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To be in the right place at the right time--it's the ultimate goal of any industrious entrepreneur. Contrary to popular opinion, we've found this elusive goal may not be a matter of random luck. In fact, we have a radical theory: The right-place, right-time element can be predicted, even orchestrated. With this proactive hypothesis as our basis, we present Dun & Bradstreet and Entrepreneur's sixth annual ranking of the top cities in the nation for entrepreneurship.
As you'll see, there are actually a bunch of right places for entrepreneurs-not fantastical utopias, but down-to-earth, well-within-reach cities like Phoenix/Mesa, Arizona, and Raleigh/Durham/Chapel Hill, North Carolina. (Well, OK, the sometimes fantastical Las Vegas and Washington, DC, did make our list.) In fact, we provide a closer look at our top-ranked city, West Palm Beach/Boca Raton, Florida, to illustrate the power of an underestimated city. While the less imaginative may move to New York City or Los Angeles, you just might find your own place in the sun in the booming, albeit less-publicized, "Treasure Coast."
We've also operated under a separate, though related, theory: The right place for your business is not necessarily the place you're in right now. If you're serious about being in the exact spot where opportunity flings open its doors, you may have to do some traveling to get there. We understand this ranking can lead to something as insignificant as a nice daydream, or to something as important as a complete business overhaul and subsequent massive success. We also understand "relocating" is a pretty scary word. To help spur you to action, we've dissected the art of moving and found four relocated entrepreneurs willing to share tales of their own moveable feats. The rest is up to you--will you be in the city that's best for you, or simply wish you were there?
What's Your Motivation?
usinesses commonly cite five main reasons for moving, according to Sharon K. Ward, an economic development consultant for Pennsylvania Power & Light Inc., a utility company in Allentown, Pennsylvania, and co-author with her husband, William Gary Ward, of the Company Relocation Handbook (Oasis Press). These are labor and work-force issues, the desire to reach new markets, the need to upgrade facilities or equipment, a desire to lower costs or increase cash flow, and considerations about the quality of life. For different businesses and at different times, certain concerns are more important than others, Ward notes. But just about all moves can be attributed to some combination of these issues.
Chief among current reasons for relocation is the need for a suitable work force. Unemployment rates are lower than they've been in decades, and the shortage of workers in some occupations, especially those requiring technical expertise, is acute. For firms that need specialized employees, it may be well worth it to relocate to an area where they can easily find these kinds of employees.
The need to reach new markets is another prime consideration. Luigi Salvaneschi, a former executive with KFC, McDonald's and Blockbuster Video, and author of Location, Location, Location (Oasis Press), says a location that taps a new market can instantly revitalize many businesses. "People should relocate if they see no growth and no future where they are," he says. "It's a matter of life and death."
When a company finds itself in outmoded or undersized facilities, that's another reason to look at moving. Most businesses start in a small facility, such as the founder's garage, then move to bigger quarters in the same city, says L. Clinton Hoch, director of location advisory services for DCG Corplan Consulting LLC, a site selection consultancy in West Orange, New Jersey. Later, the business outgrows that location or begins to find fault with its facilities, services, utilities, infrastructure or other features. "Usually only after [a business owner] goes through those three stages is he or she ready to make a move out of the original metropolitan area," says Hoch.
Cost is a concern in any business decision, and a move can cure--or create--many cost issues. For starters, the cost of living varies widely among cities. In Little Rock, Arkansas, for example, the cost of living is 13 percent below the national average. At the other end of the spectrum, New York City's costs are more than twice the U.S. average. Theoretically, a move from Manhattan to Little Rock could yield significant savings.
But costs involve more than living expenses, cautions Hoch, and differences in geographic costs have leveled out in recent years. Often, companies find themselves forced to compromise between staying close to target markets and choosing the lowest-cost facility. That's one reason for the exodus of employees from central cities to nearby suburbs, which, according to the U.S. Census Bureau, resulted in 3 million people leaving the cities, while the suburbs gained 2.8 million in one recent year.
Other financial incentives further complicate cost issues. Large companies seeking to build semiconductor factories or auto plants often land well-publicized tax concessions worth billions of dollars. Ward, a former research and marketing director for the Committee for Economic Growth, a private organization that markets the Wilkes-Barre area of Pennsylvania to businesses, points out that small companies rarely receive such perks because incentives are based on the number of jobs the business will create. However, an entrepreneur may be able to tap a cash-flow windfall by selling a building or land that has appreciated in value, then purchasing or renting lower-cost space.
