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Hot Cities 2006

South

With lower housing prices and cheaper labor, many areas of the South are drawing entrepreneurs. But the region's success in attracting and growing businesses is mostly concentrated in a few "hot spots," notes Randall Jackson, director of the Regional Research Institute at West Virginia University.

Case in point: Charlotte, North Carolina, which has ranked second two years running. Local chamber officials cite a steady immigration of young, educated workers and a large, business-friendly banking community as prime factors for the city's success.

Among Southern states, some are booming while others languish. Examining state gross product in the Southern states excluding Texas from 2001 to 2005, Jackson says Virginia--the study's second-highest-ranked state--and eighth-ranked Tennessee saw output grow 24.9 per-cent and 35.3 percent faster than the national rate, respectively. Alabama (3rd) and Arkansas (33rd) also outpaced the nation, by 17.9 percent and 21.7 percent, respectively. But most other Southern states are seeing output grow more slowly than the national rate of 12.2 percent.

With most Florida cities moving down the rankings, the state is clearly still struggling to overcome the effects of the recent hurricanes that caused widespread damage. The hard-hit Fort Myers-Cape Coral area, for instance, sank from 34th in 2005--before most hurricane impacts had been tallied--to 48th this year.

Jackson says the South's overall strong showing is the payoff from decades of migration of businesses and people to lower-cost Southern towns. As more business owners gained experience with the South's favorable working conditions, word spread. The region has gradually banished its past negative reputation as a racially tense area populated primarily by unskilled workers.

Some Southern cities have also become more aggressive in actively courting growing businesses in recent years. For instance, in Shelby County, Tennessee, home of seventh-ranked city Memphis, county mayor AC Wharton Jr. recently approved a program to offer cash-strapped small businesses legal and accounting help at county expense if they need assistance completing the required paperwork to qualify for government contracts. "The key is the signal it sends that in the government sector, we are serious about doing business with small business," Wharton says.

The South's rising star is Texas. With its economy firing on all cylinders, the state jumped from 17th in 2005 to 11th in this year's rankings. Where once oil prices could cause boom and bust, the economy is now well-diversified and strong in international exports, technology, financial services, and wholesale and retail trade, says Dallas Federal Reserve Bank economist Fiona Sigalla. At the moment, of course, with gas prices high, it's boom time in the oil industry, too. The rig count in the state recently hit 750, a level Sigalla says hasn't been seen there since the mid-1980s.

Other Texas advantages: lots of available land for building, a population growth rate nearly double the nation's, a relatively low cost of living and scant regulation. Texas also has no state income tax, which Sigalla says appeals to entrepreneurs who are worried about their personal tax bills.

It's Got the Beat
Jonathan Epstein, 37, has a wide-angle view of thriving Memphis. The city native is co-founder of Running Pony Productions, a 12-year-old video production company that's grown to more than $1 million in annual sales.

Tourism is booming here, thanks to renewed interest in Memphis' key role in American music history. Running Pony counts Elvis Presley Enterprises and Graceland as major clients.

Epstein describes the business climate as "regulation-light and easy to navigate." With big-city salaries and a median home price of about $140,000, quality of life here can't be beat. "I've been thrilled to be able to stay home, build a business and do exactly what I love," he says.

The city is a major national distribution hub that boasts headquarters for AutoZone, FedEx and ServiceMaster. And International Paper just moved to town. There's ample opportunity here for growing businesses to work with the big boys, says Epstein.

The author is an Entrepreneur contributor. The opinions expressed are those of the writer.

Carol Tice, a freelance writer, is chief executive of TiceWrites Inc. in Bainbridge Island, Wash. She blogs about freelance writing at Make a Living Writing. Email her at carol@caroltice.com.

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This article was originally published in the September 2006 print edition of Entrepreneur with the headline: The Right Spot.

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