March 17, 2014

Study: Best Cities for New Business

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The economic climate has inspired both the unemployed and employed to branch off their own and start their own companies, either because they're tired of searching, they are of tired of not moving up the corporate ladder, or they just have a great idea. This trend will likely continue in 2014. While there are many factors to contemplate when beginning a new business endeavor, location is one of the top issues to consider. If you set up a new retail business in a city without true customer prospects, you won't have a business for long. We looked a variety of factors to find the best locations for new businesses.

Study Methodology

We compiled the best major cities in the United States to run a business based on the following factors:

  • Unemployment Rate
  • # of Stores per Capita
  • # of Residents with a Bachelor's Degree or Higher
  • Income of Residents (per Capita)

Unemployment rate: The unemployment rate of a city indicates its economic health. Cities with a higher rate will have a larger percentage of residents who are tightfisted with their wallets, and those with a lower rate suggest businesses in general are doing well.

Number of stores per capita: A high number indicates that there are thriving business in the area. If other local businesses are able to stay in business, that increases the likelihood of potential businesses keeping their doors open.

Number of residents with a bachelor's degree or higher: The higher the average education for residents, the better the field of applicants will be for potential employers.

Per capita income of residents: The more money a person makes in a city, the higher the likelihood that businesses, and their employees, are financially sound.

10 Best Cities for New Business

10. Raleigh, NC

Raleigh, North Carolina
Raleigh, North Carolina

  • Unemployment rate: 7.3 percent
  • # of stores per capita: 298 per store
  • # of residents with a Bachelor's degree: 324,318
  • Per capita income: $30,306

Raleigh is home to companies like BB&T Insurance Services, Golden Corral, and McClatchey Broadcasting. Other companies, like Banner Apartments that recently invested $40 million into the city, continue to invest in the area's downtown. The city is home to several universities, such as Duke, University of North Carolina at Chapel Hill, and Wake Forest, which churn out well-educated potential employees for business owners. The city also has a business and technology center for professional development and leadership training.

9. San Jose, CA

San Jose, California
San Jose, California

  • Unemployment rate: 7.2 percent
  • # of stores per capita: 363 per store
  • # of residents with a Bachelor's degree: 592,703
  • Per capita income: $33,807

San Jose is the second California city to make the top 10. A lot of its appeal is Silicon Valley, the nation’s hub for the technology sector. San Jose offers its residents financial and tax incentives, as well as permitting assistance and help with site selection. There's also its BusinessOwnerSpace program, an online resource that gives new and small business owners and entrepreneurs access to public, private, and nonprofit partnerships. San Jose’s workforce program Work2future, is an initiative that aims to maximize local employment opportunities.

8. Austin, TX

Austin, Texas
Austin, Texas

  • Unemployment rate: 5.6 percent
  • # of stores per capita: 318 per store
  • # of residents with a Bachelor's degree: 477,058
  • Per capita income: $26,206

Austin has a growing number of young potential employees moving to the area and a low unemployment rate, which makes Austin No. 8 on the list. The city is working to encourage women and minorities become entrepreneurs through its WBE/WBE program, which provides resources and development opportunities for participants. Austin also has a small business development program that fosters job creation and holds special events throughout the year. And the city actively encourages its residents to shop locally. Through the site LocallyAustin.org, residents can find a small-business directory and mapping app so they can find the nearest locally owned company.

7. Denver, CO

Denver, Colorado
Denver, Colorado

  • Unemployment rate: 6.8 percent
  • # of stores per capita: 311 per store
  • # of residents with a Bachelor's degree: 708,325
  • Per capita income: $32,597

Denver, the next city on the list is just a hop away from Salt Lake. Denver has a low number of stores per resident and a highly educated workforce. The city offers many incentives for business owners, including an Enterprise Zone Tax credit for companies in certain areas, and Gap financing, which can provide up to 50 percent of a project's funding. Entrepreneur magazine also sees Denver as a startup city, citing the area's high quality of life and an entrepreneurial spirit among residents.

6. Salt Lake City, UT

Salt Lake City, Utah
Salt Lake City, Utah

  • Unemployment rate: 4.3 percent
  • # of stores per capita: 293 per store
  • # of residents with a Bachelor's degree: 229,140
  • Per capita income: $27,333

Salt Lake City has the lowest unemployment rate on the list, which is why it ranks sixth for the best place to do business. The city already plans to have a 3.1 percent increase in jobs and expects unemployment rates to dip to almost below 4 percent in 2014. Many of the city's economic initiatives are aimed at business growth, including actively seeking new businesses to call Salt Lake City home. There's also Prosperity 2020, which looks to improve education scores so the state remains in the top 10, as well as to improve school environments to encourage higher graduation rates. When a city has strong education, employees with families who live in the area are more likely to stick around.