An even more intangible entity is the quality of life. Companies evaluating relocation often look at recreational opportunities, education facilities, crime rates, health care, climate and similar factors when evaluating a city's quality of life. That's another reason deteriorating inner cities are losing businesses, as companies seek an improved quality of life elsewhere. "Maybe it's an unhealthy or unsafe area to live in," notes Ward. "Or, it may be hard to recruit workers because of [the location]."
When you move or expand to a new location, the odds are stacked in your favor, according to Salvaneschi, who has overseen the selection of new sites for thousands of retail establishments. "Because you've been in business for some time," he says, "you are fully aware of all the problems your current location has. If you have poor traffic and know that's the problem, you look for a new location that has good traffic."
But there are no guarantees in relocation, and as many things can go wrong with a move as can go right. Ward cites a recent study of readers of Area Development magazine that identified a number of common mistakes. They included rushing the decision, focusing too narrowly on a few costs, failing to use available economic development services, ignoring quality-of-life factors, missing important environmental or regulatory concerns, and, believe it or not, failing to plan for future expansion. And those can be boiled down to hurrying too much and trying to do a move too cheaply.
Part of the problem is the complexity of these two issues. There's no set time for how long it should take to move, Ward says, and sometimes you don't have a choice. "I've worked with companies that made a decision in three or four months because they didn't have a choice," she says. Others might expend two or three years in the process, with no better results.
Unfamiliar factors complicate cost calculations, adds Salvaneschi. A mover must figure in the cost of business interruption, for instance. Almost inevitably, a business's productivity will be reduced for a period of days or even weeks after a move. And that's not all. "You may also have some loss of goodwill," Salvaneschi says. "Especially if you've been in that location for many years, you're going to lose some loyal customers."
Finally, there are the usual miscalculations, accidents and unforeseeable circumstances that require some sort of contingency fund in the budget for the move, generally 10 to 30 percent of the moving costs. It may be difficult for cash-strapped entrepreneurs to commit this amount, but considering the number of things that have to go smoothly for a move to happen within budget, it's a requirement.
Although deciding to move is tough, it's nothing compared to actually making the move. That starts with writing detailed specifications about what your new location must offer. Make sure you understand key motivations, and see that their requirements are met. If your main reason for moving is to tap a better labor market, don't get distracted by a favorable lease offered by a prospective new landlord or incentives dangled before you by an economic development agency. "You wouldn't want to move to find a well-qualified work force only to find that it's worse in your new location," says Ward.
You'll also need accurate and complete information about the new location before you can commit to moving there. Reference publications such as the Statistical Abstract of the United States and magazines such as American Demographics are good places to start. You can also subscribe for a month or two to local newspapers in the cities you're considering (or read them online) to get a general feel for local circumstances.
Be specific when gathering information from other sources, including economic development agencies, chambers of commerce, utility companies, real estate brokers, employment agencies, other small-business owners and so on. Don't ask general questions like "Is there a good supply of affordable office buildings?" Instead, ask "How many 10,000-square-foot blocks of vacant Class A downtown office space exist, and what are the going terms and prices?"
You should also visit any site on the short list of your targets. "I have a saying: You walk it; you drive it; you fly it," says Salvaneschi. Only by walking and driving around a location from various angles can you get a feel for traffic patterns. Aerial views from small planes or helicopters can help you grasp the dynamics of a particular retail zone, he adds.
Making the move itself is another challenge in making the relocation work. It's important to decide what equipment, fixtures, records and other items to actually move. It might be better to dispose of certain items, such as inventory, at fire-sale prices rather than pay to haul them across the country. Some employees might be better left behind as well. The average cost for a domestic relocation of a current employee who owned a home was $53,696 in 1998, according to the latest figures available from the Employee Relocation Council in Washington, DC.
Once you've decided where, when, what and who you'll move, assign someone to be in charge of the relocation. He or she will be kept very busy, with tasks from soliciting bids from movers to keeping employees informed about the plans. Books such as Ward's and Salvaneschi's offer many checklists to help movers marshal the details.
