The appeal of starting a business is substantial anywhere, but its location can often play a pivotal role in its survival and success.
Entrepreneurship often thrives in places that offer the right mix of resources, support, and market opportunities. In regions with a strong or growing economy, businesses have the opportunity to connect with a broad customer base and recruit top-tier talent, amplifying their growth potential. Certain locales also nurture a more business-friendly environment through lower operating costs, including taxes, wages, and rent, and supportive legislation.
This year, traditional powerhouses such as New York City, San Francisco, and Boston did not feature among the top 20. While these cities have historically been known for their vibrant startup cultures, high tax rates and business operating costs may have deterred new ventures, particularly for San Francisco and Boston (which experienced an 11% and 13% drop in new business applications from 2021 to 2022, respectively). Instead, several mid-sized cities with fewer than 250,000 residents made the list. This trend underscores the notion that a sprawling metropolis isn’t a prerequisite for new business success. In fact, less populous cities offer their own unique advantages, such as lower costs and a tightly-knit community, which can be vital for businesses in their early stages.
To identify the top cities fostering new business growth in 2023, the data and research team at Swyft Filings turned to the most recent data from the United States Census Bureau, the Bureau of Economic Analysis (BEA), and other government sources. They evaluated the 300 most populous cities in the U.S. on key factors such as the rate of new business formations and business climate favorability.
Without further ado, here are the top 20 cities whose residents are the most likely to have brought their business ideas to life, and where the business environment is best positioned to foster long-term success.
Key Findings
National averages: In 2022, about 1.5% of the population, or 15 out of every 1,000 people, submitted a new business application. Despite this substantial figure, business applications in the United States declined overall between 2021 and 2022 by 6.24%.
Regional differences: Regional disparities are evident when examining new business applications per capita in 2022 and the year-over-year change in these applications. The South exhibits the highest rate of new business applications per capita, with 18 for every 1,000 residents, on average. On the other hand, the West, Northeast, and Midwest present lower rates of 14, 13, and 12 applications per 1,000 residents, respectively. In terms of yearly change from 2021 to 2022, all regions experienced a decrease in new business applications. The West saw a dip of just 1.96%, while sharper declines were observed in the Northeast (6.06%), the South (7.64%), and the Midwest (7.79%).
Tax rates and new business applications are inversely related: An analysis of new business applications per capita in 2022 across the 300 most populous cities in the U.S. revealed a low inverse correlation with personal income tax, corporate income tax, and state sales tax rates in those cities, Pearson’s r = -0.25, -0.15, and -0.16, respectively. While these findings provide an interesting correlation, it's important to remember that they do not demonstrate a direct cause-effect relationship.
Methodology
To identify the best cities for new businesses, the data and research team at Swyft Filings ranked the 300 most populous cities in the United States using a composite score of factors across five key dimensions: new business applications, historic business survival data, economic health and workforce productivity, the cost of doing business, and new business support.
New business applications: 50% of composite score
New business applications as a percentage of the population (2022) [1], [2].
Change in new business applications from 2021 to 2022 [1].
Historic business survival data: 15% of composite score
1-year business survival rate [3].
5-year business survival rate [3].
Average business size after 5 years [3].
Economic health and workforce productivity: 15% of composite score
GDP per capita [4].
Cost of doing business: 10% of composite score
Regional price parity data by state and metro area [5].
Personal income tax rate [6].
Corporate income tax rate [6].
State sales tax rate [7].
New business support via SBA loans: 10% of composite score
SBA 7(a) loans: average dollar amount per loan [8].
SBA 7(a) loans: private lenders per capita [8].
SBA 7(a) loans: loans granted per capita [8].
Some data were available only at the state level and not at the city level. This means that each city was either helped or harmed by the business environment within its state.
The methodology used to approximate new business applications per 1,000 residents, along with the change in these applications between 2021 and 2022 at the city level, relied on county-level business application data and population statistics [9]. The data and research team at Swyft Filings derived the rate of new business applications per 1,000 residents for each county by dividing the number of new applications by the county's population.
When considering cities that spanned multiple counties, they implemented a weighted average method. The weighting took into account the proportion of the city's population that came from each corresponding county. This approach offered a more accurate city-level approximation by representing the mixed population sources of these cities.
