The Best Small and Large Cities to Start a Small Business
WalletHub ranks municipalities eager to welcome innovation
If you had your choice of any city across the U.S. to start a small business, where would you turn?
WalletHub, a personal finance firm, provided some guidelines to this question via its 2017 Best Small and Large Cities to Start a Business report.
In the report, WalletHub’s analysts compared more than 1,200 small-sized cities across 16 key metrics, ranging from average growth in the number of small and large businesses to investor access to labor costs.
Considering the firm’s findings, The NEWS reached out to contractors and manufacturers living in some of these cities and asked their opinions on the places they call home.
Small-town life offers a lot of perks that larger cities do not, including close personal and professional relationships, less overhead costs, and the opportunity to stand out with less competition. When asked to comment on the pros and cons of starting a small business, Gary Archamboult, project director in the small business development center at the University of South Dakota — small business innovation research, answered: “The smaller the community, the more important the start-up business. While initial public offerings [IPOs] may get noticed in big cities, start-ups get noticed in small cities; support networks in small cities can be more easily navigated with two degrees of separation; more attention and business mentoring from local investor groups are available; burn rate businesses can be started and grow with limited cash, which means you can get to a breakeven point much quicker; and workers seem to be more loyal.”
According to the data, out of the 20 cities listed, Holland, Michigan, ranked the No. 1 best small city to start a business in for the second consecutive year.
For Baumann & DeGroot Heating and Cooling, a residential HVAC company based along west Michigan’s coastline, this information is accurate.
“Holland, Michigan, is a great place to operate out of because there is a blurred line between business and the community; we are one in the same,” said Chris Baumann, service dispatcher and sales marketing manager, Baumann & DeGroot Heating and Cooling. “Most of our staff were born and raised in the area, go to church in the area, and are heavily invested in this community. The community rallies around, and is invested in, the success of companies, such as Baumann & DeGroot. Our customers care about the wellbeing of our employees and company, and we look out for our customers.
“Our community of Holland is built on trust,” Baumann continued. “We make an honest living by charging honest prices to honest people. Our customers know and believe we have their best interests in mind. Taking care of them, in turn, takes care of us.”
Baumann says there are perks to living in a small town, like Holland, and Baumann & DeGroot absolutely capitalizes on these.
“Holland has a much lower cost of living than average in the U.S., and we are perfectly content with that. Our labor costs, property costs, and taxes trend lower than the rest of the country. This helps foster a very competitive business environment.”
In addition, Baumann contributes Holland’s climate as a reason why they are consistently busy throughout the year.
“Our weather is perfect for heating and cooling,” he said. “Our winters are cold and dry, and our summers are hot and humid. A full spectrum of heating, cooling, and IAQ products are in high demand.”
However, it’s not all easy all of the time. Being in a small town has created some difficulties for the business.
“Our biggest challenge has been managing growth,” said Baumann. “We have a great company atmosphere and have very little turnover; however, finding young people who have an interest in pursuing a trade rather than a college degree has been a continual challenge. We have struggled to develop a pipeline of potential hires waiting in the wings. Being in a smaller metropolis, typical employment websites are of little help. Working with Indeed.com or HVAC-specific employment websites has proven to be a waste of money. There are generally 20-plus HVAC companies hiring and one to two active job seekers within 50 miles.”
Overall, Baumann & DeGroot Heating and Cooling credits its overarching success to the community, and ownership hopes to continue forward with similar success.
“We are who we are because of our community,” said Baumann. “Baumann & DeGroot has been in business 20-plus years now, and we owe all of our success to the greater Holland area. We look forward to continued investment in the community that has invested so much in us.”
BRIGHT LIGHTS, BIG CITY
Living in a large city often opens doors that are unattainable elsewhere. That’s why many people gravitate toward metropolises when opening a business. To many, more people means more money. WalletHub’s analysts compared the relative start-up opportunities that exist in the 150 most populated U.S. cities. They did so using 18 key metrics, ranging from five-year business-survival rate to office-space affordability.
According to Jeff Street, associate professor of management in the college of business at Idaho State University and director of The Center for Entrepreneurship and Economic Development (CEED), population is both the major advantage and disadvantage when considering starting a business in a large city.
“The advantage of a big city is population density; the disadvantage is also population density,” Street said. “How do you stand out in a crowd? The good news is, most of us have a collectivist side and prefer to live in a village near others with like interests. Hence, the big city usually can be broken down into small townships with similar demographics.”
So, what advice did Street give for those looking to start a business in a big city?
