Are These the Best Cities for Boomer Entrepreneurs?

There’s something compelling about a “Best Places” list that’s tough to resist. And as someone who often writes about entrepreneurship, I was doubly intrigued by the new LendingTree ranking: The Best Cities for Baby Boomer Entrepreneurs, which compared the 50 biggest U.S. metropolitan statistical areas.

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I must admit, though, the findings were a little surprising to me, since I wouldn’t have considered some of them hotbeds for boomer business launches. I’ll tell you which places scored best momentarily, but here’s a hint: after learning about them, you may find yourself humming California Dreamin’  by The Mamas & The Papas.

This list was the latest in a series of entrepreneurship location lists from LendingTree, following The Places With the Youngest Entrepreneurs and Best Places for Women Entrepreneurs.

The idea of looking for the best cities for boomer start-ups is especially timely, since this is clearly a demographic increasingly hankering to be their own boss. The Kaufmann Foundation has regularly noted this group being more likely than 20-somethings in starting new businesses, and female entrepreneurs over 50 have particularly been on the rise as I’ve written about in this post and this one.

In the new ranking, LendingTree calls San Jose — the Silicon Valley hub — the best place for boomer entrepreneurs. “In addition to representing high business income, San Jose boasts the largest share of boomer business founders,” according to Kali McFadden, senior research and analyst at LendingTree.

But McFadden told me that she, too, was surprised San Jose came in first. “When you think of San Jose, you think of startup tech and a young man’s game kind of thing,” she noted.

According to LendingTree, the average business income among baby boomer entrepreneurs in San Jose is $47,401, the highest among all 50 cities examined. And the boomer entrepreneurs’ annual median business income is $13,602, ranking fifth. In the last five years, more than one in four of San Jose’s new businesses was run by a boomer, the highest percentage among all cities surveyed.

San Francisco ranked second. (It also came in first on LendingTree’s Best Places for Women Entrepreneurs.) The city by the bay has the highest annual median income for business owners who are boomers: $16,827. It was No. 2 for average business income, at $45,505 a year. San Francisco also has a large share of entrepreneurial boomers, with one in every five new business founders born between 1946 and 1964.

Boston earned third place. “Boomer Bostonians have a medium business income of $14,106, one of the highest figures for boomer entrepreneurs across the country,” according to the researchers. It also has the second-highest rate of new businesses founded by boomers — 20.3 percent — tied with Memphis.

Sacramento, California’s capital, was No. 4 and placed second for median earnings among self-employed boomers: $15,114. The average business income boomers earn is also on the upper end, at $37,314.

And Number 5 is Nashville, which also ranks fifth for the percentage of new businesses opened by boomers: 19.1 percent. Nashville shares second place with Sacramento for the median business earnings for boomers.

Rounding out the Top 10: Hartford, Conn.; Houston; Austin, Texas; Los Angeles and Memphis.

The bottom dwellers: New Orleans, Miami and Orlando.

Boomers in New Orleans — No. 50 out of 50 — earn a median business income of just $1,008, less than 13 percent of the national average. Yikes. And boomer entrepreneurs there take home $20,562 each year, on average, which is only two-thirds of the national average.

Even worse, according to LendingTree, in Orlando (and Tampa), self-employed boomers earn a median business income of $0.

I find it hard to imagine an expensive city like San Francisco being a great place to launch a business. Wouldn’t you think the basic costs of bricks and mortar and hiring employees would hamper financial success at least in the early days?

Here’s how LendingTree came up with its ranking: Each metro area was scored on median business income for boomers; average (mean) business income for boomers and the percentage of businesses founded in the last five years started by boomers. All three factors were weighted evenly.

“Medians can tell us how much most people are earning, while the average can give us a sense of how much income there is overall,” according to McFadden. “A bigger gap between median and average indicates that there is a lot of money to be made, but fewer people are earning it.”

To determine the percentage of new businesses founded by boomers, LendingTree looked at those seeking loans on their business loan platform. “This is a clue about how attractive and hospitable metros are to entrepreneurs in that age bracket,” said McFadden.

She concedes that “expensive cities do seem to favor boomers.” Her explanation: “It’s likely that there are a higher number of professionals winding down their careers in those cities and may be hanging out that shingle to start consulting and may not have too much in overhead costs.”

Boomers in these cities, McFadden added, may also have money saved and the network and the contacts to go solo there. Moreover, expensive places may translate to cities where you can charge more for your services, hence high reported earnings.

But the numbers are still problematic to me. There is a pretty large difference between median and average incomes reported. Then too, the data doesn’t drill down to what kinds of businesses the boomers are starting and if they are part-time or full-blown, seven-day a week, all pistons rolling start-ups.

Plus, business income isn’t automatically a person’s lone income. A boomer entrepreneur could have lumped in Social Security income, retirement benefits and/or investment income he or she is receiving.

“It’s unfortunate that we can’t more detail in the data,” said McFadden. “I am a number cruncher, and it is frustrating.”

My bottom line: The best way to decide where to start your business is pretty basic and the location doesn’t need to be a best place at all. Ask yourself: Do you have a market for the goods or services you want to sell? Is there a labor supply available if you’ll need to hire workers? What kind of licensing and other bureaucratic hurdles might the state or municipality have where you want to launch?

Before opening shop, it’s critical to research local regulations ranging from business licensing laws to small business tax incentives. You should also scrutinize other new ventures in the city to see which are successful.

And for advice, there are SCORE programs (retired business professionals offering free tips to start-up founders) in every major city.

A parting thought from McFadden: “Depending on where you live, quite possibly getting a part-time job might be more economically sensible for people than starting a business.” As The Mamas & The Papas liked to sing, Dream a Little Dream…

Kerry Hannon is the author of Great Pajama Jobs: Your Complete Guide to Working From Home. She has covered personal finance, retirement and careers for The New York Times, Forbes, Money, U.S. News & World Report and USA Today, among others. She is the author of more than a dozen books including Never Too Old to Get Rich: The Entrepreneur's Guide to Starting a Business Mid-Life, Money Confidence: Really Smart Financial Moves for Newly Single Women and What's Next? Finding Your Passion and Your Dream Job in Your Forties, Fifties and Beyond. Her website is kerryhannon.com. Follow her on Twitter @kerryhannon. Read More