CNBC Metro 20

How we chose the Metro 20: America's Best Places to Start a Business

Best cities to start a business
Ezra Bailey | Getty Images

Imagine having a business plan, the secured funding to start your own business and the option to choose anywhere in the country to set up shop. Where would you go?

That's the question we set out to answer in the first-ever CNBC Metro 20: America's Best Places to Start a Business. Using private and government data, we looked at the 20 key criteria business owners should evaluate before choosing a business location, including tax and regulatory climate, workforce strength, access to capital and the cost of living.

Here's how we did it: First, we used the established list of 389 metropolitan statistical areas (MSAs), published by the Census Bureau, to define metro areas. Then we pinpointed 107 areas that had a population of 500,000 or more. New York is the largest of these, with a population of more than 20 million; Lexington, Kentucky, is the smallest city to make the cut, with an estimated population of 500,535.

To source our information, we turned to the U.S. Bureau of the Census, U.S. Bureau of Labor Statistics, Energy Information Administration, Small Business & Entrepreneurship Council, Biz2Credit, BizEquity and REIS. We also used CNBC's America's Top States for Business 2016 study for state-level scores on quality of life and business friendliness.

Some data was available only at the state level and not at the MSA level. This means in some categories, metro areas may have been helped or harmed by the business climate within their state. State-level data probably hurt cities in California, like San Francisco and San Jose, for example, while it improved the score of Texas cities, like McAllen and El Paso. In cases where the metro area was made up of territory in more than one state, we used a proportional weighted average of the different state scores (for example, the Washington, D.C., metro area includes the District of Columbia and parts of Maryland, Virginia and West Virginia).

Data was collected and each criterion was then weighted using the results of a survey of U.S.-based members of YPO — a chief executive leadership organization with more than 24,000 members (CNBC and YPO have an exclusive editorial partnership). Members there cited quality of life, taxes and regulation as among the most important factors for choosing a place to start a business.

The criteria were sorted into five categories, which themselves were weighted in order of importance. Each MSA was assigned points depending on where it ranked in each individual criterion, and each category was valued between 100 and 500 points, for a total of 1,500 points possible. The metro areas with the 20 highest overall scores made the list.

The Top 20

Here is the ranking of this year's top performers:

  1. Austin, Texas
  2. Provo, Utah
  3. Washington, D.C.
  4. Denver
  5. Charlotte, North Carolina
  6. Houston
  7. Ogden, Utah
  8. Dallas
  9. Des Moines, Iowa
  10. San Antonio
  11. Richmond, Virginia
  12. McAllen, Texas
  13. Colorado Springs, Colorado
  14. Raleigh, North Carolina
  15. Sarasota, Florida
  16. El Paso, Texas
  17. Atlanta
  18. Salt Lake City
  19. Las Vegas
  20. Seattle