Top 25 Cities for Doing Business in America

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Affordability

The theme of affordability was repeated often by many firms located in the cities that ranked high on the list. It helps explain the remarkable performance of places like No. 4 (large) San Antonio and No. 26 (medium) McAllen, Texas, all of central Florida, and much of inland California. "San Antonio is a very good sell for families," says Keith Frederick, founder of SecureInfo, a San Antonio computer security firm with 145 employees. "You can get a new three-bedroom starter house here with a two-car garage for $60,000. And it's actually a super environment for operational experience. This is one of the few places I can get the kind of talent I need."

Indeed, Inc.'s data shows many fast-growing cities, such as No. 5 (small) Sioux Falls, S.D., No. 15 (small) Fargo, N.D., and No. 8 (large) Jacksonville, Fla., also saw rapid expansion of financial and business-professional service industries, which require a work force with a high level of education. In contrast, many of the traditional hotbeds for these professional industries (e.g., Boston, New York City, San Jose) have suffered either negative or slow growth during the past few years.

These trends were particularly notable in Florida, the state that more than any other dominates our list. A remarkable six of the top 25 cities on the large list, including No. 5 West Palm Beach, No. 7 Fort Lauderdale, No. 8 Jacksonville, No. 11 Orlando, No. 14 Tampa-St. Petersburg, and No. 22 Miami, are from the Sunshine State.

Florida, suggests Donald DiFrisco, executive vice president of Palm Beach Gardens-based Cross Match Technologies, has become increasingly attractive to information workers given the rapid housing inflation in places like the Bay Area and Boston. Corporate relocations of the 1980s and 1990s--including companies such as Motorola and Nokia--also have left a repository of talent that can be used by fast-growing, smaller firms.

Sarasota, No. 3 on the medium cities list, has become rich with what Reuben Ben-Aire, CEO of MadahCom, calls "early retirees." Many people in their 50s came to Florida to retire but, for financial reasons or out of boredom, have reentered the work force. "These people have everything you want including experience," says the 60-year-old entrepreneur, who moved his firm from New York City in July 2002 and has since gone from four to 30 employees. "They like being here and they know it costs less. Every dollar they make here is simply worth more."

The Inland Empire

An even more surprising group of top-flight cities can be found in California, whose coastal economy, particularly in the Bay Area, has been struggling since the end of the dot-com craze. Here the biggest entry is No. 2 Riverside-San Bernardino, a region with more than 3 million people east of Los Angeles. In many ways, the region, known as the Inland Empire, is the polar opposite of places like San Jose--its economic drivers are mundane industries such as housing construction, warehousing, and diversified manufacturing.

Yet even here the key high-end growth industries, such as technology, financial and business services, are expanding at strong rates. This, suggests local economist John Husing, is being driven in part by sky-rocketing housing costs on the coast of California. Skilled workers with families are responding by moving. Since 1990, Husing notes, more than 660,000 people have moved into the inland. The bulk of this growth comes from ethnic minorities, predominantly Latinos, whose numbers swelled by 500,000, and Asians. Both groups see the inland as the one place in southern California where their hard work can be rewarded with a middle-class lifestyle. They keep coming. Between 2000 and 2020 the inland is expected to add another 1.5 million people, more than the growth forecast for all but five states. Such growth provides business opportunities to entrepreneurs.

"What we have here are families, and families create growth," says Ramon Alvarez, the father of three and owner of the nation's only Latino-owned Jaguar dealership, in Riverside, Calif. "You see a lot of upward mobility around here. I see a run of growth that could last for 10 or 15 years."

"It's Econ 101," observes Bart Hill, CEO of San Joaquin Bank, a fast-growing financial institution based in Bakersfield, Calif. "It's just much cheaper to do business here than on the coast." Hill has seen a rapid growth in manufacturing, health, and financial service firms in his area. But there are even signs that some of California's vaunted technology industry may be moving inland. Sacramento, Santa Rosa, Stockton, and other smaller inland communities have been picking up high-end jobs for years. Even such perennial hard cases as Fresno have become attractive to knowledge workers, according to Lance Donny, CEO of Brightcode, a small software service firm located in the longtime agricultural center.

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