North Carolina Ranks High for Small-Business Startups

Home-based and independent agents may want to think about relocating their business to the Tarheel State, where Raleigh and Charlotte both received high honors in the new bizjournals study.

Raleigh is No. 1 in the national rankings, while Charlotte is No. 2.

Bizjournals used a six-part formula to analyze the nation's 100 largest metropolitan areas, searching for the places that are most conducive to the creation and development of small businesses.

The two North Carolina markets emerge as the clear leaders, thanks to their outstanding records in four statistical categories with a direct impact on small-business activity:
    •     Population: Raleigh and Charlotte picked up a combined total of 427,000 new residents between 2002 and 2007. Raleigh grew by 21.2 percent in that five-year period, Charlotte by 17.4 percent. Both dwarfed the national growth rate of 4.8 percent.
    •     Employment: The entire country is endangered by the current recession, the two North Carolina hubs included. But they cushioned any future blow with outstanding job growth during the 2003–08 span—23.0 percent in Raleigh, 15.4 percent in Charlotte. The U.S. gain was 5.8 percent.
    •     Small-business growth: The number of small businesses grew dramatically in both markets from 2005 to 2006, the latest period covered by official statistics. Raleigh led the way with a 4.6 percent rise, followed by Charlotte at 4.0 percent. The national increase was 1.3 percent.
    •     Small-business concentration: The typical U.S. market has 24.57 small businesses for every 1,000 residents. The North Carolina markets enjoy concentrations that are at least 10 percent bigger, with Raleigh at 27.58 per 1,000, Charlotte at 27.07.

Two other markets with North Carolina connections rank among the 30 best metros in the study. Greensboro holds 29th place, and the Virginia Beach-Norfolk metro, which extends into northeastern North Carolina, is 19th.

The highest scores in bizjournals' study went to areas that have prosperous economies, are expanding rapidly and are densely packed with small businesses. (Bizjournals defines a small business as any private-sector employer with 99 or fewer employees.)

Seattle ranks third in the overall standings, putting it just behind Raleigh and Charlotte in terms of small-business vitality. Austin, TX, and Boise, ID, round out the national top five.

The South and West offer a definite advantage for entrepreneurs, accounting for all but one of the 10 metros with the best small-business scores. The South is home to five of the leading markets, the West to four.

The sole exception in the top 10 comes from the East — Portland, ME, which ranks 10th. The highest-rated Midwestern market is Des Moines, IA, in 22nd place.

The 100 markets in bizjournals' study group had a combined total of 197.3 million residents as of mid-2007, equaling 65 percent of the nation's population. They also contained 4.9 million small businesses.

At the very bottom of the new rankings is Detroit, offering further proof that the declining fortunes of the automotive industry have harmed all kinds of small businesses in Michigan.

Employment has fallen 7.5 percent in the Detroit area since 2003, the worst decline anywhere outside of New Orleans, which was devastated by Hurricanes Katrina and Rita in 2005. Detroit also suffers from a weak concentration of small businesses, with only 22.70 per 1,000 residents, nearly 8 percent below the national average.

Also mired in the bottom five are Toledo, OH; Modesto, CA; Dayton, OH; and Rochester, NY.
This is the fourth time that bizjournals has rated the small-business vitality of America's major markets—and Raleigh is the fourth different winner.

Orlando, FL, was No. 1 in the previous rankings, which were released in July 2007. The runners-up were two other Florida markets that were hot at the time: No. 2 Sarasota-Bradenton and No. 3 Miami-Fort Lauderdale. (Florida's 2007 superpowers now rank seventh, 44th and 12th, respectively.) Last place on the 2007 list went to Springfield, MA.

Miami-Fort Lauderdale finished first in January 2006, boosted by what was then a prosperous economy with a rapidly expanding population base. Memphis, TN, finished last.

Portland, ME, was the leader in bizjournals' original standings in January 2005, in large part because it had the nation's highest concentration of small businesses back then, just as it does now. San Jose, CA, occupied last place in the 2005 rankings.

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