San Jose Shoots Up in National Small-Business Rankings

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That’s a sharp difference from a year ago, when San Jose was ranked No. 75, and ranked No. 50 the year before that.

Rankings are based on a six-part formula that rewards markets that have prosperous economies, are expanding rapidly, and are densely packed with small businesses (defined as any private-sector employer with 99 or fewer employees.)

Austin, Texas finished first in the small-business rankings for the second straight year, thanks to its outstanding records in three statistical categories that have a direct impact on small-business activity:

• Population: The Austin area added 286,000 residents between 2004 and 2009, an increase of 20.2 percent. The only metro to grow faster was Raleigh at 22.8 percent.

• Employment: Austin’s job base expanded by 9.3 percent between 2005 and 2010, the third-fastest upswing in the nation.

• Small-business growth: The number of small businesses grew by 1.5 percent in Austin between 2007 and 2008, the latest period covered by official statistics. No other market did better than 0.6 percent.

At the very bottom of the rankings is Modesto, which lost 3.4 percent of its small businesses between 2007 and 2008 — and 11.3 percent of its jobs between 2005 and 2010.