Best Cities for Entrepreneurs

Find out which cities topped our 10th annual list of the best cities for small business.

By Mark Henricks

Opinions expressed by Entrepreneur contributors are their own.

Minneapolis-St. Paul may not be the best place to start a new business, but if you're already in business in the Twin Cities, count your lucky stars. That's the message of D&B and Entrepreneur's 10th annual search for the nation's best cities for entrepreneurs, which placed Minnesota's largest metropolitan area at the top of the national rankings for large cities.

Minneapolis-St. Paul's vault from 15th place in 2002 to lead the entrepreneurial cities this year had some striking characteristics. To begin with, the Twin Cities' Entrepreneurial Activity Score, which measures the number of new business starts, was strictly middle-of-the-road, with 58 out of a possible 100 points. The Twin Cities scored better on Small-Business Growth, with a 96, and Risk, with a 93. These measure growth in employment for existing small businesses and bankruptcy filings, respectively. The area's high rankings on these scores show that its existing small firms are growing well and face little risk of going under, says Nipa Basu, director of statistical consulting for D&B, which compiles the Best Cities data. The Job Growth score, which looks at Bureau of Labor Statistics data on total job growth for businesses of all sizes, measures a city's overall economic health, Basu explains--and that's where Minneapolis-St. Paul really improved, going from a score of 45 last year to 77 this year. "It's not really the emergence of new businesses that put Minneapolis-St. Paul on top," says Basu, "but more the growth and stability of the businesses that are [already] there."

Christopher Puto, dean of the college of business at the University of St. Thomas, says one factor such data doesn't measure is the Twin Cities' creativity quotient. "The people in this region are highly supportive of creative activity," says Puto. He traces the creativity-valuing culture to the fact that 3M Corp., the famously inventive creator of Post-it notes, Scotch tape and countless other standards, is based there. "[3M's] whole culture spawned this," he says.

The two most visibly entrepreneurial sectors of the regional economy, according to Puto, are services and health-care technology. The city's base of health-care companies such as Medtronics, a $6.4-billion medical device maker, spawns biotech firms, he says, while the robust economy sustains service providers.

Nicole Robbins, proprietor of Peace of Mind Early Education Center in suburban Woodbury, is an example of the type of entrepreneur that put Minneapolis-St. Paul on top. The 32-year-old entrepreneur's company is 10 years old, employs 60 people, and has annual sales of more than $2 million. Robbins started with one child-care center and grew to four before buying a building this year to consolidate three centers into a single location. Both locations are in Woodbury. This conservative, steady growth plan is teamed with a creative marketing approach. Rather than just take care of children, Robbins' center offers families ancillary services, such as on-premises dry cleaning, a meal pickup service and more. "We'll take kids for haircuts and get their pictures taken," says Robbins. "Our slogan is 'We take care of our parents as well as we take care of your kids.'"

Not all cities have taken care of their entrepreneurs as well as Robbins' hometown. This year, several large Texas cities slipped in the rankings. Dallas, which ranked first in 2001 and second in 2002, this year fell to 24th. What happened?

Blame the tech wreck for Texas cities' slump, says Bill Sproull, vice president of economic development for the Greater Dallas Chamber of Commerce. "We've been a hotbed of technology start-up companies, as reflected in the 2001 and 2002 ranking," notes Sproull. "As the tech sector cooled down dramatically, I'm not surprised to see the rankings reflect that." Sproull notes that high numbers for entrepreneurial activity--87 in Dallas, 83 in Fort Worth-Arlington and 81 in Houston--indicate Texas cities are not exactly entrepreneurial vacuums. "The number of new business start-ups tells me that entrepreneurs still think this is a great economy in which to succeed," Sproull says.

In Fort Worth, a slump in existing small-business growth drove it down from two straight fifth-place finishes to a woeful 37th this year. In other cities whose rankings changed, the stories were similar. Will Minneapolis-St. Paul go the way of these former winners? Robbins, who is poised for rapid growth in her child-care center, says, "I don't think things have tapered off at all."

Ready to check out the top ten?

  1. Minneapolis/St. Paul, MN/WI
  2. Washington, DC, MD/VA/WV
  3. Atlanta, GA
  4. Fort Lauderdale, FL
  5. Salt Lake City/Ogden, UT
  6. West Palm Beach/Boca Raton, FL
  7. Norfolk/Virginia Beach/Newport News, VA/NC
  8. Miami, FL
  9. Charlotte/Gastonia/Rock Hill, NC/SC
  10. Orlando, FL
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