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Best states for growing a small business

If you're seeking the ideal place to grow a small business, Florida is the state for you. Four of America's five best markets for small businesses are in Florida, led by No. 1 Orlando, according to a new Bizjournals study.
Urban Sprawl Consumes Areas Surrounding Orlando
A sign in a window announces building space for rent in Orlando, Fla. The city is one of the best places to grow a small business, according to Platt / Getty Images file
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If you're seeking the ideal place to grow a small business, Florida is the state for you. Four of America's five best markets for small businesses are in Florida, led by No. 1 Orlando, according to a new Bizjournals study.

"Construction has scaled back, but we're still seeing substantial growth in Florida," says Mark Vitner, senior economist for Wachovia Corp. "The numbers for new-business formation are strong in virtually every major market. Overall, Florida remains a very good place to do business."

Florida's top-rated markets are scattered throughout the state. Orlando is the economic hub of central Florida, No. 2 Sarasota-Bradenton overlooks the Gulf of Mexico, No. 3 Miami-Fort Lauderdale is a gateway to the Caribbean, and No. 5 Jacksonville hugs the Atlantic coast 350 miles north of Miami.

These four markets, despite their diverse locations, share several attributes. Each has experienced rapid growth since 2000 in population, employment and the number of small businesses.

Bizjournals used a 12-part formula to rate small-business vitality in the nation's 75 largest metropolitan areas.

The 75 markets, taken as a group, had 179 million residents as of mid-2005, accounting for 60 percent of the nation's total population. They also included 4.5 million small businesses, a number that rose by 7 percent between 2000 and 2005.

The study's objective was to identify those metros that are most conducive to the creation and development of small businesses.

The highest scores 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.)

Orlando's broad record of economic strength vaults it to the top of the standings. It's the only market to rank among the 10 national leaders for population growth, small-business creation, and small-business concentration.

The latter category compares each market's number of small businesses with its population. Orlando's ratio of 2,821 small businesses per 100,000 residents is 16 percent better than the study group's average of 2,439 per 100,000.

"Orlando is going full speed ahead," says Vitner. "Most people think of it as Disney World and Mickey Mouse, but it's much more than tourism. It has a tremendously diverse base of industries -- high-tech, software development, defense, benefits administration, video-game manufacturing."

Four metros, including two in Florida, have more than 3,000 small businesses per 100,000 residents. Miami-Fort Lauderdale's ratio of 3,161 is the nation's highest concentration, followed by Bridgeport-Stamford, Conn. (3,094), Sarasota-Bradenton (3,067) and Denver (3,043).

The highest-rated market outside of Florida in the overall standings is Las Vegas, which ranks fourth on Bizjournals' list. Las Vegas is the national leader in population growth, adding 335,000 people between 2000 and 2005, an increase of 24.3 percent.

Sixth through 10th on the list of America's best markets for small businesses are Raleigh, Washington, Salt Lake City, Oxnard-Thousand Oaks, Calif., and Minneapolis-St. Paul.

The high rankings earned by Las Vegas and Salt Lake City are proof that the Intermountain West has become a growth center for small businesses. A third market in the region, Denver, holds 11th place.

"Residents of the Rocky Mountain states have typically had a more entrepreneurial mindset than found in the East and the South," says Jeff Thredgold, president of Thredgold Economic Associates in Clearfield, Utah. "Tax rates are typically lower in the mountain states, while the regulatory burden involved in creating a business is much less painful than found in the Northeast."

Springfield, Mass., sits at the bottom of the standings, which means that it's America's weakest major market for small-business vitality, according to the study.

Springfield has only 2,213 small businesses per 100,000 residents, a concentration that is 22 percent smaller than Orlando's. The number of small businesses in the Springfield area has declined 8.4 percent in five years. And local population has been virtually flat since the beginning of the decade.

Also mired in the bottom five are El Paso, Texas; Dayton, Ohio; New Orleans and Memphis.

This is the third time that Bizjournals has rated the vitality of small-business sectors. Miami-Fort Lauderdale was No. 1 in the previous rankings, which were released in January 2006. Memphis finished last on that list, which was confined to the nation's 50 largest markets.

Portland, Maine, was the leader in Bizjournals' original standings in January 2005, while San Jose occupied last place. Those rankings encompassed the 91 markets that had at least 500,000 residents at the time.