Best Cities For Small Business: Large Cities

15 min read

This story appears in the October 1996 issue of Business Start-Ups magazine. Subscribe »

may get the lion's share of attention, yet , which is growing jobs three times faster, is anything but sleepy. Proof positive: It ranks No. 1 on our list for the second year in a row.

The , formerly based on timber and agriculture, is sprouting a new crop of high-tech businesses, which thrive in the lush, capital-rich Silicon Forest. Some $12 billion in capital investment has been injected into the economy, mostly by high-tech firms.

Small businesses in Portland flourish in an environment where they're respected and wooed by the public, private and banking sectors.

Historically, entrepreneurs witnessed the birth of the country's first ; recently, they benefited from Venture Oregon, an event that presented start-up companies' business plans to venture capitalists.

Challenges include revamping telecommunications, transportation infrastructure and higher education. However, the city should stand strong for at least the next five or six years, thanks to careful planning, a diversified economy and up-and-coming industries, such as biotech, food processing, manufacturing and exporting.

Perhaps Portland's biggest asset, however, is the unique mind-set of its entrepreneurs, who are more intent on building lasting companies than on making it big and cashing out. Following in the footsteps of (a local company made good), entrepreneurs are able to shed the trappings of other high-tech meccas and, in their characteristic laid-back way, just do it.

Denver (1996)

Just when everyone thought Denver's couldn't possibly climb any higher, just keeps getting better in the Mile High City. With an influx of people moving in from around the country, restaurants and small boutiques are finding a steady stream of customers, as are service-based businesses such as printing and desktop publishing companies. What's more, Internet-related businesses that weren't around a year ago have emerged in droves.

Yet while Denver's entrepreneurial outlook remains favorable, problems persist. A recent survey found local businesses are concerned about finding skilled labor. And soaring property costs, underfunded school systems and heavy traffic have residents worried about maintaining their quality of life.

Still, with the opening of the Park Meadows Mall and the Coors Field stadium (for the Rockies baseball team), and emerging opportunities in real estate development and tourism spurred by the new Denver International Airport, it's almost certain Denver's economy will continue to grow.

Minneapolis/St. Paul (1996)

When it comes to doing in the twin cities, slow and steady wins the race. Not that the Minneapolis/St. Paul area is dull. Although it eschews the big booms and devastating busts other large cities face, industries such as printing and publishing, medical products, machining and computers make for a solid, diversified base. And giants such as 3M, Honeywell and General Mills cry out for suppliers.

Famed for --it wasn't dubbed Moneyapolis by Forbes magazine for nothing--Minneapolis' private equity community includes major players with a passion for investing in . The city also boasts one of the country's highest rates of Small Business Administration (SBA) lending on sheer volume.

Government support systems offering entrepreneurial assistance include Minnesota Technology Inc. and the Minnesota Technology Project Outreach. Legislatively speaking, some relief came via a recent easing of workers' comp costs; one issue that still looms, though, is the city's commercial property taxes, which are among the nation's highest.

The area is also home to the sprawling Mall of America, which fosters some of the nation's most innovative retail concepts. Meanwhile, plans for entertainment retailing downtown and revitalization of the city's riverfront area offer future opportunities.

Atlanta (1996)

When the Olympics wrapped in August, the pumped-up prosperity Atlanta's small businesses enjoyed didn't fizzle. In fact, according to a University of Georgia study, Atlanta-area businesses should feel the positive economic effects of the Olympics for 30 years to come. That's one reason for small businesses in Atlanta to stay put-and even more reason for new entrepreneurial ventures to take root there.

Georgia's favorite peach, Atlanta had a reputation as a hub of hospitality long before the Olympics came to town. It's been the second-busiest convention city in the United States for the last several years and, as such, boasts a rich service sector. Hotels, food service, restaurants and convention-related companies do good in Atlanta, as do high-tech firms and those specializing in providing services that downsized corporations now outsource, such as management and payroll.

Access to capital can be a challenge in Atlanta, however, and some have complained that the state doesn't do enough to promote exporting. Nonetheless, with a pro-business governor, some of the fastest-growing counties in the United States, reasonable operating costs and rental rates, and plentiful labor, Atlanta's small-business climate deserves a gold medal.

Indianapolis (1996)

Indianapolis doesn't believe in paying lip service; it prefers taking action. The city's strategies to ensure small- success include nurturing strong public-private collaborations, encouraging small firms to enter the global arena, and creating a competitive banking climate that has led to a growing trend of downsized executives purchasing small manufacturing firms in the area. The state's tax structure, one of the most favorable in the nation, doesn't hurt, either.

Rather than trying to lure Fortune 1000 companies from other cities, Indianapolis is working to grow its own. Its Value Added Committee, comprised of government, corporate and small-business advocates, provides entrepreneurs with everything from mentoring and trouble-shooting to management assistance and networking opportunities. The city also understands it is only as strong as its weakest link and, consequently, has aggressively focused on strengthening the smallest new and emerging businesses using an Enterprise Community grant from the U.S. Department of Housing and Urban Development.