5. Minneapolis, MN

Minneapolis, Minnesota
Minneapolis, Minnesota

  • Unemployment rate: 4.9 percent
  • # of stores per capita: 321 per store
  • # of residents with a Bachelor's degree: 881,581
  • Per capita income: $30,734

The city that houses the largest shopping mall in the country is also the fifth best place to do business. The city has very low unemployment and a highly educated workforce. Minneapolis is trying to capitalize on this by offering programs like Grow North, which gives breaks to businesses that relocate here. To further win over businesses, Minneapolis’ commercial promotional literature states that its residents have a high quality of life because of its 22 city lakes, more than 170 parks and strong public transit – suggesting that healthy and happy employees are typically better employees.

4. Boston, MA

Boston, Massachusetts
Boston, Massachusetts

  • Unemployment rate: 6.6 percent
  • # of stores per capita: 275 per store
  • # of residents with a Bachelor's degree: 1,369,597
  • Per capita income: $33,589

John Hancock, Liberty Mutual, and New Balance are some of the largest corporations that call Boston home. Low unemployment and a low number of stores per capita show that many businesses in Boston are thriving. The city is working hard to keep it that way – the Boston Redevelopment Authority works to move the city to have a more sustainable future. There's also ReStore Boston, which helps area businesses and homeowners with storefront improvements. The city is also considering several business-friendly initiatives, like Boston Buying Power – a program that gives businesses the opportunity to buy energy at discounted rates.

3. Seattle, WA

Seattle, Washington
Seattle, Washington

  • Unemployment rate: 5.8 percent
  • # of stores per capita: 312 per store
  • # of residents with a Bachelor's degree: 918,119
  • Per capita income: $42,369

With a remarkably low unemployment rate and a high average income for its residents, Seattle ranks third on the list. The city has many educational institutions, which result in more qualified potential applicants. The city also has a thriving port and aerospace sector, which lowers shipping charges for business owners. Seattle also has the benefit of a strong track record of big businesses originating in the city – both Nordstrom and Starbucks began here. Seattle is also committed to greener, more sustainable businesses, and helps business owners find ways to conserve resources and save money.

2. San Francisco, CA

San Francisco, California
San Francisco, California

  • Unemployment rate: 6.9 percent
  • # of stores per capita: 324 per store
  • # of residents with a Bachelor's degree: 1,414,393
  • Per capita income: $47,278

San Francisco ranks second on the list because of its residents’ high average income. “The city of doers and dreamers” has a strong and highly educated workforce. The city also has an active small business assistance center to walk business owners through every aspect of the process. It also has some city loans and tax incentives, including payroll tax credits for businesses that create new jobs and zero percent tax on capital gains.

1. Washington, D.C.

Washington, DC
Washington, DC

  • Unemployment rate: 5.7 percent
  • # of stores per capita: 350 per store
  • # of residents with a Bachelor's degree: 1,885,862
  • Per capita income: $45,004

The nation's capital is also the best place to do business in the country. It has low unemployment and residents with high average incomes and education levels. The city also hopes to entice future business owners through several initiatives, including tax and relocation incentives. There's also the city's Certified Capital Company program, which gives insurance companies a tax credit against their premium taxes up to $50 million in long-term equity for new or expanding businesses. D.C. is also targeting areas deemed as business improvement districts, which have relatively low rents, to rebuild to become strong business centers.


Though the location of a business is a key component in business plans, this study doesn't take into account other factors, such as area taxes, cost of living and saturation of markets. Potential business owners should consider these components before deciding on the perfect place for a business.

Sources used in this study:

  • Unemployment rates by metropolitan statistical area as reported by the Bureau of Labor Statistics.
  • Rental vacancy rates by metropolitan statistical area, number of retail stores per capita, educational attainment and per capita income determined by the U.S. Census.

Tracy Jones is a contributing writer at CreditDonkey, a credit card comparison and financial education website. Write to Tracy Jones at tracy@creditdonkey.com. Our data-driven analysis has been recognized by major news outlets across the country and has helped small business owners make savvy financial and lifestyle decisions. (read more)

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