Small Business News

Study Ranks Best and Worst Cities to Start a Small Business

When starting a new business, there are several factors that can affect how successful you and your business are. In addition to things like competition and market size, sometimes the demographics and economy of where you choose to set up shop can also have an impact on your profitability (or lack thereof). With that in mind, LendingTree recently released a study ranking 50 cities on how good they were for opening a new small business.

In terms of methodology, LendingTree utilized a few pieces of data and set some parameters to create their list. First off they only used data from businesses that had applied for loans on the platform between January 1st, 2016 and January 23rd, 2018. Moreover businesses bringing in more than $7,500,000 annually were excluded as were businesses that had existed for less than six months or more than 60 months. Lastly, to score each of the 50 most popular cities in the country, LendingTree considered the annual revenues of business in each area as well as the percentage of them that reported being profitable.

Topping the list of the best cities to open a small business was Sacramento, California where the average annual revenue was found to be $315,661 and 84.3% of applying businesses were profitable. Incidentally, Sacramento was one of three California cities to make the top 10 as Fresno and Los Angeles placed ninth and tenth respectively. In fourth place, Knoxville, Tennessee actually saw the highest profitability percentage (86.8%), although its $241, 841 annual revenue figure was the second lowest of the top 10, topping only Oklahoma City’s $238,758. Rounding out the top five were Grand Rapids, Michigan; Portland, Oregon; and Denver, Colorado.

As for the worst cities to open a business, Cincinnati, Ohio had the dubious distinction of placing last. The Kentucky-bordering city was found to have a profitability rate of just 79.8% and an average annual revenue of $198,374. While Cincinnati’s combined figures earned it the 50th spot, other cities had lower revenues or profitability percentages. For example it was Chicago’s 78.2% profitability that marked the lowest figure despite it placing 41st overall. Meanwhile 42nd-placed Virginia Beach, Virginia saw the lowest average revenue at $197, 585. Joining Cincinnati in the bottom five were Rochester, New York; Philadelphia, Pennsylvania; Louisville, Kentucky; and Birmingham, Alabama.

Obviously, by limiting it to only LendingTree applicants and using self-reported data, this study wasn’t the most scientific. Moreover, as mentioned at the top, there are so many factors that can dictate the success of a business that a study like this is always likely to overemphasize a single aspect of a much larger story. All that said it is interesting to see where newer small businesses seem to be performing well and could serve to motivate entrepreneurs wherever they may be.

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