California, Texas & Florida Dominate U.S. Small Business Growth.

Much of the country could borrow a page from cities throughout California, Texas, Florida, and the Carolinas, which accounted for 30 of the top 50 markets with the highest growth rates in the number of small businesses for the six years through 2003, according to the State of Small Business Report by Sales Genie.

While the number of small businesses in the nation’s Top 100 metropolitan statistical areas (MSAs) grew an average of 18.6 percent, only 23 MSAs saw consistent growth during the same time, according to the report, which classified a small business as a company with 1 to 500 employees, as well a registered address and telephone number.

Conversely, more than half of the MSAs (55) across the United States suffered declines from 2002 to 2003, even as the economy was beginning to rebound, said Vinod Gupta, creator of salesgenie.com, a small business sales lead database and a division of infoUSA, which Gupta founded 32 years ago.

“The numbers are stunning because they show an extremely positive trend from 1998 to 1999, and even into 2000,” said Gupta, adding that small businesses are the engine of the U.S. economy. “But, then the number of small businesses began to slip, as annual increases began dropping from 8.2 percent growth in 2000, to 4.7 percent in 2001, to 2.4 percent in 2002, and, eventually, to a loss of -0.6 percent – that’s nearly 46,000 small businesses lost — in 2003 alone.”

Many of the MSAs in California, Texas, Florida and the Carolinas experienced growth rates ranging from 19.7 percent to 32.9 percent during the six-year period studied. (See attached grid.) However, the number one market for small business growth was the Las Vegas region, which saw the number of small businesses soar to 73,163 in 2003 from 46,170 in 1998, a growth rate of 58.5 percent.

Among the nation’s largest markets with 100,000 small businesses or more, only seven of the Top 25 MSAs showed consistent, annual growth in the number of small businesses from January 2000 through December 2003. Those markets are Riverside, CA; Orange County, CA; San Diego, CA; Washington D.C.; Los Angeles, CA; Tampa, FL; and, St. Louis, MO.

“This is excellent news for these large markets because they represent anywhere from 108,000 to 409,000 small business in their respective regions, and reflect strong levels of innovation and entrepreneurship, which are needed to continue driving the American economy forward.”

Gupta, who has long provided products and services for small businesses of all shapes and sizes, said American small businesses will have many new opportunities in 2005 and beyond, but it also will face serious challenges as well.

“For example, our population overall is getting older,” he said. “This presents all kinds of opportunities to provide new products and services across all industries to the 65-and-older population. Especially as we grow more diverse, there will be many more opportunities for minorities, including women-owned businesses and Black, Hispanic, and Asian entrepreneurs.

“We’re already seeing those benefits in many of our largest markets that are racially and culturally diverse,” he added.

As for challenges, Gupta urged federal legislators to continue being sensitive to the needs of small businesses and entrepreneurs through their support for the Regulatory Flexibility Act, which encourages entrepreneurial success by requiring federal agencies to consider their impact on small business before they issue final regulations.

Additionally, he also encouraged governors and state lawmakers to adopt similar provisions at the state level to continue fostering small business instead of making it more difficult for them to successfully operate. He also cited foreign export barriers, tax laws, and other provisions could help stall a small business rebound in 2005.

Giovanni Coratolo, director of small-business policy for the U.S. Chamber of Commerce, said efforts by state and local governments can have a profound impact on the number of small businesses and their survival rate.

“Although many factors contribute to an entrepreneur’s decision to make the plunge into small business ownership, conscious efforts on behalf of government officials in cities, regions and states to create and environment that will foster the growth and stability of their small business community,” he said. “Fundamentals like regulation, tort reform, taxes, and a business friendly climate always matter. Entrepreneurs will try to eliminate as much downside risk as possible when choosing where to locate their next venture.”

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