Best Places for New Businesses - 2019 Edition

 

Starting a new business can be a daunting venture. It always carries risk, and no matter how prepared you think you are, success isn’t a guarantee. There are some places in the country, though, that are more hospitable to new businesses than others. To find the cities where entrepreneurs should think about starting their business ventures, SmartAsset analyzed the data and found the cities that are best for new businesses.

Specifically, we analyzed 50 metro areas across the following metrics: new businesses as a percentage of total businesses, startup early survival rate, percentage of all businesses that break even or make profit, percentage of all businesses ceasing operations because of finances, percentage of businesses with a loan from a bank or financial institution and percentage of businesses getting $100,000 or more from a bank or financial institution. For details on our data sources and how we put all the information together to create our final rankings, check out the Data and Methodology section below.

Key Findings

• Western and Southern metro areas populate the top 15. According to Census regional divisions, six of our top 15 metro areas are in Southern states. Five of our top 15 metro areas are in Western states.
• A lot of startups have the potential to succeed. Though long-term success is not guaranteed and results vary by state, an average of almost 80% of startups survive their first year, according to data from the Census Bureau.

 

1. Kansas City, MO-KS 

The Kansas City metro area leads this list. About 85% of startups in Missouri survive their first year, the highest rate in our study. This metro area also has the third-highest percentage of all businesses with a loan from a bank or financial institution, at approximately 19%. New businesses represent 5.3% of all businesses in the metro area.

2. Nashville-Davidson—Murfreesboro—Franklin, TN

The Nashville, Tennessee metro area takes the No. 2 spot on our list. It sees only about 1% of businesses closing because of finances, tied for the third-lowest rate in the study. It has the second-highest percentage of all businesses receiving a business loan from a bank or financial institution - at approximately 20% - and the third-highest percentage of businesses receiving at least $100,000 from a bank or financial institution, at a little more than 17%.

3. Memphis, TN-MS-AR

The list moves across the Volunteer State to the Memphis, Tennessee metro area, which also includes parts of Mississippi and Arkansas. The Memphis metro area leads both banking metrics in this study – about 23% of businesses received a loan from a bank or financial institution, and almost 18% of businesses received at least $100,000 from a bank. The Memphis metro area doesn’t rank very well for new businesses as a percentage of total businesses, however, as just 4.1% of all businesses are new.

4. Minneapolis-St. Paul-Bloomington, MN-WI

The Minneapolis metro area, which also includes Twin City St. Paul and Bloomington in Minnesota, as well as parts of Wisconsin, takes fourth place. The startup early survival rate in Minnesota is 83.9%, the third-highest rate for this metric in the study. The Minneapolis metro area also ranks third overall in terms of the percentage of all businesses that at least break-even, with almost 85% of businesses there meeting that benchmark.

5. Louisville, KY-IN

The Louisville metro area, which spans parts of Kentucky and Indiana, places fifth on our list of the top 10 places for new businesses. Louisville places in the top 10 in four different metrics: almost 84% of all of its businesses in 2016 at least broke even, only about 1.1% of its businesses that year had to cease operations because of finances, more than 18% of its businesses received a loan from a bank and approximately 16% of its businesses received at least $100,000 from a bank or other financial institution.

6. Milwaukee-Waukesha-West Allis, WI

The Milwaukee-Waukesha-West Allis, Wisconsin metro area comes in at No. 6. Almost 18% of all businesses in the area had at least $100,000 from a bank or financial institution, the second-highest rate in this study. The metro area has the fourth-lowest percentage of businesses ceasing operations for financial reasons, 1.2%. Additionally, around 4.3% of the businesses in the Milwaukee metro area are new businesses.

7. Portland-Vancouver-Hillsboro, OR-WA

The Portland, Oregon metro area, which also includes parts of Washington State, is seventh. This metro area ranks 11th overall for percentage of new businesses, at 5.7%. Portland ranks first overall for percentage of all businesses breaking even, at 85.3%, and is tied for the third-lowest percentage of all businesses closing because of financial reasons, at 1%.

8. Riverside-San Bernardino-Ontario, CA

The metro area around Riverside, California includes San Bernardino and Ontario, and ranks eighth in our study on the best places for new businesses. California boasts a startup survival rate of 82.3%, the fifth-best in this study. This metro area ranks in the top 20 of the study for three metrics: new businesses as a percentage of all businesses, at 5.2%; percentage of all businesses that had profits or broke even, at 82.6% and percentage of all businesses that received at least $100,000 from banks and other financial institutions, at 14.1%.

9. Boston-Cambridge-Newton, MA-NH

The Boston-Cambridge-Newton, Massachusetts-New Hampshire metro snags the ninth spot in our list. It has a state startup survival rate of 82.7%, the fourth-highest of all 50 metro areas in our study. While it does not score well for new businesses as a percentage of all businesses (at 3.4%, it ranks in the bottom 10 for this metric overall), it still ranks in the top half of the study for four of the other five metrics we considered.

10. Charlotte-Concord-Gastonia, NC-SC

The final metropolitan area in our top 10 is Charlotte-Concord-Gastonia, North Carolina-South Carolina. Around 6.3% of the businesses in the area are new, the fourth-highest rate for this metric in the study. The Charlotte metro area ranks 13th overall for percentage of businesses that received $100,000 or more from banks and other financial institutions, at 14.8%, and ranks 21st overall for percentage of all businesses that had profits or broke even, at 82.5%.

To find the best places in America to start a new business, we analyzed data for the 50 largest metro areas across the following metrics:

• New businesses as a percentage of total businesses. Data comes from the Census Bureau’s 2016 Annual Survey of Entrepreneurs.
• Startup early survival rate (by state). Data comes from the Census Bureau’s 2016 Annual Survey of Entrepreneurs. This metric counts all the startups that survive at least one year.
• Percentage of all businesses that had profits or broke even. Data comes from the Census Bureau’s 2016 Annual Survey of Entrepreneurs.
• Percentage of all businesses ceasing operations because of finances. Data comes from the Census Bureau’s 2016 Annual Survey of Entrepreneurs.
• Percentage of all businesses with a business loan from a bank or financial institution. Data comes from the Census Bureau’s 2016 Annual Survey of Entrepreneurs.
• Percentage of all businesses receiving a loan of at least $100,000 from a bank or financial institution. Data comes from the Census Bureau’s 2016 Annual Survey of Entrepreneurs.

First, we ranked each metro area in each metric. We then found the average of all rankings for each metro area, giving each metric equal weight except for the two relating to bank loans, which each received a half weight. We used that average ranking to find the final scores for each metro area. The metro area with the highest average ranking received a score of 100, while the metro area with the lowest average ranking received a score of 0.

Tips on Managing your Money

• Smart business advice. If you are looking to start a new business, consider working with a financial advisor. SmartAsset's free tool matches you with financial advisors in your area in 5 minutes. If you’re ready to be matched with local advisors that will help you achieve your financial goals, get started now.
• Budgeting is key. A budget can help you put aside money to invest in a small business, if you want to. Use a comprehensive budget calculator to see how you can optimize your savings.

Questions about our study? Contact us at press@smartasset.com