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Jacksonville Competing in the Top of the Pack for Small Business

Jacksonville Competing in the Top of the Pack for Small Business

What makes a city great for small businesses - and how does Jacksonville fare?

Article by James Cannon, Jacksonville Business Journal, April 29, 2016  READ FULL ARTICLE HERE

Although Jacksonville isn’t ranked as the best city in the country to start a small business, it’s definitely competing in the top of the pack and can boast that it is in the second-best state in terms of friendliness to small businesses.

The city placed 30th out of more than 100 major metropolitan areas in an American City Business Journals study of small business vitality across America, with some metrics showing a sense of optimism might be warranted.

The 16-part formula used to assess cities’ small-business climates placed Jacksonville in the 50th percentile or better in all metrics, with the city scoring as high as 16th place when small business growth is limited to year-over-year gains.

Austin came in first in the ranking, with three Florida cities taking the runner-up slots: Miami in second place, Cape Coral-Fort Myers in third and Sarasota-Bradenton in fourth.

These and the other cities near the top of the standings earned high marks for being fertile metros for the creation and development of small businesses, defined as enterprises with one to 99 paid employees.

Here are the five vital qualities these small-business hot spots share, in descending order of importance:

1. The local count of small businesses is growing rapidly.

It’s logical that the clearest indication of a positive climate for entrepreneurs would be a strong increase in the number of small businesses.  A statistical correlation test of the 16-part ACBJ formula found the two most important categories were small-business growth rates over three- and one-year intervals.  That explains why Austin was ranked as the nation’s best market overall. The number of small businesses there grew by 9.7 percent during the most recent three-year period, which was nearly three points better than anyplace else.

Provo, Utah, came next with a three-year growth rate of 6.8 percent, followed by four metros in the range between 5 percent and 6 percent: Miami; Houston; McAllen-Edinburg, Texas; and Cape Coral-Fort Myers, Florida. All of these markets finished in the upper third of the overall small-business rankings. Although Jacksonville fell into a respectable top third of all metros analyzed for overall business friendliness, the city was near the top of the pack for growth within one year — 16th place with more than 1.6 percent growth.

“We’re very optimistic about small business growth in Jacksonville,” said Susan Verbeck, senior vice president of lending for Community First Credit Union. “The fundamentals are there; residential and commercial development has picked up significantly. We’re seeing a lot of small business owners willing to take more risk and debt because our market has stabilized.”

The credit union’s Small Business Administration loan numbers mirror the executive’s optimism. She said not only did Community First exceed its 2015 lending goal, it has already surpassed more than 35 percent of its 2016 goal.  “This marks our highest level of [SBA] lending to date,” Verbeck said.  But Community First isn’t the only financial services provider bullish on Jacksonville’s small business environment: FirstAtlantic Bank is doubling down on its efforts to bring SBA loans to customers.  The bank’s president, Mitchell Hunt, said he has expanded his SBA loan division and the tools available for his clients because of the city’s favorable climate.

2. Population is expanding briskly.

This is a chicken-and-egg proposition. Does an increase in the number of small businesses (and hence in the number of jobs) attract more people to an area? Or does an upswing in population create more opportunities for entrepreneurs?  It’s impossible to pinpoint a single answer, but no one can deny that population growth is an important predictor of small-business success.

Austin led the group again. Texas’ capital region added 161,210 people during the most recent three-year span, the equivalent of 147 newcomers each day. Its growth rate of 9.1 percent was a point and a half ahead of the runner-up, Cape Coral-Fort Myers.  Rounding out the top five for population growth were Houston; Raleigh, North Carolina; and the Charleston, South Carolina region. The five leaders in this category all ranked among the best 18 metros in the final standings.

Despite Jacksonville’s lackluster population growth during a three-year period — 28th in the country with more than 4.2 percent increase in population — the city has experienced a greater growth rate in the past year, placing 20th with a 1.65 percent population increase.

