A runner passes the Cisco Systems headquarters in San Jose on Monday, February 8, 2021. Photographer: … [+]
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Tech Hub conquers the crown despite a pandemic year
Biz2Credit has identified San Jose as the “Best Small Business City in America” based on average annual sales, credit scores, company age, and the BizAnalyzer score developed by Biz2Credit, which takes into account the local business climate including rents, labor costs, and Tax rates. The analysis examined the financial data of 32,000 companies that applied for small business loans – including companies that applied for PPP loans in 2020.
San Jose ousted San Francisco from the top of the 2019 rankings. The other metropolitan areas in the top ten small business growth 2020 were: San Diego, Los Angeles, Boston, San Francisco-Oakland, New York, Tampa-St. Petersburg, Seattle and Sacramento.
In these top 10 metropolitan areas, the leading industries were: 1) professional, scientific and technical services, 2) retail, and 3) other services (other than public administration). Although the cities in the center of these metropolitan areas receive the most recognition, the study measures metropolitan areas based on Census Bureau tracts, which cover a much more diverse range of businesses in an area than just those in city centers.
Overall, the average annual revenue for small businesses decreased to $ 689,000 in 2020 from $ 771,000 in 2019, a decrease of 10.6%. This reflects the direct impact of the coronavirus economic toll on small businesses, many of which have had to close due to measures taken to contain the pandemic.
Somewhat surprisingly, the average business owner credit scores rose 3.4% from 597 in 2019 to 617 in 2020. In fact, consumer credit scores have risen across the board due to the much higher savings rate due to pandemic closings. Based on the results of the study, this also applies to business owners who may have been able to save on rent or other outstanding debt during government-mandated closure periods.
This suggests that the heavy reliance on credit scores is a flawed predictor of business performance, but many lenders continue to use it as a primary factor in business loan decisions. A wider range of factors should come into play to make smart credit decisions, especially when serving the smallest small business.
Although real estate experts say suburban markets are booming because city dwellers want to escape the population density of urban areas and work from home, new research shows that strong economic foundations in big cities keep them alive and attractive to small businesses. A major hub for the tech industry, San Jose, CA has benefited from and sustained a resilient economy for small businesses despite the pandemic.
The technology industry in Silicon Valley continues to thrive, with San Jose taking center stage. Miami with its diverse economy remains high-profile. Just two years ago it was the number one small town in the country and is still at the top of the list. It benefits from being in a state where coronavirus mitigation restrictions have been less stringent for businesses.
For this analysis, “small businesses” were defined as those with fewer than 250 employees or annual sales of less than $ 10 million. The top 25 cities for small businesses in 2020 (with 2019 ranking in brackets) are:
2020 rank city (2019 rank)
1. San Jose, CA (4)
2. Miami-Fort Lauderdale, FL (3)
3. San Diego, CA (6)
4. Los Angeles, CA (5)
5. Boston, MA (8)
6. San Francisco-Oakland, CA (1)
7. New York, NY (2)
8. Tampa-St. Petersburg, FL (unrated)
9. Seattle, WA (9)
10. Sacramento, CA (21)
11. Orlando, FL (unrated)
12. Washington, DC (7)
13. Baltimore, MD (10)
14. Denver, CO (unclassified)
15. Raleigh, NC (22)
16. Portland, OR (13)
17. Philadelphia, PA (18)
18. St. Louis, MO (unclassified)
19. Charlotte, NC (20)
20. Chicago, IL (14)
21. Riverside, CA (12)
22. Minneapolis-St. Paul (25)
23. Detroit, MI (11)
24. San Antonio, TX (unrated)
25. Phoenix, AZ (16)
Tampa-St. Pete, Orlando, Denver, St. Louis, and San Antonio were not ranked in the 2019 study. Places that were on the 2019 list but dropped off the 2020 list this year were Austin (15), Milwaukee (17), Cincinnati (19), Pittsburgh (23), and Atlanta (24).
Small businesses in technology centers are booming. The top 10 subway areas of annual sales (* Average annual sales measured in 2020):
1. San Jose, CA: $ 1,280,602
2. Miami-Ft. Lauderdale: $ 1,056,919
3. New York, NY: $ 1,035,781
4. Seattle, WA: $ 1,022,581
5. San Diego, CA: $ 1,019,886
6. Los Angeles, CA: $ 961,298
7. San Francisco-Oakland: $ 882,112
8. Tampa-St. Pete, FL: $ 844,073
9. Portland, OR: $ 832,234
10. Washington, DC: $ 795,106
Many of these companies can easily allow their employees to work from home, which has been proven to increase productivity. Places like Las Vegas, which thrives heavily on tourism and related industries, suffered badly from the pandemic in 2020.
If sorted by Age of businessCities in the Midwest and South had the youngest median age, an indication of startup activity and growth. Indianapolis has become a logistics hub, while the growth of new businesses in Phoenix, Dallas, Houston and Orlando is an indication of the population trend as cities in warmer, business-friendly states have become increasingly popular places to live. The top 10 cities with the youngest companies (in months) were:
1. Indianapolis, IN: 62
2. Phoenix, AZ: 62
3. Dallas-Ft. Worth, TX 63
4. Houston, TX 64
5. St. Louis, MO 64
6. Raleigh, NC 65
7. Chicago, IL 66
8. Birmingham, AL 67
9. Orlando, FL 70
10. Denver, CO 70
With the exception of Indianapolis, which is a major logistics hub, launch activity has been in warm weather locations such as Phoenix, Dallas-Ft. Worth and Houston.
If sorted by Credit scoreTech hubs like San Jose, San Francisco, New York, and Boston had the highest numbers.
1. San Jose, CA: 650
2. San Francisco-Oakland 641
3. Los Angeles: 640
4. New York, NY: 638
5. Boston, MA: 637
6. Washington, DC: 635
7. San Diego, CA: 635
8. Raleigh, NC: 632
9. Miami-Ft. Lauderdale: 631
10. Tampa-St. Pete, FL: 629
Credit scores tend to be better in areas where annual earnings are strong.