No major state has weathered the recession more successfully than Texas. So it’s logical that the best place to launch a new business would be a prominent Texas metropolitan area.
The nation’s top score for small-business vitality, according to a new Portfolio.com/bizjournals study, belongs to Austin, the state's capital and the center of a thriving metro with 1.7 million residents. A six-part formula was used to analyze the nation’s 100 largest metros, looking for the places that are most conducive to the creation and development of small businesses. (Click here to explore an interactive that breaks down the survey, or click here to download a pdf of the results.)
Austin emerges as the clear winner, based on its outstanding performances in three statistical categories of critical importance to entrepreneurs:
—Population: The Austin metro area added 270,000 people between 2003 and 2008, a gain of 19.5 percent. That was four times faster than the national population increase of 4.8 percent during the same five-year period.
—Employment: All 100 markets suffered job losses in the past year. But Austin softened the blow with impressive long-term growth, expanding its job base by 15.6 percent between 2004 and 2009. National employment actually dropped by 0.5 percent.
—Small-business growth: The number of small businesses in Austin shot up by 5.6 percent between 2006 and 2007, the latest period covered by official statistics. No other market came close to matching that pace. The typical metro experienced small-business growth of 1.4 percent.
The highest scores in the Portfolio.com/bizjournals study went to areas that have prosperous economies, are expanding rapidly, and are densely packed with small businesses. (A small business is defined for the survey as any private-sector employer with 99 or fewer employees.)
The six-part formula analyzed 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, and five-year rates for population and employment.
Baton Rouge, Louisiana, is second in this year’s rankings. It experienced a robust 2006-2007 increase of 3.9 percent in its number of small businesses, nearly tripling the national rate.
Last year’s top market for entrepreneurs, Raleigh, North Carolina, drops to third place this year. Its five-year population increase of 22.5 percent was the very best in the study group, but Raleigh couldn’t match Austin’s growth rates for jobs or small businesses.
Rounding out the national top five are Charleston, South Carolina, and Portland, Maine. The number of small businesses in Charleston grew by 4.3 percent in a single year. Portland had the nation’s strongest concentration of small businesses, 34.64 for every 1,000 residents.
The most promising region for entrepreneurs is the South, which is home to 12 of the 20 best metros for small businesses. The East and Midwest have three top-20 markets each, while the West has the other two.
The 100 metros in the Portfolio.com/bizjournals study group had a combined population of 199.1 million as of mid-2008, accounting for 65.5 percent of the national figure of 304.1 million. Those same metros contained a grand total of 4.99 million small businesses.
Last place in the small-business-vitality rankings again belongs to Detroit, which continues to pay the price for the decline of the domestic automotive industry. The Detroit area lost 298,000 jobs during the past five years—an employment decline of 16.3 percent, easily the worst in any metro. It also experienced short-term drops in population and the number of small businesses.
Joining Detroit in the bottom five, in descending order, are Youngstown, Dayton, and Toledo, Ohio, and Milwaukee.
This is the fifth time that Portfolio.com/bizjournals has rated the small-business vitality of America’s major markets—and Austin is the fifth different winner.
These were the results in prior years:
—Raleigh was No. 1 in the most recent rankings, which were released in February 2009. A fellow North Carolina metro, Charlotte, was just a step behind in second place. (The recession has since hit home in Charlotte, pushing it down to 31st place in the current standings.)
—Orlando topped the list that was published in July 2007. The runners-up were two other Florida markets that were hot at the time: No. 2 Bradenton-Sarasota and No. 3 Miami-Fort Lauderdale. (Miami is still a strong seventh today, but Bradenton has plummeted to 63rd place.)
—Miami-Fort Lauderdale finished first in January 2006, followed by two metros that were then attracting record numbers of tourists, Las Vegas and Orlando. (Markets that are heavily dependent on tourism don’t fare well in recessions. Orlando is 17th in the current rankings, and Las Vegas is 68th.)
—Portland, Maine, was the winner in bizjournals’ initial analysis of small-business vitality in January 2005, in large part because it had the nation’s heaviest concentration of small businesses back then, just as it does now. Miami-Fort Lauderdale and Jacksonville, Florida, were the runners-up. (Jacksonville is now 13th.)
Click here to explore an interactive that breaks down the survey, or click here to download a pdf of the results.