“Do your homework by using the local-government-generated data about the various population segments of the big city,” he said. “Undertake your start-up in the township or community that most aligns with your target market research. Then, once successful, expand to the next area most similar to your target market or stay in the same community. As they say, the best way to eat an elephant is one bite at a time.”
St. Louis landed at No. 7 on WalletHub’s large city segment.
Butch Welsch, owner of Welsch Heating & Cooling, said his family operation — which has been passed down from generation to generation — has operated in St. Louis for 122 years.
“I didn’t [select this location], but I would if I had to do it,” he said. “I like the fact that here in St. Louis we get cold in the winter and hot in the summer, which provides ample opportunity for contractors to show their value in both the winter and summer. Our temperature extremes are not like most cities.”
Being in a big city that experienced a boom in construction during the 90s has allowed Welsch to maintain a large amount of contacts for many years.
“When new residential construction was going very strong in the mid to late 90s, we were doing mostly new construction work,” Welsch said. “We installed thousands of HVAC systems in those homes during that boom period. Now that 20 years or so have gone by, those installations are providing us with a tremendous service and replacement market. In smaller areas, which didn’t have those strong new construction times, we would have much more trouble surviving with the amount of competition we face.”
Lubbock Texas ranked No. 13 on the large city segment of WalletHub’s study.
As an HVAC manufacturer in the area, Genesis Air Inc. has reaped the benefits of being in a large city because there is a large pool of employees.
“Lubbock has a skilled workforce and a low unemployment rate,” said Paul Roberts, applications/field super, Genesis Air. “We have a very small turnover rate, and our employees are happy. The majority of our workforce has been here since its inception.”
Houston ranked No. 18 on the list, and Chris Crawford, operations manager, Vanderford Air, has enjoyed both living and operating his business in the city.
“There’s no shortage of anything in Houston,” he said. “I come from a small town atmosphere, where everyone knows everyone, and there is a limited level of what the demand is going to be for product selling for your business. Here, that isn’t true. It’s such a big place that we put ourselves in a 30-square-mile service area radius, and we have more business than we could ever take. We could expand our services and triple our size in a year if we wanted to.”
Large towns present different areas with different demands and needs. Crawford said he’s absolutely benefited from this level of diversity.
“The north side is all about businesses, so there’s that need there,” he said. “The south side is closer to Galveston, so people are all about boating and the water, which provides a humidity factor. Then, there is the east side, which is closer to Louisiana and the bayou areas. Every side has its own traits and personalities that make it unique in the scheme of things.”
While living in a big city can be great, there is a downfall — competition.
“The HVAC competition is tremendous. I don’t know how many [HVAC businesses] there are, but I would guess more than a thousand,” said Crawford. “There are small mom and pop shops, mid-range guys who make $5 million to $6 million, and then the big guys who earn $50 million or more. There is a tremendous amount of opportunity.”
“Truthfully, it isn’t all that great living in a big city,” said Welsch. “We have 724 competitors, and every time I drive on the highway, I see a van with the name of a new HVAC company on the side. It is very competitive in St. Louis. We are a union contractor, and there are only about 14 or 15 other union contractors that participate in the residential market. That leaves 710 non-union contractors out there to compete with us.”
According to WalletHub, the following have been listed as2017’s Best Large and Small Cities to Start a Business:
Top 20 Large Cities to Start a Business
1 Oklahoma City
2 Salt Lake City
3 Charlotte, North Carolina
4 Tulsa, Oklahoma
5 Grand Rapids, Michigan
6 Durham, North Carolina
7 St. Louis
8 Austin, Texas
9 Amarillo, Texas
10 Sioux Falls, South Dakota
11 Springfield, Missouri
12 Raleigh, North Carolina
13 Lubbock, Texas
14 Port St. Lucie, Florida
15 Laredo, Texas
16 Lincoln, Nebraska
17 Winston-Salem, North Carolina
19 Orlando, Florida
20 Fort Worth, Texas
Top 20 Small Cities to Start a Business
1 Holland, Michigan
2 Carbondale, Illinois
3 Springville, Utah
4 East Chicago, Indiana
5 Jefferson City, Missouri
6 Wilson, North Carolina
7 Enid, Oklahoma
8 Rio Rancho, New Mexico
9 Clearfield, Utah
10 Cheyenne, Wyoming
11 Irondequoit, New York
12 Hobbs, New Mexico
13 La Vergne, Tennessee
14 Tonawanda, New York
15 North Chicago, Illinois
16 Superior, Wisconsin
17 Deer Park, Texas
18 Big Spring, Texas
19 Maryland Heights, Missouri
20 Grand Island, Nebraska
Publication date: 9/4/2017