And while Indianapolis' remains strong despite a shortage of computer-skilled labor, the Crossroads of America is not resting on its laurels: A recently commissioned study will help pinpoint what needs to be done to create more entrepreneurial growth for the next 20 years.

Charlotte, NC (1996)

A few years ago, Charlotte suffered from the "CH" syndrome--people always confused it with Charleston, South Carolina, and Charlottesville, Virginia. Then the city snagged an NBA franchise (the Hornets) in 1988 and a professional football team (the Panthers) in 1993, and suddenly the confusion evaporated.

But the Queen City is no Johnny-come-lately to the economic playing field. In fact, it's America's second largest financial center and home to two powerhouse banks--NationsBank and First Union. These institutions, plus dozens of smaller banks clustered around them, feed an expansive network of financial services companies. The city has also attracted a diverse roster of firms including USAir, Stanley Tools, Sea-Land Service and TransAmerica Insurance, as well as the companies supplying them.

Like most growing areas, Charlotte is dealing with a labor shortage and an infrastructure straining under a burgeoning population. It also faces an even more critical challenge: whether to become a "world-class city" with all the attendant problems or remain a strong regional hub offering a slower, friendlier place to settle in.

Cincinnati (1996)

The Cincinnati metropolitan area vaulted from a ranking of 15th best large city last year to a ranking of 7th this year. Credit a diverse , revamped zoning laws for homebased businesses, and a banking community increasingly reaching out to entrepreneurs as key factors in Cincinnati's surge.

Then again, it hardly hurts that this Ohio city is perfectly positioned to tap into the national market: Almost 60 percent of the U.S. population lives within 600 miles of Cincinnati. Nearly 60 percent of the nation's manufacturers also operates within the same radius. Of course, Cincinnati businesses look beyond the nation's boundaries, too: International trade generates roughly $4 billion for the area annually.

What are Cincinnati's dominant industries? Manufacturing, service and retail companies all play important roles in the local economy. In terms of exporting, jet engines, computer software and paper goods are among the top products.

Although Cincinnati's future appears promising, there is still a troublesome shortage of skilled labor. Maybe a low crime rate and reasonable cost of living will help remedy the situation.

Columbus, OH (1996)

Hello, Columbus. Like many of this year's hot cities, the capital of Ohio is cultivating--and benefiting from--a solid technology base. Given the number of postsecondary educational institutions in the area (including Ohio State University), it only makes sense that high-tech entrepreneurs are drawn to Columbus. Not only is there an aura of academia, but there is also a technology incubator to nurture small businesses that want to follow in the footsteps of local success story, CompuServe Inc.

As is the case with its fellow Ohio cities Cincinnati and Cleveland, Columbus relies on service businesses to pack an economic punch. Retail, too, produces a significant number of start-up operations. Not nearly as manufacturing-driven as other parts of the Buckeye State, however, Columbus instead appears to prefer drawing on the strength of the number of consultants in the area--many of whom, almost certainly, were casualties of the national trend toward downsizing.

Last year, Columbus was ranked the 14th best large city in our listing; this year, it moves up six notches to capture the 8th spot. This jump--along with the even more impressive appearance of three Ohio cities in our listing--lends credence to Ohio's proclamations that this is one state on the economic upswing.

Pittsburgh (1996)

This steel town is constructing a new industry for itself: high technology. The transition has been gradual, building on the rich soil provided by Carnegie Mellon University, top-ranked in computer science, and the University of Pittsburgh, a leader in medical research. The city ranks as the nation's 5th highest in university research and development per capita and in its number of software engineers.

Traditionally a big- town, Pittsburgh has suffered in the past from a lack of . Yet the big industries often open opportunities for small companies, especially in the telecommunications, technology, and medical and biomedical fields. Meanwhile, state and city governments are sweetening the pie for with outreach programs such as the nationally recognized Ben Franklin program, which provides millions of dollars each year for technology or product development. Organizations like the Enterprise Corp. link entrepreneurs to investors, while the city's economic development agency offers creative financing packages. Venture fairs and a city-sponsored development fund promise future growth.

Still, the government's relationship with small business is a double-edged sword: Pennsylvania is infamous for its high taxes, yet many hope a recent legislative breakthrough lowering the cost of workers' comp indicates a regulatory turnaround.

St. Louis (1996)

Between Chrysler, Ford and General Motors, you could safely say the auto industry is the driving force behind in the St. Louis area. Detroit it's not, but the city with the Gateway Arch is the nations's No. 2 city when it comes to auto manufacturing.

Not that there aren't other industries making a mark in this city. St. Louis is the home of McDonnell Douglas, so it goes without saying that aerospace is big business, which feeds local small companies by employing them as subcontractors. Among the St. Louis area's other growing industries are health care, high-tech, advertising, banking and construction.

St. Louis could well be called the headquarters capital of the United States; more than 30 large corporations, including Anheuser-Busch, Ralston Purina, Emerson Electric and Enterprise Rent-a-Car, call it home, and more than 20 Fortune 1000 companies are situated here. Although some say St. Louis' various layers of government cause bureaucratic difficulties for small-business owners and the city could do more to encourage minority , nobody's complaining about the city's helpful , excellent transit system and high quality of life. That's why more and more entrepreneurs are telling their business associates to meet them in St. Louis.