Top Cities Encouraging Business Growth in 2023
20. Plano, Texas
Population: 289,547
Composite score: 53.17
Business applications 1,000 residents, 2022: 20
Change in business applications, 2021-2022: -2.30%
19. Jersey City, New Jersey
Population: 286,670
Composite score: 53.21
Business applications per 1,000 residents, 2022: 19
Change in business applications, 2021-2022: -2.94%
18. McKinney, Texas
Population: 207,507
Composite score: 53.23
Business applications per 1,000 residents, 2022: 20
Change in business applications, 2021-2022: -2.27%
17. Fort Lauderdale, Florida
Population: 183,146
Composite score: 53.38
Business applications per 1,000 residents, 2022: 39
Change in business applications, 2021-2022: -9.03%
16. Spokane, Washington
Population: 107,325
Composite score: 53.97
Business applications per 1,000 residents, 2022: 13
Change in business applications, 2021-2022: +1.82%
15. Paterson, New Jersey
Population: 156,661
Composite score: 54.22
Business applications per 1,000 residents, 2022: 18
Change in business applications, 2021-2022: -0.89%
14. Roseville, California
Population: 154,817
Composite score: 54.38
Business applications per 1,000 residents, 2022: 11
Change in business applications, 2021-2022: +3.88%
13. Cape Coral, Florida
Population: 216,992
Composite score: 54.60
Business applications per 1,000 residents, 2022: 23
Change in business applications, 2021-2022: +4.22%
12. Tyler, Texas
Population: 109,286
Composite score: 54.95
Business applications per 1,000 residents, 2022: 14
Change in business applications, 2021-2022: +4.71%
11. Austin, Texas
Population: 974,447
Composite score: 54.96
Business applications per 1,000 residents, 2022: 23
Change in business applications, 2021-2022: -1.57%
10. Sioux Falls, South Dakota
Population: 202,078
Composite score: 55.25
Business applications per 1,000 residents, 2022: 14
Change in business applications, 2021-2022: 1.26%
9. Midland, Texas
Population: 134,444
Composite score: 55.40
Business applications per 1,000 residents, 2022: 20
Change in business applications, 2021-2022: +1.36%
8. St. Petersburg, Florida
Population: 261,256
Composite score: 56.40
Business applications per 1,000 residents, 2022: 27
Change in business applications, 2021-2022: +3.69%
7. Anchorage, Alaska
Population: 287,145
Composite score: 56.60
Business applications per 1,000 residents: 13
Change in business applications, 2021-2022: +9.61%
6. Greeley, Colorado
Population: 109,209
Composite score: 58.43
Business applications per 1,000 residents, 2022: 16
Change in business applications, 2021-2022: +6.77%
5. Sacramento, California
Population: 528,001
Composite score: 58.75
Business applications per 1,000 residents, 2022: 15
Change in business applications, 2021-2022: +7.07%
4. Miami, Florida
Population: 449,514
Composite score: 59.57
Business applications per 1,000 residents, 2022: 48
Change in business applications, 2021-2022: -6.05%
3. Mobile, Alabama
Population: 183,289
Composite score: 59.86
Business applications per 1,000 residents, 2022: 24
Change in business applications, 2021-2022: +11.50%
2. Denver, Colorado
Population: 713,252
Composite score: 61.04
Business applications per 1,000 residents, 2022: 29
Change in business applications, 2021-2022: +1.11%
1. Colorado Springs, Colorado
Population: 486,248
Composite score: 63.63
Business applications per 1,000 residents, 2022: 20
Change in business applications, 2021-2022: +11.35%
Bibliography
United States Census Bureau. “Business Formation Statistics - Annual County Data.” Accessed July 18, 2023.
United States Census Bureau. “County Population Totals and Components of Change: 2020-2022.” Accessed July 19, 2023.
Bureau of Labor Statistics. “Establishment Age and Survival Data.” Accessed June 12, 2023.
Bureau of Economic Analysis. “GDP by State.” Accessed July 18, 2023.
Bureau of Economic Analysis. “Regional Price Parities by State and Metro Area.” Accessed July 18, 2023.
Individual state government websites for all 50 states. Accessed July 18, 2023.
Tax-Rates.org. “2023 Local Sales Taxes By State.” Accessed July 18, 2023.
U.S. Small Business Administration. “Lender Reports.” Accessed June 18, 2023.
United States Census Bureau. “City and Town Population Totals: 2020-2022.” Accessed July 25, 2023.
All charts, statistics, and findings on this page are free to use. We kindly request that you attribute any full or partial use to Swyft Filings with a link to this page. Thank you!
