San Francisco Identified As “The Top City For Small Business”

Tech hubs continue to thrive. Newcomers to the Top 25 list include Pittsburgh, Milwaukee, Kansas City, and Las Vegas.

San Francisco as the “Best Small Business City in America,” based on average annual revenues, credit scores, age of business, and Biz2Credit’s proprietary BizAnalyzer score, which factors in costs, including real estate, labor costs, and taxes, among others.

The annual review of the financial performance of small firms in major U.S. markets examined the financial performance of more 50,000 credit applications from small and midsized businesses across the country for the full prior year (2022). The analysis looked at firms having fewer than 250 employees or less than $10 million in annual revenues.

Last year’s top city, San Jose, dropped to seventh place this year, while No. 2 Baltimore fell off the top 10. Additionally, four cities on last year’s ranking fell off last year’s list entirely (previous year’s rank in parathesis): Lakeland, FL (16); Port St. Lucie, FL (18); Houston (20); and Cleveland (23).

This year’s rankings included several metro areas that were not ranked among the Top 25 Cities for Small Business last year: Pittsburgh (rated No. 10), Milwaukee, Kansas City, and Las Vegas.

Factors to determine the rankings include the local business climate, including rents, labor costs, and local tax rates. Biz2Credit examined the financials of over 50,000 companies that submitted applications for small business loans and financing in 2022.

According to Biz2Credit’s study, the Top 10 Best Small Business Cities in 2022 were:

1. San Francisco, CA
2. Sacramento, CA
3. San Diego, CA
4. New York, NY
5. Boston, MA
6. Los Angeles, CA
7. San Jose, CA
8. Portland, OR
9. Seattle, WA
10. Pittsburgh, PA

Technology hubs, such as San Francisco, San Jose, Boston, New York, and Seattle, rated highly as the tech sector thrived throughout 2022, despite layoffs from some large corporations. The tech boom fuels other industries including real estate, construction, logistics, food and accommodation. It is a case of the rising tide floating all the boats.”

Overall, the weighted average revenues for small businesses increased from $376,000 in 2021 to $441,000 during the 12 months of 2022. Average credit scores for business owners likewise increased to 642 from 633 in 2021. These indicators reflect how the small company economy has rebounded since the pandemic.

The Top 25 Cities for Small Business overall this year are:

2023 Rank (2022 Rank)

1. San Francisco, CA (5)
2. Sacramento, CA (12)
3. San Diego, CA (11)
4. New York, NY (3)
5. Boston, MA (4)
6. Los Angeles, CA (6)
7. San Jose, CA (1)
8. Portland, OR (8)
9. Seattle, WA (14)
10. Pittsburgh, PA (Unranked)
11. Denver, CO (10)
12. Washington, D.C. (7)
13. Riverside, CA (22)
14. Baltimore, MD (2)
15. Milwaukee, WI (Unranked)
16. Kansas City, MO (Unranked)
17. San Antonio, TX (24)
18. Austin, TX (17)
19. Philadelphia, PA (25)
20. Providence, RI (9)
21. Tampa, FL (15)
22. Nashville, TN (21)
23. Orlando, FL (19)
24. Las Vegas, NV (Unranked)
25. Miami, FL (13)

Interestingly, the cities new to the list are relatively lower cost cities, rather than expensive places like San Francisco, San Jose, New York, and Boston. The cost structures in places like Pittsburgh, Milwaukee, and Kansas City are much more affordable than in larger urban areas.”

The Top 10 metro areas by Annual Revenue were:

1. San Francisco: $870,000
2. San Jose: $827,000
3. Austin, TX: $755,000
4. New York: $701,000
5. Los Angeles: $696,000
6. Denver: $682,000
7. Sacramento: $682,000
8. Baltimore: $672,000
9. Boston: $661,000
10. San Antonio: $660,000

Cities with large technology sectors are the ones with the highest revenues. All of the cities in the top 10 averaged higher than $660,000.

The Biz2Credit analysis also examined Age of Business (in months), an indication of startup activity. The #1 spot with the youngest age of business was Milwaukee (55 months).

Age of business is an indication of entrepreneurship and new business growth. Our analysis found that companies are sprouting in places like Milwaukee, Birmingham, AL, and Greenville, SC, which had not made Biz2Credit’s list of Best Small Business Cities before.

When sorted by credit score, tech hubs such as San Francisco, Seattle, and New York had the highest numbers. The nationwide average was 642, up from last year’s 633 average credit score, based on submissions to Biz2Credit’s platform.

1. San Francisco: 660
2. Seattle: 657
3. New York: 656
4. Boston: 655
5. Los Angeles: 654
6. Providence, RI: 653
7. San Jose: 652
8. Denver: 649
9. Sacramento: 647
10. Portland: 647

Despite inflation, many small businesses did well in 2022, and their owners’ rising credit scores reflect that.

The metro areas with the Most Small Business Loan Applications in 2022 were:

1. New York
2. Atlanta
3. Miami
4. Los Angeles
5. Chicago
6. Houston
7. Dallas
8. Philadelphia
9. Orlando
10. Phoenix

The top 10 cities with the youngest Age of Business (in months) were:

1. Milwaukee (55)
2. Birmingham, AL (56)
3. Philadelphia (56)
4. San Jose(57)
5. Detroit (58)
6. Denver (58)
7. Austin, TX (58)
8. Greenville, SC (58)
9. Sacramento (59)
10. Oklahoma City (59)

While the overall economy is still strong, small business owners face unprecedented challenges nonetheless. The labor market is tight, cities are still recovering from the effects of the pandemic, inflation persists, and the Federal Reserve announced another interest rate hike on May 3. However, inflation has indeed slowed, and the Fed signaled that it may not be raising interest rates any further this year.

Click here to view the full Best Small Business Cities study.