Detroit, Michigan’s largest city, is digging out of a financial crisis years in the making. But a NerdWallet analysis has found that some of Detroit’s closest neighbors have strong economies and are great places to start a business. We pinpointed the best locations — and also came across some striking findings.
Among top cities in the NerdWallet survey of Michigan is Auburn Hills. In 2010 — as Detroit was crippled by debt — Bob Kittle and Buzz Brown started Munetrix, a technology company in Auburn Hills, 25 miles north of Detroit. In 2013 and 2014, as Detroit was filing for bankruptcy, Kittle and Brown received $48,000 in two grants from the Michigan Small Business Development Center.
Today, Munetrix builds data analytics platforms for over 300 local governments and school districts in Michigan, Florida and Pennsylvania, and has 10 employees in addition to its founders, plus paid interns from Oakland University, a nearby public research university.
“We’re really proud to be a Michigan-based company helping the economy,” Kittle tells NerdWallet. The company is also proud, he says, to be “giving young adults the opportunity to learn and earn a salary at the same time they hone their public-sector skills.”
NerdWallet analyzed 128 places in Michigan using six metrics to create a ranking of the top cities in the state to start a business.
The Detroit area is making strides. Although Detroit is still getting back on its feet, the economies of some cities in the area are vibrant. Four of the top 10 cities on our list are in the Greater Detroit area: Auburn Hills, Plymouth, Troy and Wixom. The Great Recession helped set up businesses in those places for success, Kittle says. “As the market recovered,” he says, “learning how to live lean afforded us the ability to get back on our feet quite well.”
Diversification is key. Some analysts have argued that the problem with Detroit’s economy was its focus on the automotive industry. In contrast, the cities on our list have economies fueled by a range of sectors, including manufacturing, tourism, finance, health care, life sciences and automobiles.
City size doesn’t matter. Six of the cities on our list have populations less than 10,000; the largest is Troy, with a population of nearly 82,000.
We looked at 128 places in Michigan with populations of 5,000 or more, and considered six metrics in two categories to determine the best places in the state to start a business:
Business environment. The analysis took into account the average revenue per business, the percentage of businesses with paid employees and the number of businesses per 100 people in each place.
Note: We included the percentage of businesses with paid employees to highlight the businesses that can hire. Most small businesses, however, are sole proprietorships — one-person unincorporated businesses.
Local economy. We looked at the median annual income, median monthly housing costs and the unemployment rate for each place.
Top 10 places to start a business in Michigan
1. Auburn Hills
This northern Detroit suburb tops our list because of its high average revenue per business ($9,544,306). It has a mix of industrial, commercial and residential areas, which together create an economy for both global and local businesses. Fiat Chrysler Automobiles U.S. and other automobile manufacturers are headquartered here, as well as smaller businesses like Munetrix. The Auburn Hills Chamber of Commerce offers member businesses networking opportunities, conferences, workshops and marketing tools.
2. Traverse City
Traverse City’s economy runs largely on tourism. Visitors come here to play on the beaches, check out the region’s wineries, breweries and distilleries, attend the National Cherry Festival and to explore Sleeping Bear Dunes National Lakeshore, just northwest of Traverse City. Local businesses include Cherry Capital Foods, a distributor that works exclusively with Michigan farmers, and Grand Traverse Distillery, which makes vodka, whiskey, gin and rum and offers public tours. The Traverse City Area Chamber of Commerce provides businesses with insurance discounts, marketing opportunities and networking events. Businesses can also join the Downtown Traverse City Association to tap into promotional tools and networking events.
This suburban city west of Detroit has a picturesque downtown with a revolving lineup of festivals, concerts and other events that attract visitors. It also has many independently owned businesses, including Jay’s Stuffed Burgers, which makes up patties filled with combinations of cheeses, vegetables, eggs and bacon, and Espresso Elevado, a coffee bar. Businesses here benefit from being just 15 miles from Ann Arbor, home of the University of Michigan’s flagship campus. The Plymouth Community Chamber of Commerce has networking opportunities, online listings and referrals for local businesses, and the Michigan Life Science and Innovation Center is a resource for businesses focused on life sciences, biotechnology and health care.
Twenty miles north of Detroit, Troy is a hub for finance, technology, automotive research and development, and it is the largest city in our top 10. The city’s major employers include Bank of America, PNC Bank, Altair Engineering and CareTech Solutions, which makes health care IT products. The Troy Chamber offers businesses advertising and sponsorship opportunities, business development groups and roundtable discussions. A local accelerator, Automation Alley, provides resources for technology businesses in the region, including funding for startups.
