BLOG: Study notes best places to set up a biz
AKRON (April 21, 2014) — If you're looking to start a tire dealership, or open another store in a new market, head south to Jacksonville, Fla.
In addition to the lure of warm weather after many of us are brushing off a brutal winter season, Jacksonville is deemed the best city for entrepreneurs to set up shop, according to a study by Wallet Hub, an online financial tool of Evolution Finance Inc. for consumers and small business owners.
Wallet Hub said it used 14 metrics to gauge the relative entrepreneurial opportunities that exist in the 150 largest U.S. cities, based on population. These metrics together encapsulate a city's overall business friendliness by considering the level of overhead involved with opening a business as well as the level of local business competition, the depth of the talent pool, and the cost of living. The metrics included the cities' five-year business survival rate, affordability of office space, educational background of the local labor force, and even the length of the average work day.
Most of the best cities were concentrated in the South and Southwest. The rest of the top five, in order: Fayetteville, N.C.; Augusta, Ga.; Jackson, Miss.; and Memphis, Tenn.
At the bottom of the list was Newark, N.J., behind Providence, R.I., and several cities in California. For a complete list, click here.
What I found surprising was the upside of high unemployment rates in ranking a city. Wallet Hub said entrepreneurs ideally want to open up shop where unemployment far exceeds the number of available jobs, enabling business owners to be selective about who they hire and how much they pay.
For this metric, the economically depressed city of Detroit topped the list with 26-percent unemployment, followed by three cities in California (Stockton, Fresno and Modesto) and Toledo, Ohio.
Some of the other metrics included:
• Average annual salary. Most entrepreneurs need employees but they'd rather not lose their shirt paying high salaries. Therefore, cities with relatively low income levels are extremely attractive. So in Detroit's case, along with its highest unemployment ranking, it also ranked as the city with the lowest salaries, averaging $36,753. Cleveland ($37,245) came in second followed by Hialeah, Fla. ($39,587); Rochester, N.Y. ($42,455); and Toledo ($42,532).
• Lowest cost of living. Local cost of living is important for a few reasons, according to Wallet Hub: It affects pricing and margins for companies, it dictates the wages for employees and, obviously, it determines the entrepreneur's own disposable income at the end of the day. For the most bang for the buck, set up shop in Laredo, Texas. Other top cities in this category included Greensboro, N.C.; Toledo; Springfield, Mo.; and Brownsville, Texas.
• Length of average workday. Fayetteville made the number two spot overall due in part to its people being workaholics, apparently. Many a tire dealer will claim they spend more time in their shop than they do at home. So it can be frustrating when the local workforce is conditioned to punch out at exactly 5 p.m. every day.
Wallet Hub compared the average amount of time people in each city spend at work, with the longest average workday considered optimal. Fayetteville topped this list at 8.38 hours for an average workday, followed by Plano, Texas; Anchorage, Alaska; Las Vegas; and Scottsdale, Ariz.
• Number of businesses per capita. While a bustling business community denotes a strong local economy, it also could indicate a saturated market that cannot support too many more new businesses. For this category, Moreno Valley, Calif., has the lowest number of businesses per capital followed by Fontana, Calif.; North Las Vegas, Nev.; Grand Prairie, Texas; and Port St. Lucie, Fla.
One of the best nuggets of advice included in the report came from David Deeds, director of the Morrison Center for Entrepreneurship at the University of St. Thomas, St. Paul, Minn.: “Do your homework! Research the market in depth. Figure out who your best customers are likely to be and develop a well-thought-out strategy on how you can reach them and convert them to buyers.”
Kathy McCarron is a Tire Business reporter. She can be reached at [email protected]
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