Hot Spots

Got the itch to move? Looking to expand? Our Hot Cities rankings are back for 2005 and ready to help point you in the right direction.

Editor's note: To view our most recent Entrepreneurial Hot Cities ranking view our Best Cities for Small Business slideshow.

Anthony Helmstetter went to high school in Phoenix, and when it was time to start his business, that's where he--like many others--returned. In Phoenix, the co-founder of saw a sustained population boom creating an environment ripe for small business. "When you have people coming in, that creates demand for products and services," says Helmstetter, 43. "A lot of people are bringing their dollars into the Phoenix area."

After hatching his idea for an online goal-setting service in Silicon Valley in 1999, Helmstetter relocated to Phoenix in 2000 before going operational in 2001, lured by the city's rapid growth, modest real estate prices and sunny climate. Since then, has grown to have hundreds of affiliates and thousands of users worldwide.

Thousands of similar stories helped Phoenix lead large cities (cities with more than 50,000 businesses) in Entrepreneur and NPRC's Annual Entrepreneurial Hot Cities rankings. Arizona, likewise, was the top state, and nearby Tucson was the second-place midsize city (20,000 to 50,000 businesses). But high-ranking hot areas exist in every region and in all sorts of environments. Some Hot Cities feature low costs and rapid population growth. Others offer stable populations with excellent quality of life. Some Hot City economies rely on government and tourism, while others are supported by financial services and manufacturing.

Still, some common characteristics emerge among the leaders, says Justine Walden, senior researcher at National Policy Research Council, a Washington, DC, think tank that calculated the Hot Cities rankings with Entrepreneur. For instance, the communities that fared best tend to have pleasant climates, good universities and capacious airports.

If there is one big trend evident from this year's Hot Cities, it's that small-business success tends to track population growth. The Census Bureau's 2005 report on the 100 fastest-growing counties found 60 in the South, 23 in the West and 17 in the Midwest. About the hot spots for entrepreneurs, Walden says, "Of the top 10 states, seven are in the Southeast or Southwest. And of the top 10 cities, eight are in the Southeast or Southwest."

In talking to entrepreneurs and those who advise them in our Hot Cities, it's also clear that entrepreneurship is regarded as a linchpin to the nation's prosperity. "In Arizona, 95 percent of all companies have less than 100 employees," says Tom Fraker, executive director of the Arizona Small Business Association, a 3,000-member lobbying and education group in Phoenix. "That's why I have a passion for this."

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This article was originally published in the October 2005 print edition of Entrepreneur with the headline: Hot Spots.

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