Chicago (1996)

With the Sears Tower looming overhead, it's easy to overlook the little things in Chicago. But bigger doesn't necessarily mean better in the Windy City. In fact, is the fastest-growing segment of the city's , and 81 percent of the companies that belong to the Chicagoland Chamber of Commerce have fewer than 100 employees.

Sure, there are some pretty big businesses in the Chicago area--Motorola, Zenith and a large Ford plant, to name a few. Rather than eclipse the area's small businesses, however, these monolithic corporations provide prime opportunities for entrepreneurial ventures to make money.

While Chicago recently took a big step forward by recognizing homebased businesses, many homebased entrepreneurs find the new regulations too restrictive. Finding educated workers also remains a problem for entrepreneurs.

Outweighing most concerns is a diversified economy: The service sector is booming, and the high-tech and medical services industries are experiencing marked growth as well. Chicago is also a transportation hub and America's convention capital--offering plenty to sustain small business long into the future.

Milwaukee (1996)

No, Milwaukee isn't one of those cities in the spotlight because of its exponential economic growth. Rather, with a solid manufacturing and exporting base, Milwaukee is just one of those cities where thrives--and has done so for many years.

Among the newest enterprises to emerge are data processing companies, which primarily aid a host of large financial institutions in the area, as well as multimedia businesses. The tourism, construction and printing industries are booming, too.

To foster Milwaukee's small-business climate, a Marquette University clinic opened recently, providing technical and legal assistance to small businesses. Plus, the city is striving to support small businesses by lowering taxes and adding more police officers to curtail crime.

As for the future, the Wisconsin Center for conventions and a new baseball stadium--both of which are expected to open by the end of the decade--are certain to draw more visitors and, therefore, more opportunities for restaurants, hotels, tourism and the like. Looks like Milwaukee is here to stay.

Kansas City, MO (1996)

Straddling the Kansas and Missouri rivers smack dab in the middle of the country, Kansas City is a distribution and transportation mecca as well as the deserving recipient of the moniker "Heart of America." The area is home to Hallmark, Sprint and H&R Block, which nourish surrounding small businesses with healthy portions of contract work. Those three corporations notwithstanding, Kansas City isn't particularly heavy with Fortune 500 companies; the large businesses in the area tend to be homegrown, with histories of two or three generations of family ownership. Booming industries here include high-tech, telecommunications, finance and gaming.

Start-up businesses in Kansas City have good odds for survival. The city is home to the legendary Kauffman Foundation, whose main goal is to nurture entrepreneurial ventures through infancy. Kansas City also has a large number of philanthropic foundations and nonprofit organizations. All this doting assistance has strongly encouraged here: Ninety percent of businesses in the Kansas City metropolitan area each employ fewer than 100 people. A labor shortage may make doing in Kansas City a challenge, but more and more entrepreneurs are meeting that challenge head-on--and enjoying the payoff that comes with it.

Cleveland (1996)

Although home to the Rock and Roll Hall of Fame and the Indians, one of Major League Baseball's most popular teams, Cleveland still seems to suffer a bit from an image problem. The city has gone through bad times, it's true (witness 1978's defaulting on loans and the recent loss of its beloved Browns football team), but good times loom on the horizon. In this, its bicentennial year, Cleveland now seems almost--dare we say it?--downright hip.

Not that it happened easily. Since the decade began, Cleveland has plunked down more than $3 billion to revitalize its downtown area. Pegging itself as "The New American City," Cleveland has realized the fruits of its labor with a resurgence in tourism and a healthy start-up rate of 7,000 businesses annually.

Still a manufacturing powerhouse, Cleveland counts health-care and service-oriented companies as other driving economic forces. International trade, in particular, is booming: Between 1992 and 1995, the Port of Cleveland nearly doubled the international cargo handled.

The Council of Smaller Enterprises (COSE), an affiliate organization of Cleveland's chamber of commerce, has been especially active in promoting . By allowing its 16,000 members to group-purchase necessities like health insurance, COSE saves them millions of dollars.

So much for that image problem.

Boston (1996)

Perhaps the first Northeastern to heal from the wounds of the recession, Boston has emerged stronger than ever, thanks in large part to .

Reforms in workers' comp, unemployment insurance and corporate taxes have been passed in the past several years, alleviating Boston's major deterrent to entrepreneurs: oppressively high business costs. This has freed local entrepreneurs to pursue the city's booming industries, including Internet and software programming, financial services, health care and higher education. Meanwhile, new investment and research and development tax credits provide strong incentives for innovation.

As a result, nearly all sectors in Boston are growing, and the city is planning ways to accommodate that growth in the coming years. A major infrastructure project to relieve downtown congestion has been underway for several years. And with Boston College, Boston University and nearby Harvard and Massachusetts Institute of Technology to draw from, Boston benefits from one of the nation's most talented labor pools. The 4 percent unemployment rate, however, indicates the city may soon face a labor shortage. Undaunted, Bostonian entrepreneurs seem ready to start their own American revolution: Last year, the number of approved SBA loans doubled.


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