In business, as in your personal life, not every move works out. But by looking closely at their reasons for moving and making sure the chosen spot addresses those needs, entrepreneurs increase the odds that the grass really will be greener and that what appears to be a better city for their businesses will turn out to be the best.
Places Rated Almanac (Macmillan General Reference) by David Savageau and Geoffrey Loftus. Facts on labor markets, cost of living, housing, education, crime, health care and climate for more than 350 metropolitan areas in North America.
Statistical Abstract of the United States 1998 (U. S. Department of Commerce). More than 1,000 pages of graphs, tables and other statistics describing the United States in myriad ways. Available in book or CD-ROM format from Superintendent of Documents, P.O. Box 371954, Pittsburgh, PA 15250.
STAT-USA (www.stat-usa.gov). A vast online information service with economic, business, social and environmental data generated by scores of federal sources.
About Dun & Bradstreet
Dun & Bradstreet (D&B), with the world's largest information database, tracks 49 million companies worldwide--11 million in the United States alone. Businesses use D&B's services to find new customers and evaluate their creditworthiness, identify potential suppliers, and collect overdue receivables.
Through face-to-face and telephone interviews and public-records searches, more than 200 million financial transactions are added annually to D&B's files in the United States alone. D&B updates its information base continually--an average of 950,000 times each business day.
When businesses are entered in the D&B database, they are issued D-U-N-S numbers (similar to Social Security numbers). The U.S. federal government requires companies to have this number to bid for government contracts. Also used by the United Nations and the European Union, the D&B D-U-N-S number is quickly becoming the universal standard for identifying businesses on the Web as well.
For more information about D&B, call (800) 234-3867 or visit the D&B Web site at www.dnb.com. To register for a D-U-N-S number, call (800) 333-0505.
By The Numbers
Perhaps we can't convince you to uproot yourself--your home, your business, your life--and trek to an unfamiliar locale based solely on the potential for success in one of our hot cities. But if you are interested in such a dramatic change, you might be curious to know just how we weeded out our nation's top entrepreneurial spots.
This year, we used four basic criteria in ranking our top cities: entrepreneurial activity (based on the number of businesses that are 5 years old or less within metropolitan statistical areas), small-business growth (those businesses with fewer than 20 employees that had significant employment growth from January 1998 to January 1999), economic growth (which measures the change in job growth over a three-year period through January 1999) and risk (cities with the lowest business failure rates). We then used a point system to determine each city's overall ranking as well as its ranking within a specific region.
Still need convincing? Read on. The next nine pages give a much more complete picture of what it's like to be an entrepreneur in one of these cities. Who knows? You might just start collecting moving boxes.
Top 5 Midsized Cities
1. Wilmington/Newark, DE/MD
2. Tacoma, WA
3. Louisville, KY/IN
4. Charleston/North Charleston, SC
5. Pensacola, FL
Top 20 Large Cities
1. West Palm Beach/Boca Raton, FL
2. Salt Lake City/Ogden, UT
3. Raleigh/Durham/Chapel Hill, NC
4. Atlanta, GA
5. Orlando, FL
6. Las Vegas, NV/AZ
7. Phoenix/Mesa, AZ
8. Norfolk/Virginia Beach/Newport News, VA/NC
9. Middlesex/Somerset/Hunterdon, NJ
10. Washington, DC/MD/VA/WV
11. Indianapolis, IN
12. Jacksonville, FL
13. Dallas, TX
14. Houston, TX
15. Fort Lauderdale, FL
16. Cincinnati, OH/KY/IN
17. San Jose, CA
18. Charlotte/Gastonia/Rock Hill, NC/SC
19. Austin/San Marcos, TX
20. Seattle/Bellevue/Everett, WA
Top 5 Southeast
1. West Palm Beach/Boca Raton, FL (1*)
2. Raleigh/Durham/Chapel Hill, NC (3)
3. Atlanta, GA (4)
4. Orlando, FL (5)
