Venture capital flow into Florida companies is rising. Some of the factors driving the trend are the rise in immigration and the shift to more gig-oriented work.
Scott B. Smith Photography | Getty Images
Miami has vaulted to the No. 1 spot for starting a small business in the U.S., according to Biz2Credit’s annual rankings of the Top 25 Cities for Small Business Growth released Tuesday.
More than 82,000 small businesses employ 53% of the Miami-Dade County’s workforce, revealed a study commissioned by the Florida Small Business Development Center. It also has a high percentage of microbusinesses, according to the FIU Metropolitan Center.
A number of factors are driving small business growth. One is a rise in immigration, since many entrepreneurs bring high skills to the area. Another is a shift to more gig-oriented work. Government support for this key employment sector is also driving the trend. As a result, venture capital flows into Florida companies is rising, reports PitchBook/NVCA’s quarterly venture capital report.
The city’s economy is boosted by a thriving tourism industry, along with international trade, financial services (Miami is home to the largest concentration of international banks in the U.S.) and telecommunications, as Miami is the most important city in the country for Spanish-language media. Construction in Miami is still robust, and the area continues to attract entrepreneurs, especially Latino small business owners. The city has long been considered a gateway to Latin America for import/export companies.
Miami won the overall top spot, jumping from third place in 2018 because it topped Biz2Credit’s proprietary BizAnalyzer analytic tool, which considers local economic factors that may not be applicable in other areas, such as the cost of doing business and tax rates. Miami companies averaged $1,198,424 in annual revenues, second only to New York City. Further, with an average credit score of 631, Miami ranked fourth behind only San Jose (643), San Francisco (637) and New York (634).
For the survey using data from calendar year 2018, Biz2Credit examined 30,000 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.
Miami Mayor Francis Suarez has pushed to upgrade government processes that are typically slow moving, such as the process for obtaining a permit to open a small business. On Oct. 1, 2018, the city launched its Electronic Plan Review (ePlan) to provide residents, contractors and developers with the option to apply, upload drawings and documents for permits electronically via smartphone or computer. This service speeds up the permitting process by replacing the traditional paper-based review method, thereby improving the plan review cycle.
“We’re committed to customer service and efficiency, and ePlan helps us achieve this while also proving that resilience and innovation can be part of everything we do,” said City Manager Emilio Gonzalez. “As part of our Service City Initiative, we continue streamlining our processes and making our services easily accessible to our residents and businesses.”
In September 2018 the SBA regional administrator, Ashley D. Bell, partnered with Mayor Suarez in signing a Strategic Alliance Memorandum, thereby creating a two-year partnership to foster business development and growth among Miami’s vast entrepreneurial network.
Additionally, the Miami-Dade Office of the Florida Small Business Development Center helps companies start, grow and succeed. Florida SBDCs have assisted hundreds of thousands of potential and existing business owners by providing the management advice, training and information needed to make sound business decisions in a complex and ever-changing marketplace. Florida SBDCs offer this business management and technical assistance at little or no cost.
Further, the Miami-Dade Department of Procurement Management, which is charged with buying goods and services for the county, has streamlined operations, simplified procedures and documentation and brought in some of the best purchasing professionals available. Small business owners can register and enroll as eligible vendors with Miami-Dade County.
The economic boom has helped small businesses such as Miami-based JeisonGermanGroup.
“I started the business part-time; we’re full time now just for the simple fact that we were able to uncover some really good opportunities that allowed us to really grow, ” said Jeison German of the JeisonGermanGroup, a four-year-old consulting company with $1.5 million in annual revenues that provides technology and merchant services for start-ups, small businesses and middle-market-size companies.
“My business is going to quadruple what we did last year, added German, whose 130 clients include restaurants, retail, B2B companies and financial firms.
“We have been fortunate to service the small business community in Miami since 2000. Miami continues to offer a dynamic and friendly business climate powered by a multicultural workforce and emerging opportunities across a multitude of industries,” said Manuel Chinea, COO of Popular Bank.
Top 25 cities for small business in 2019 (2018 ranking in parentheses)
- Miami (No. 3)
- San Jose, CA (No. 2)
- San Francisco (No. 4)
- New York (No. 1)
- San Diego (No. 9)
- Los Angeles (No. 5)
- Boston (unranked)
- Sacramento, CA (No. 10)
- Baltimore (No. 16)
- Washington, DC (No. 7)
- Philadelphia (No. 22)
- Chicago (No. 12)
- Seattle (No. 14)
- Riverside, CA (No. 6)
- Minneapolis (unranked)
- Phoenix (No. 11)
- Las Vegas (No. 18)
- Charlotte, NC (No. 24)
- Nashville, TN (unranked)
- Raleigh, NC (unranked)
- Detroit (No. 20)
- Oklahoma City (unranked)
- Houston (No. 21)
- Cleveland (unranked)
- Pittsburgh (unranked)
Half of the Top 10 Best Cities for Small Business Growth are located in California: San Jose (No. 2), San Francisco (No. 3), San Diego (No. 5), Los Angeles (No. 6) and Sacramento (No. 8). These cities benefit from having a robust technology sector, an educated workforce, a solid tourism sector and nice weather.
Boston debuted on the list at No. 7 after not being ranked last year. Boston has a lot going for it, most notably a thriving tech sector and access to an educated workforce due to the large number of highly rated colleges and universities in the area.
Several cities located in the middle of the country that were not on the 2018 Top 25 ranking climbed onto the list this year: Minneapolis (No. 15), Nashville (No. 19) and Raleigh (No. 20), Oklahoma City (No. 22), Cleveland (No. 24), and Pittsburgh (No. 25). These cities benefit from lower cost structures than expensive places such as New York, San Jose and San Francisco.
The top 10 metro areas with highest annual revenue
- New York $1,273,960
- Miami $1,198,424
- San Jose, CA $1,190,007
- Washington, DC $1,101,367
- San Francisco $1,088,626
- Boston $947,624
- Oklahoma City $943,137
- Seattle $900,008
- San Diego $887,370
- Philadelphia $882,683
New York is still the place where the revenues are highest. This comes as little surprise. However, Miami is not that far behind, and that is one of the major reasons why it ranked No. 1 overall.
When sorted by Age of Business (in months), cities in the south and west, such as Oklahoma City, Nashville, Raleigh, Las Vegas and Charlotte, had the youngest average age of business, an indication of start-up growth. Cleveland and Detroit, two Midwestern cities with growing tech sectors, were the exceptions to the trend.
Miami’s spot at No. 1 is interesting because it is not known as a technology hub in the way that New York, San Jose and San Francisco are. The lower cost structure in Florida makes it less expensive to do business there, and we are seeing a migration away from high-cost cities. Many of the cities in the Midwest have climbed on the list.
What we can take away from the study is that small businesses are doing well all across the country. The overall economy is still doing well by many measures: the Dow Jones Industrial Average hovers around record highs, optimism among small business owners remains strong, and we continue to see solid job creation and low numbers for unemployment. Additionally, the Federal Reserve has pulled back from its trend of continuously raising interest rates, so companies in need of capital still are getting low-cost funding. While nothing lasts forever, we remain in an economy that is ripe for small business growth.
Rohit Arora, special to CNBC.com, is also the co-founder and CEO of Biz2Credit.