5. Iron Mountain
The economy of Iron Mountain, in the Upper Peninsula near the Wisconsin border, is rooted in the mining industry. Today, its economy is fueled by a combination of manufacturing, health care, tourism and retail businesses. Local businesses include the Good Earth Salon, Spiro’s downtown restaurant and Iron Mountain Iron Mine, which gives underground tours of the original mine. The Dickinson Area Chamber Alliance provides local businesses with networking opportunities, referrals and free and reduced-cost services including health and worker’s compensation insurance.
In the northern Lower Peninsula, on Little Traverse Bay, Petoskey is a quaint town known for its beaches in the summer, snow sports in the winter and its downtown any time of the year. Local businesses include Roast & Toast, a downtown cafe; V2V, a women’s clothing store; and Petoskey Brewing, a microbrewery established in 1898 and restored in 2012. The Petoskey Regional Chamber of Commerce helps promote and grow local businesses through its networking events, development programs, referrals and insurance discounts.
In southern Michigan, about equidistant from Kalamazoo, Lansing and Ann Arbor, Marshall is steeped in history and known for its 19th century architecture. The city’s top employers include Tenneco, an auto parts maker, and Progressive Dynamics Inc., a power converter manufacturer. Other local businesses include Marshall Carriage Co. & Ghost Tours and Northfield Mandolins. The Marshall Area Chamber of Commerce hosts networking conferences and monthly leadership events and features members in its online directory.
About a decade ago, Wixom, northwest of Detroit, began a long-awaited revitalization of its downtown, which went up in flames in the 1920s. Local businesses include Adept Plastic Finishing Inc. and Wolverine Assemblies, which provides warehouse services to companies including Honda, Ford and John Deere. Businesses can join the Lakes Area Chamber of Commerce to be included in its directory, get referrals, attend networking events and get discounts on business products and services.
9. St. Joseph
With an iconic lighthouse, white sand beaches and 17 parks, St. Joseph attracts visitors and people looking for a second home. Local downtown businesses include Schu’s Grill & Bar and Clementine’s Too, a restaurant on the St. Joseph River. The city also has a strong corporate community, which includes appliance manufacturer Whirlpool Corp. and LECO Corp., a technology company focused on the life-sciences, environment, agriculture, food, energy and mined-materials industries. The Cornerstone Chamber of Commerce serves businesses in St. Joseph with networking events, marketing opportunities and discounted insurance plans, among other business resources.
This city in Michigan’s Upper Peninsula has the lowest unemployment rate in our top 10: just 3.2%. Among area businesses are Lindberg & Sons Inc., a construction company, and Lawry’s Pasty Shop, which sells traditional Upper Peninsula savory pasties. A membership in the Greater Ishpeming-Negaunee Area Chamber of Commerce offers perks including TV and radio advertising discounts, insurance discounts, customer referrals and networking opportunities.
Check out this interactive map of our top 10 cities to start a business in Michigan. Click on a marker to see the city’s overall score.
Top places to start a business in Michigan
NerdWallet analyzed 128 places in Michigan with populations of 5,000 or more. We excluded places with fewer than 500 businesses, regardless of population. The score for each community was calculated using these criteria:
Business climate, 65% of the overall score, is based on three metrics from the U.S. Census Bureau’s Survey of Business Owners.
- Average revenue of businesses is 20% of the score. A higher average contributed to a higher score.
- Percentage of businesses with paid employees is 25% of the score. A higher percentage contributed to a higher score.
- Businesses per 100 people is 20% of the score. A higher number contributed to a higher score.
Local economic health, 35% of the overall score, is based on three metrics from the U.S. Census Bureau’s American Community Survey.
- Median annual income is 10% of the score. A higher median income contributed to a higher score.
- Median annual housing costs are 10% of the score. Lower median costs contributed to a higher score.
- Unemployment rate for residents over 16 years old is 15% of the score. A lower rate contributed to a higher score.
Jonathan Todd conducted data analysis for this study.
Update: A link in earlier versions of the methodology has been changed.
For more information about how to start and run a business, visit NerdWallet’s Small Business Guide. For free, personalized answers to questions about starting and financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.
St. Joseph, Michigan, lighthouse image via iStock.