5. Norfolk/Virginia Beach/Newport News, VA/NC (8)
Top 5 Central
1. Indianapolis, IN (11*)
2. Dallas, TX (13)
3. Houston, TX (14)
4. Cincinnati, OH/KY/IN (16)
5. Austin/San Marcos, TX (19)
Top 5 Northeast
1. Middlesex/Somerset/Hunterdon, NJ (9*)
2. New York, NY (23)
3. Boston, MA/NH (28)
4. Monmouth/Ocean, NJ (31)
5. Bergen/Passaic, NJ (33)
Top 4 Mountain
1. Salt Lake City/Ogden, UT (2*)
2. Las Vegas, NV/AZ (6)
3. Phoenix/Mesa, AZ (7)
4. Denver, CO (21)
Top 5 West
1. San Jose, CA (17*)
2. Seattle/Bellevue/Everett, WA (20)
3. Orange County, CA (22)
4. Portland/Vancouver, OR/WA (26)
5. San Diego, CA (30)
Best Bets Entrepreneurial Activity
1. Las Vegas, NV/AZ (6*)
2. Orlando, FL (5)
2. Salt Lake City/Ogden, UT (2)
4. Monmouth/Ocean, NJ (31)
5. Austin/San Marcos, TX (19)
Best Bets Lowest Failure Rates
1. Cincinnati, OH/KY/IN (16*)
2. Indianapolis, IN (11)
2. New Orleans, LA (41)
4. West Palm Beach/
Boca Raton, FL (1)
5. Greensboro/Winston-Salem/High Point, NC (38)
Best Bets Economic Growth
1. Las Vegas, NV/AZ (6*)
1. New York, NY (23)
3. Phoenix/Mesa, AZ (7)
4. Orlando, FL (5)
5. West Palm Beach/Boca Raton, FL (1)
Best Bets Small Business Growth
1. Charlotte/Gastonia/Rock Hill, NC/SC (18*)
2. Las Vegas, NV/AZ (6)
3. Salt Lake City/Ogden, UT (2)
4. Washington, DC/MD/VA/WV (10)
5. Dallas, TX (13)
No. 1: West Palm Beach / Boca Raton, Florida (1999)
Innovation. Plenty of disposable income. A diversified economy. A skilled work force. And a quality of life that makes you say "Ahhhh . . ."
That's the simplest way to sum up the No. 1 city on Dun & Bradstreet and Entrepreneur's 1999 list of hot spots for small businesses. But that doesn't begin to explain why the West Palm Beach/Boca Raton area--affectionately known as the "Treasure Coast"--continues Florida's tradition of populating our list.
Thirty years ago, as was the case with most other areas of Florida, tourism and agribusiness dominated the Palm Beach County economy. But that changed with the birth of the personal computer, created by then-local IBM in Boca Raton. Although long gone from the area, Big Blue's legacy includes highly skilled workers and a technological infrastructure that's helped the county develop a high-tech hub on Blue Lake--prompting the moniker--in-the-making Silicon Beach.
Other hot industries include aerospace engineering, with a few sizable companies such as Sikorsky Aircraft Corp. and B/E Aerospace Inc. serviced by several smaller firms nearby; business and financial services; and the medical/pharmaceutical/health-care sector. And while Miami remains the East Coast's gateway to Latin America, West Palm Beach/Boca Raton is beginning to attract its share of international companies that like the more laid-back lifestyle of this metropolis.
Access to capital is a problem for small nontech businesses in this area, but the county has several programs that can help in other ways. One provides employee-training grants to entrepreneurs who add at least five jobs within a two-year period, and another is a partnership with NASA where the space agency provides up to 40 free hours of engineering and manufacturing consulting assistance to small firms.
Officials are confident that while their booming economy is tied to the country's overall economic high tide, the depth of the area's industry diversification and the strong entrepreneurial spirit pervading the county will allow it to sail smoothly around any obstacles.
No. 2: Salt Lake City / Ogden, Utah (1999)
Peter Baron's expansion of Socket Public Relations from its original Atlanta home to Austin and then, most recently, Salt Lake City, might seem uncoordinated. The cities don't particularly resemble one another in size, culture or geography, other than that each sports an office of the high-tech public relations firm. But there is a method to Baron's moves.
"We've discovered a pattern," explains Baron, 39. "We look for a concentration of high-tech software start-ups. Then we look at the support infrastructure, particularly the high-tech PR firms. In Salt Lake City, there was a great base of technology companies and, to date, not a great base of well-established high-tech PR firms."