3. There is a deep stock of budding entrepreneurs.

A small business, by definition, must have at least one paid employee. But the U.S. Census Bureau also tracks what might be called smaller businesses, the kind that people operate by themselves, often out of their own home.  These are known as “nonemployer businesses” because they lack payrolls, but they carry the potential to become small businesses. If their products or services become popular, many of these tiny enterprises could begin to hire workers. The ACBJ formula analyzed each metro’s ratio of nonemployer businesses per 100,000 residents. This factor scored high on the correlation test, proving to be a strong indicator of small-business vitality.

Miami was the clear champion of this category, with 13,372 nonemployer businesses per 100,000 people. Three other markets were above 9,000: Atlanta; Bridgeport-Stamford, Connecticut; and Los Angeles. Miami took second place in the overall small-business rankings. The other three areas listed here were all among the top 32. Jacksonville, comparatively, had one of its lowest scores (44th place) in this category with just over 7,000 nonemployer businesses per 100,000 people.

4. Key economic indicators are trending in a positive direction.

Here is another common-sense conclusion: If employment and economic output are increasing at a nice pace, small businesses will almost certainly prosper.

The two economic indicators that correlated most strongly with small-business vitality were growth in private-sector jobs and gross metropolitan product (GMP). The latter is a measure of the annual output of goods and services within a given market — essentially the local version of the nation’s gross domestic product.

Five metros saw private-sector employment grow by at least 14 percent between 2012 and 2015. Cape Coral-Fort Myers topped the nation with a three-year job-growth rate of 15.9 percent. Others were Provo; San Jose; Riverside-San Bernardino, California; and Austin.  This is the category where Jacksonville did the best: The First Coast placed 13th and 16th for 3-year and 1-year growth, respectively, for private-sector employment.

Some of these same metros emerged on the GMP-growth metric, where Dallas-Fort Worth led with a jump of 20.4 percent in three years. The runners-up were Austin, San Jose and Houston. All markets with strong growth rates for private-sector employment or gross metropolitan product finished in the upper 40 percent of the small-business vitality standings.

Despite being near the top for private-sector growth, Jacksonville’s GMP was middling, with only about 6 percent growth in the previous three years. Even more worrisome though, was Jacksonville’s personal income growth. Placing 54th in the cities studied, the city’s residents only experienced an average increase of 10.5 percent in the previous three years.

However, year-over-year numbers show Jacksonville might be exiting its slump as it posted considerably higher income growth (almost 5 percent.)

5. There is a strong concentration of small businesses to population.

You might expect to find little or no deviation between local ratios of small businesses per 100,000 residents, but the variations are actually quite substantial.

Portland, Maine, historically has been the leader in this category. Nobody seems to know why, not even the entrepreneurs of Portland. The latest count, taken in 2013, found 16,928 small businesses and 520,363 persons in the Portland area, which translated to a ratio of 3,253 small businesses for every 100,000 people. Only one other market was above 3,000: Miami at 3,025 businesses per 100,000 people.

The next three metros in this category were Bridgeport-Stamford, Sarasota-Bradenton and New York City. The top five markets in the concentration category all ranked among the 35 best metros overall for small-business vitality.  Warmer parts of the country tend to be the most promising regions for entrepreneurs. The South contains 12 of the nation’s top 20 metropolitan areas for small businesses, while the West has seven. The only outlier hails from the East: New York City is 16th in the overall rankings.

But a sunny address doesn’t guarantee business success. The two metros with the worst small-business vitality scores also can be found in the South — last-place Augusta, Georgia, and next-to-last Memphis. Both markets lost more than 2 percent of their small businesses during the past three years, and their remaining concentrations are exceptionally low.  So what does the future hold for Jacksonville? While it’s not in the top 20 areas for small business, it does share that warmer climate — and a good showing on some metrics. But for all of the city’s progress, there are things some say Jacksonville needs to do before the city reaches the next tier.

“We have a healthy environment and there have been a lot of good signs,” said Rob Hooper, CEO of Atlantic Logistics. “But we need to make sure we follow through with Downtown’s redevelopment, investing in the urban core and deepening at the ports.”

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The Clay Florida Economic Development Corporation provides concierge service for companies who want to re-invest in expansion in the county or relocate their companies to the region.

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