Saul Loeb | AFP | Getty Images The real estate and construction boom, as well as the talent pool, has boosted New York City to the No. 1 spot for starting a small business in the U.S.
For a second year in a row, New York City surpassed Silicon Valley to become the top city for small business, according to Biz2Credit's annual study of the Top Small Business Cities in America.
The Big Apple's dynamism and diverse industry base has helped fuel growth and make it a magnet for entrepreneurs. The city's booming real estate market and construction industry, banking and finance, tourism and technology sectors are major drivers of this trend.
New York City overtook small-business city leader San Jose, California, the hub of Silicon Valley, last year. The California city has the No. 2 spot on the list. While technology companies are thriving in Silicon Valley, the high cost of doing business and the high cost of living is taking a bite out of profits for many small firms. High taxes and commercial rents are a significant drag on small-business owners there.
As a result, the average annual revenue for small businesses in New York City is $1,016,446 compared to $748,529 in San Jose, the Biz2Credit survey revealed.
The real estate and construction boom has helped small businesses such as Queens-based Superior Glen Construction, which builds hotels in New York.
"Last year we had revenues of $11 million. In the past two years the amount of work we are doing has increased," said Amritpal Sandhu, owner of Superior Glen Construction. "There is a lot of construction happening all over New York City."
Another factor that secured the New York City lead is its talent pool. Further, the city attracts a talent pool of the best and brightest college graduates from the top schools in the region and across the country. That gives it a competitive advantage.
Small-business revenue growthFor the survey, Biz2Credit analyzed 27,000 small businesses with fewer than 250 employees. Firms in the study had to be operational for at least one year and had less than $10 million in annual revenues. The ranking is based on a weighted average of data on Biz2Credit's customers across the country. The study looks at the health of small companies in each metro area, the rate of small-business creation and the economic ecosystems for entrepreneurs, including the cost of doing business, tax climate and local talent pool.
New York City topped the list after registering the highest-average annual revenues, and its business owners had the second-highest credit scores, at 639, compared to 654 for San Jose, which ranked first in credit score numbers. New York won the overall top spot because it placed atop Biz2Credit's proprietary BizAnalyzer score, which considers local economic factors that may not be applicable in other areas, such as cost of doing business and tax rate.
A diversified economy Over the last year, Mayor Bill de Blasio has tasked city agencies to continue to fuel small-business growth. Throughout the city, incubators and co-working spaces are springing up. The latest will be the Union Square Tech Hub, slated to open in 2020. It will include 58,000 sq. ft. of fluid work space for start-ups and a 36,500-sq.-ft. tech training center.
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