Salt Lake City offered a base for expanding toward the West Coast without actually setting up in costly and competitive Silicon Valley, California. Salt Lake City's work force was another factor. "We need to hire well-educated and well-traveled college graduates to be our consultants," says Baron, who has a total of 45 employees at his three locations. "And Utah, especially Salt Lake City, is known for that."
So far, the two-employee office is doing well, contributing to the $3 million in sales all three locations earned last year. "We've been on a bunch of new business calls and are getting a great reaction," Baron says. "Pretty soon, we'll have a good client base in Salt Lake City."
No. 9: Middlesex / Sommerset / Hunterdon, New Jersey (1999)
After working as a senior executive for Campbell's Soup and Mars Inc., Al Poe knew the value of having a strong team behind him. So when he moved MenuDirect Corp. from Windsor, Connecticut, to Piscataway, New Jersey, he was looking above all for a good supply of the right kind of people.
MenuDirect, a supplier of meals for diabetics and others on special diets, required access to both blue-collar and white-collar workers, which make up Poe's 60-person work force. "We're hiring warehouse workers, telemarketers, dieticians, nurses and administrators," says Poe, 50. "And all those [types of people] are plentiful here."
Because its meals, consisting of both frozen and shelf-stable menu items, are shipped directly to its customers, MenuDirect needed easy access to transportation facilities as well. "We're right off the parkway," says Poe. "We've had no trouble with people finding us."
Another factor is the scientific and medical resources offered by the nearby Rutgers and Princeton universities, and the many pharmaceutical firms that dot central New Jersey. Says Poe, "To find all this in a mixed-use facility under one roof was the most exciting thing."
No. 19: Austin / San Marcos, Texas (1999)
Equity Title Services Corp., a vendor-management company that coordinates title appraisals and closing services for banks nationwide, moved from the Houston suburb of Conroe to Austin this past June in search of a better quality of life for its employees and improved access to software-savvy workers. "What we do is 99 percent by phone, fax and e-mail, so we can do this from just about anywhere," explains 29-year-old John Childers, CEO and co-owner with president Hunt Pettit, also 29, of the nine-employee firm, which projects earnings of $5.2 million this year. "Austin was the place, technologically and culturally."
Austin's labor market offered ample programming talent to help the company refine its main tool, a computer program that helps it provide real estate title and appraisal services. The city was also home to many of the midsized banks that are Equity Title's main customers.
After evaluating the Dallas/Fort Worth area and Houston as well as Austin, the partners found themselves deciding between Dallas/Fort Worth and Austin, Childers says. Austin won out primarily for its more relaxed culture, but the business side has also been positive. "I have nothing but good things to say," says Childer. "We're just tickled to be here."
No. 22: Orange County, California (1999)
Atairgin Technologies was founded in 1996 in Pullman, Washington, by Washington State University professors Michael K. Skinner and Gordon B. Mills to research a promising new cancer-detection technology. After three years, the company was ready to commercialize its technology and move into clinical development--and was also ready for a new home.
CEO Patrick Walsh chose Irvine, California, in business-friendly Orange County, due to its compelling blend of reasonable costs, excellent access to labor and a preexisting base of university medical research resources. "We also looked at San Francisco, which has a booming biotech industry, San Diego and Pasadena [in Los Angeles County]," says Walsh, 38.
Orange County beat San Francisco on costs, says Walsh. And he decided against San Diego because the company didn't want to be lumped in with the many small biotech firms there, while the Los Angeles area's health technology industry wasn't developed enough to offer the kind of skilled workers the company would need. Irvine allowed Walsh to recruit for his 12-person staff from as far south as San Diego and as far north as Marina Del Rey (in Los Angeles County).
"The weather's great, the community is growing, there's a very low crime rate in this area, and the schools are great," says Walsh. "That's tough to beat."
Atairgin Technologies Inc., (800) 833-1193, www.atairgin.com
The Business Development Board of Palm Beach County Inc., (561) 835-1008, www.bdb.org
DCG Corplan Consulting LLC, firstname.lastname@example.org
Equity Title Services Corp., 6300 La Calma, #450, Lacosta Centre, Austin, TX 78752, (888) 686-2856
MenuDirect Corp., (732) 980-6700, www.menudirect.com
Pennsylvania Power & Light Inc., (610) 774-5453, email@example.com
Socket Public Relations, (770) 492-0373, www.socketpr.com