20 Best Cities For Small Business

St. Louis has been dubbed the "largest small town in the country." And that's no lie. While home to corporate giants like Anheuser-Busch and Enterprise Rent-A-Car, this conservative Midwestern town maintains a close-knit community, one where business is still done on a handshake.

The large corporate presence here ensures a steady flow of contracting work to small companies. Dominant industries are aerospace, biomedical and advanced manufacturing. Corporate downsizing in recent years has fueled the growth of small businesses, particularly in the high-tech arena.

Although access to capital presents a challenge for entrepreneurs in the St. Louis region, a new St. Louis Regional Commerce and Growth Association program called CAPCO (Certified Capital Co.) is improving the situation. The program raises venture capital funding for small companies by giving insurance companies tax credits for investing in certified CAPCO companies. Difficulty finding skilled workers and dealing with what's often perceived as a slow pace of change also plague the small-business community.

As for the future, it's expected the legislature will hold a special session this fall to consider a tax credit for historical renovation and restoration of older buildings in the downtown area, which should stimulate business. Plus, a $3 billion expansion of the Lambert-St. Louis International Airport scheduled to break ground next year could turn this not-so-small town into a major exporting and transportation center.

Seattle
With names like Microsoft, Starbucks, Nordstrom and McCaw Cellular on its list of homegrown companies, people wonder, is it something in the water? Actually, there's no secret to Seattle's business success. A generally supportive government, a diverse economic base, a renowned high-tech sector, and an abundance of ambitious entrepreneurs operating under the awesome idea that they could become the next Bill Gates are all this city needs to charge up a vibrant small-business environment. By all accounts--D&B's included--it's surprising the city didn't make last year's list. Nonetheless, there are many reasons for Seattle's inclusion this year.

The high-tech sector has proved it can add not only sizzle to this city's economy but also solidity. From Boeing to Microsoft, conglomerates are proving to be small-business friends, not foes. Boeing enlists the help of many small aerospace manufacturing-related companies, while ex-Microsoft employees who spin off new technology companies have become celebrities in their own right. With the buzz that Seattle will be the nation's information technology leader of the future, the number of start-up information technology companies has multiplied rapidly over the past two years.

And perhaps there's something in the water, after all. Seattle's reputation as being America's most livable city attracts entrepreneurs, a talented labor pool and, as of late, a slew of venture capitalists.

Yet a few viruses persist--among them escalating housing costs, heavy traffic, and fairly steep business and occupation tax rates. However, the absence of corporate and personal income taxes provides a welcome contrast to the high gross-receipts tax on businesses.

A city known for setting business trends, Seattle has recently become a hotbed of innovation in both the biotech and telecommunications industries. And the city's multicultural population and Pacific Rim location make it ideal for international business. Should entrepreneurs in these sectors follow in the footsteps of their predecessors and become national leaders in their fields, we could see a whole new generation of sleepers in Seattle.

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