Personal Finance

The 15 Big Cities Most Dependent on Small Businesses

small business owner open door
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This story originally appeared on Construction Coverage.

Small business is often held up as a key driver of the U.S. economy, and for good reason.

According to the U.S. Small Business Administration, small businesses account for 64 percent of net private-sector jobs created since 2005. Collectively, small enterprises employ around 60 million Americans, which represents nearly half of the private workforce in the U.S. Compared with larger firms, small businesses tend to be more nimble, which promotes competition and innovation in the economy. Additionally, small businesses help strengthen communities, and entrepreneurship is a common route through which immigrants assimilate into the social and economic life of the U.S.

The continued success of small businesses matters more for some locations than others. Rural states in the Upper Plains, such as Wyoming and Montana, and in New England, such as Vermont, have a much higher share of small-business employees in the workforce than other states. Because these areas tend to have few large employers, failures in the small-business sector could create job shortages and prolonged economic hardship in these areas.

At the metro level, some of the areas most dependent on small businesses are in the aforementioned rural states, but other factors are at play as well. Some are Rust Belt communities where employment was formerly dominated by now-offshored manufacturing operations, leaving smaller businesses to generate most of the economic activity. Others have strong startup ecosystems that encourage entrepreneurs to create new firms. Many of these areas also have high populations of immigrants and racial minorities, who may open up small operations to serve their neighborhoods and immediate social networks.

To identify the locations most dependent on small businesses, researchers at Construction Coverage used U.S. Census Bureau data to find the percentage of employees in each metro employed at small businesses, defined as those firms having fewer than 500 employees.

Keeping reading to see the large U.S. metropolitan areas most dependent on small businesses.

15. Baltimore-Columbia-Towson, MD

Baltimore, Maryland
sean-pavone / Shutterstock.com
  • Percentage of employees at small businesses: 48.53%
  • Total number of small-business employees: 573,447
  • Total number of small businesses: 52,387
  • Percentage of total payroll paid by small businesses: 42.56%
  • Total small-business payroll per employee: $48,700
  • Total large-firm payroll per employee: $61,994

14. Austin-Round Rock, TX

Austin, Texas
Roschetzky Photography / Shutterstock.com
  • Percentage of employees at small businesses: 49.39%
  • Total number of small-business employees: 413,394
  • Total number of small businesses: 40,661
  • Percentage of total payroll paid by small businesses: 42.47%
  • Total small-business payroll per employee: $48,145
  • Total large-firm payroll per employee: $63,651

13. Sacramento–Roseville–Arden-Arcade, CA

Sacramento, California
Andrew Zarivny / Shutterstock.com
  • Percentage of employees at small businesses: 49.45%
  • Total number of small-business employees: 367,438
  • Total number of small businesses: 38,300
  • Percentage of total payroll paid by small businesses: 41.78%
  • Total small-business payroll per employee: $45,280
  • Total large-firm payroll per employee: $61,702

12. Washington-Arlington-Alexandria, DC-VA-MD-WV

Jon Bilous / Shutterstock.com
  • Percentage of employees at small businesses: 49.64%
  • Total number of small-business employees: 1,327,443
  • Total number of small businesses: 116,882
  • Percentage of total payroll paid by small businesses: 45.11%
  • Total small-business payroll per employee: $60,027
  • Total large-firm payroll per employee: $71,999

11. San Diego-Carlsbad, CA

The skyline of San Diego, where median rent is well below median mortgage payments
Dancestrokes / Shutterstock.com
  • Percentage of employees at small businesses: 50.06%
  • Total number of small-business employees: 634,069
  • Total number of small businesses: 69,216
  • Percentage of total payroll paid by small businesses: 42.59%
  • Total small-business payroll per employee: $49,023
  • Total large-firm payroll per employee: $66,233

10. San Francisco-Oakland-Hayward, CA

San Francisco, California
IM_photo / Shutterstock.com
  • Percentage of employees at small businesses: 50.31%
  • Total number of small-business employees: 1,090,428
  • Total number of small businesses: 104,849
  • Percentage of total payroll paid by small businesses: 37.81%
  • Total small-business payroll per employee: $67,798
  • Total large-firm payroll per employee: $112,911

