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20 Best Cities For Small Business

Our annual ranking of the nation's top entrepreneurial spots

We have to contradict Dr. Seuss. However, in the case of small business, we believe it's not just the places you'll go, but the place where you start, that adds spice to the journey. Therefore, it's become our annual mission to determine which cities in America best provide small businesses with springboards to success.

Tapping into many different resources, and drawing on the abilities of Dun & Bradstreet (D&B) to tie everything together, our fourth annual ranking reveals several surprises, as well as some of the usual suspects. For example, while some of this year's top cities (or, more accurately, Metropolitan Statistical Areas) are already well-established veterans of our list, others are first-timers. And, sadly enough, a few stars from years past seem to have fallen from the list.

Whatever their history, this year's top cities were scored in five categories: government attitude toward business (taking into consideration corporate tax rates and the 1997 State Development Report Card Ratings by The Corporation for Enterprise Development), business performance (company failure rates and payment delinquencies), economic growth (employment growth and growth in the average wage per job), risk (the chances of business failure over the next 18 months, according to a company's financial health, the amount of time it's been in business, history of its principals, record of paying suppliers and so on), and affordability (increases in the cost of living index, as well as growth in wages).

While D&B used this statistical information to compile the list, we dug deeper to find the story behind the successes. We've noticed some common factors--many top cities on our list, for example, boast strong high-tech, biotech and telecommunications sectors. Also, increases in venture capital indicate not only potential future growth for the city but also a confidence in the area's entrepreneurs. Large corporations seeking local suppliers and services usually turn out to be small-business allies. And innovative small-business programs, like the Milwaukee (#13) Economic Development Corp.'s Capital Access Program, give entrepreneurs a much-needed break.

While the factors listed above tend to be the building blocks of a solid small-business foundation, a few unexpected advantages showed up during our research of this year's list. We figured the casino industry would be powering Las Vegas (#8) but found it's also spurred small-business growth in unlikely areas such as Kansas City, Missouri (#10). This year, certain cities also scored big in the form of professional sports--Nashville, Tennessee (#15) sports fans, for example, welcomed the Tennessee Oilers, while Nashville entrepreneurs cheered the opportunities that accompanied the transported team.

Speaking of sports, we found that we had a "three-peat" champion of our own. Not only did Portland, Oregon, win the number-one slot for the third year in a row, but it seems to be pulling away from the pack. Portland ranked far higher than any other city, says Steve Hess, D&B's director of analytical services. "It has one of the lowest risks of insolvency, one of the lowest failure rates, one of the lowest delinquency rates and, at the same time, enjoys strong wage and job growth," says Hess. "Most of the other cities did well in a few categories and had problems in others. But Portland has consistently proven to be a terrific place for small business. It sticks out as the champion."

Meanwhile, Boston, one of 1996's notables, dropped off, which means the Northeast is conspicuously absent from our list. And even among this year's star performers, some problems emerged-the labor shortage and infrastucture were common examples.

Hess was perhaps more surprised by certain cities that were on the list. Cities such as St. Louis (#2) aren't what you'd typically consider booming, or even healthy, environments for small business, but they continue to appear on our list, serving their local entrepreneurs undeniably well.

Without further ado, we present our ranking of the best entrepreneurial cities in the nation.

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This article was originally published in the October 1997 print edition of Entrepreneur with the headline: 20 Best Cities For Small Business.

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