Pittsburgh selected as top city for small businesses

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Once again, Pittsburgh as a metropolitan region is ranked as a top rated city by an outside national source. Fortune Small Business Magazine listed the area as the second best city to launch a small business. Oklahoma City is rated the number one ranked city with Raleigh, N.C., Houston, Texas and Hartford, Conn., following Pittsburgh.

Howard-Slaughter
HOWARD SLAUGHTER JR.

Agreeing that Pittsburgh should be highly ranked as a good place to launch a business, Ruth Byrd-Smith said, “Pittsburgh is a city where there is a strong generational work ethic. The climate is seasonal without being harsh. The people are friendly and it is a very economical place to live.” Byrd-Smith, a former entrepreneur is the director of the Allegheny County Minority/Women and Disadvantaged Business Enterprise.

Howard B. Slaughter Jr., Ph.D., CEO of Landmarks Community Capital Corp., also agrees with the ranking. He says the cost to do business here relative to other major metropolitan areas is far less when comparing similar sized markets. “Small business in the region often tap into the social fabric of this area which is very strong and closely knit. These businesses also rely heavily on the educational institutions which provide a plethora of information, statistics and technical assistance and talent,” he points out, adding that the metro area is relatively easy to maneuver from a traffic standpoint, making it more accessible to conduct business.

“Pittsburgh does have a lot to offer in terms of culture, education institutions, talented young people, a lower cost of living and a solid workforce with a vast amount of experience,” says Mark Peterson, president of Bridgeway Capital. “However, I am surprised that Pittsburgh received this rating since western Pennsylvania’s small business creation and job growth rate is extremely low compared to similar regions.” He pointed out that Harold Miller of PittsburghToday.org recently reported in the Post-Gazette that Pittsburgh has some of the lowest rates of entrepreneurship and new business formation in the country. He also says that according to the Kauffman Foundation for Entrepreneurship, Pennsylvania lags far behind the nation in entrepreneurial activity with only 140 entrepreneurs per 100,000 adults compared to 320 nationally. While we should be proud that Pittsburgh is getting positive national attention, we must remember that a ranking alone will not increase jobs and draw entrepreneurs. It’s our collective responsibility to make more capital available, find workable solutions for improving this region and spur economic growth.

When questioned if the condition of the economy has an effect on how small businesses prosper in the region, Lisa Coffey, director of Administration at All Purpose Cleaning Services, Inc. in the West End says, “The economic recession has affected our business. Some of our clients have reduced the level of services or discontinued the service all together.” To offset the changes she states that it has been necessary to make budget adjustments, revisit our strategic plans and realign our pricing structure to gain a competitive edge.

“This recession brings a credit crisis that has greatly impeded small business growth in our area,” says Peterson. The lack of cash flow and credit has forced many businesses to shut doors. On a more positive note, the businesses that do survive have figured out how to do so in the hardest of times. When the upturn begins, these businesses should remain successful. Half of the Fortune 500 companies were started during recessions.

Coffey, Byrd-Smith and Slaughter consider the assets of this region as a strong workforce, reasonable hourly wages, low crime and fewer home foreclosures. The same resources were considered as part of the criteria used as research for the study.

As the former regional director of Fannie Mae, Slaughter says that in comparison to other markets this MSA has a lower price point for home sales on average that other similar market, which means from an aggregate dollar perspective, the foreclosure total dollar cost is much lower. He explained that in some respects three homes in Pittsburgh foreclosed equates to one home in other markets, so the impact financially is less and the lower mortgage payments, because the cost of homes is lower gives borrowers a greater option to rework payments that may have been past due, all helping the borrower and the market. The work ethic in this region is strong, cost of living is lower and crime when considering the region is lower, although it is higher in certain areas, but as a whole, it is an attractable features since it’s lower. This is a key factor in businesses locating here, knowing crime is low and workers like to work and wages go further in markets where the cost of living is lower, such as the Pittsburgh MSA.

Peterson says the selling points are strong but wonders if they are strong enough to attract more entrepreneurs to this region. “We can take some comfort knowing that Pittsburgh did not experience the unsustainable real estate values that led to this recession, but unless we act together we will likely not experience dramatic growth as the recession ends—in entrepreneurial growth or jobs.”

The region’s biggest drawback according to the report and area experts is state taxes. If Pittsburgh legislators are not careful, they will impede the growth of small business in our region and force existing businesses to relocate is Coffey’s take on the tax situation. Slaughter says a higher tax base may mean more people to do business with, a shrinking tax base leaves less opportunities, thereby making it more difficult to increase business.

The report was based on findings utilizing a methodology developed by the Ewing Marion Kauffman Foundation and Robert Fairlie, an economist and scholar of entrepreneurship at the University of California, Santa Cruz. Reporters interviewed entrepreneurs and economic development officials about the pros and cons of metro areas throughout the U.S. and through the findings, 50 cities were ranked.

(The website for the report is:  http://money.cnn.com/smallbusiness/best_places_launch/2009/index.html.)

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