. Seattle’s significant portion of businesses making a profit is particularly impressive – nearly 71% of firms.
  • Denver also has a high rate of firms making a profit, earning the area second place. Additionally, Denver has some of the youngest businesses in the country — nearly 36% of businesses in the area have been open less than six years.
  • Florida cities take three of the top 10 places: Tampa, Miami and Orlando (the state’s fourth city, Jacksonville is only just outside at No. 11). Along with No. 1 Seattle, Portland, Ore., represents the Pacific Northwest in the No. 5 spot.
  • At the bottom of the list, Memphis, Tenn., has a small pool of startups. About 28% of businesses have been operating for less than six years, one of the lower rates in the study. Bigger firms tend to dominate the Memphis business scene, as about 44% of firms take in more than $1 million in revenue and more than 10% of businesses employ at least 250 people. In an environment where large firms dominate, it may be difficult for new businesses to gain traction.
  • The Rust Belt as a whole did not fare well in our study: Pittsburgh, Cleveland, Cincinnati and Buffalo, N.Y., all placed in the bottom 15.

Top metro areas for new small businesses

1. Seattle

Our No. 1 city boasts a large number of profitable businesses and small firms. More than 95% of businesses in Seattle have fewer than 250 employees and about 70% earn less than $1 million in revenue. About a third of all companies have been open for less than six years. About 71% of all businesses in Seattle are profitable.

Seattle’s Office of Economic Development offers a list of resources for startups in the city, including coworking spaces, accelerator and incubator programs, meetups and investing groups. Seattle also hosts several major events for startups, held by organizations such as Techstars and Geekwire (the latter also provides services to technology communities in the Pacific Northwest and provides news for those communities around the world). The Seattle area, home to tech giants like Microsoft and Amazon, is a hotbed of tech-driven entrepreneurs.

2. Denver

Denver follows close behind Seattle with many small and profitable businesses. Nearly 95% of all firms have fewer than 250 employees and almost 36% of businesses are less than six years old. About 71% of all companies in the area are profitable and around 70% generate less than $1 million in revenue.

Denver’s fastest-growing sectors include tech, energy and health care, although aerospace, broadcast and telecommunications, financial services, biosciences and IT software are also major industries in the area. Local entrepreneurs can showcase their work and network with others at Denver Startup Week; this year’s edition is happening Sept. 14-18, 2020.

3. Tampa

Tampa ranks No. 3 with similar scores as the top two cities. About 35% of businesses in Tampa are less than six years old, and 74% of all companies bring in less than $1 million in revenue. Nearly 96% of all firms employ fewer than 250 people. Of all companies in Tampa, almost 65% are profitable.

Many resources exist for new business owners, including the Entrepreneur Collaborative Center operated through the Hillsborough County Economic Development Department. Tampa Bay Wave, another entrepreneurial hub, acts as an accelerator, coworking space and general community for nearby startups.

Methodology

In order to rank the best metro areas for new small businesses, researchers looked at several data points for 50 metro areas:

  • Business profitability rate. The percentage of firms that earned a profit.
  • New business rate. The percentage of businesses that are younger than six years old.
  • Income: Percentage of businesses with less than $1 million in revenue.
  • Size: Percentage of businesses with fewer than 250 employees.

To compile the overall list, researchers first ranked individual metros in each metric. Researchers then found each metro area’s average ranking, giving equal weight to each metric. The metro areas were assigned a score based on the average ranking. The metro area with the best average ranking received a 100 while the metro area with the worst average score received a zero. Data for all metrics comes from the Census Bureau.

 

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