9. Grand Rapids-Wyoming, MI

Grand Rapids, Michigan
Henryk Sadura / Shutterstock.com
  • Percentage of employees at small businesses: 50.36%
  • Total number of small-business employees: 253,133
  • Total number of small businesses: 19,092
  • Percentage of total payroll paid by small businesses: 48.50%
  • Total small-business payroll per employee: $43,895
  • Total large-firm payroll per employee: $47,283

8. Buffalo-Cheektowaga-Niagara Falls, NY

Buffalo, New York
Atomazul / Shutterstock.com
  • Percentage of employees at small businesses: 50.93%
  • Total number of small-business employees: 245,969
  • Total number of small businesses: 21,132
  • Percentage of total payroll paid by small businesses: 46.54%
  • Total small-business payroll per employee: $40,162
  • Total large-firm payroll per employee: $47,880

7. Portland-Vancouver-Hillsboro, OR-WA

Portland, Oregon waterfront
Josemaria Toscano / Shutterstock.com
  • Percentage of employees at small businesses: 51.41%
  • Total number of small-business employees: 538,511
  • Total number of small businesses: 55,667
  • Percentage of total payroll paid by small businesses: 41.79%
  • Total small-business payroll per employee: $45,280
  • Total large-firm payroll per employee: $66,725

6. Los Angeles-Long Beach-Anaheim, CA

The streets of Los Angeles, where median rent is relatively low
Sean Pavone / Shutterstock.com
  • Percentage of employees at small businesses: 51.93%
  • Total number of small-business employees: 2,764,749
  • Total number of small businesses: 313,657
  • Percentage of total payroll paid by small businesses: 46.12%
  • Total small-business payroll per employee: $52,115
  • Total large-firm payroll per employee: $65,764

5. New York-Newark-Jersey City, NY-NJ-PA

New York City
Taiga / Shutterstock.com
  • Percentage of employees at small businesses: 51.98%
  • Total number of small-business employees: 4,356,853
  • Total number of small businesses: 499,998
  • Percentage of total payroll paid by small businesses: 41.10%
  • Total small-business payroll per employee: $56,279
  • Total large-firm payroll per employee: $87,294

4. Providence-Warwick, RI-MA

Providence, Rhode Island
Sean Pavone / Shutterstock.com
  • Percentage of employees at small businesses: 52.36%
  • Total number of small-business employees: 333,667
  • Total number of small businesses: 33,162
  • Percentage of total payroll paid by small businesses: 47.72%
  • Total small-business payroll per employee: $43,098
  • Total large-firm payroll per employee: $51,898

3. Oklahoma City, OK

Oklahoma City skyline
Natalia Bratslavsky / Shutterstock.com
  • Percentage of employees at small businesses: 53.32%
  • Total number of small-business employees: 269,939
  • Total number of small businesses: 28,210
  • Percentage of total payroll paid by small businesses: 48.62%
  • Total small-business payroll per employee: $40,574
  • Total large-firm payroll per employee: $48,974

2. Miami-Fort Lauderdale-West Palm Beach, FL

Miami, Florida
littleny / Shutterstock.com
  • Percentage of employees at small businesses: 53.50%
  • Total number of small-business employees: 1,184,791
  • Total number of small businesses: 167,326
  • Percentage of total payroll paid by small businesses: 48.27%
  • Total small-business payroll per employee: $43,392
  • Total large-firm payroll per employee: $53,498

1. New Orleans-Metairie, LA

New Orleans, Louisiana at night
f11 photography / Shutterstock.com
  • Percentage of employees at small businesses: 53.65%
  • Total number of small-business employees: 265,378
  • Total number of small businesses: 23,960
  • Percentage of total payroll paid by small businesses: 49.26%
  • Total small-business payroll per employee: $43,602
  • Total large-firm payroll per employee: $51,989

Detailed Findings & Methodology

Small business
Nestor Rizhniak / Shutterstock.com

The data used in this analysis is from the U.S. Census Bureau’s Statistics of U.S. Businesses, which includes all U.S. businesses with paid employees. To identify the locations most dependent on small businesses, researchers calculated the percentage of all employees at small businesses—defined as those firms having fewer than 500 employees. The researchers also calculated the percentage of total payroll accounted for by small-business employees, as well as the average payroll per employee at large and small businesses.

To improve relevance, only metropolitan areas with at least 100,000 residents were included. Additionally, metros were grouped into cohorts based on population size: small (100,000–349,999), midsize (350,000–999,999), and large (1 million or more).

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.


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