Yes, Minnesota can be a deep freeze — 1996 brought a whopping record low of 60 below zero. But educated residents and major companies headquartered here are warm to Minnesota. With a strong economy and highly educated workforce, the Gopher State is a solid place to start a business, a NerdWallet analysis has found.
Minnesota has the sixth-lowest unemployment rate in the country at 3.6%, according to the U.S. Bureau of Labor Statistics. It’s home to public companies such as Target, Best Buy and UnitedHealth Group, and private companies including Andersen Corp., Cargill and Carlson.
“We have a lot of smart, educated and affluent people here,” says Julie Kearns, owner of Junket: Tossed & Found, a Minneapolis shop showcasing vintage and local art. In this state, 48% of residents age 25 and older have an associate’s degree or higher college credential, which places the state second only to Massachusetts (52%), according to the Minnesota Office of Higher Education.
Minnesota residents are also a connected bunch, Kearns says. “People maintain relationships since kindergarten. So, when you’re from here, I think your access to an extended network is stronger than it might be coming from elsewhere.”
To determine the best places to start a business in Minnesota, NerdWallet looked at 123 places with a population of 5,000 or more and considered six metrics in two categories:
Business environment. This category makes up 65% of the total score. We looked at the average revenue of businesses in each community, the percentage of businesses with paid employees and the number of businesses per 100 people.
Local economic health. In this category, which makes up 35% of the total score, we looked at factors such as median annual income, median annual housing costs and unemployment rates.
The Twin Cities are tops. The top 10 were dominated by communities in the suburbs of the Twin Cities of Minneapolis and St. Paul. Eight of the top 10 cities are located in the area, which includes nearly 3 million people in seven counties.
Low unemployment. Minnesota has an unemployment rate of 3.7%, well below the national average of 5.5%, according to the Bureau of Labor Statistics. Each of the cities that cracked the top 10 has an unemployment rate below the national average, and five cities have an unemployment rate below Minnesota’s average.
On the small side. Two of the cities in the top 10 have populations under 10,000. All but one of the top 10 cities has populations under 60,000.
Best places to start a business in Minnesota
1. Golden Valley
The Minneapolis suburb of 20,594 has the highest average revenue per business and benefits from a very low unemployment rate of 3%, according to U.S. Census Bureau data. General Mills, Pentair, Allianz Life, Honeywell and UnitedHealth Group are some of Golden Valley’s major employers. Golden Valley is served by the TwinWest Chamber of Commerce, which provides members with opportunities to grow their businesses through networking opportunities, business programs, events and workshops.
This suburban city just 8 miles west of Minneapolis has the fourth-highest rate of businesses per 100 people (15.75) and a low unemployment rate of 4.3%. Minnetonka is home to Cargill, a food and other products company that was ranked as the single largest private company in the U.S. by Forbes in 2014, and UnitedHealth Group, which is No. 14 on the Fortune 500 list. Other notable companies in the city include SuperValu, St. Jude Medical and Carlson. Minnetonka is served by the TwinWest Chamber of Commerce.
Edina, southwest of Minneapolis, is known for its 40 neighborhood parks and recreational facilities, which include the Edina Aquatic Center, Alden Park, Braemar Golf Course and Braemar Field and the Edina Art Center. The city is No. 3 on our list mainly due to its high average revenue per business and low unemployment rate. Several notable companies are headquartered in Edina, including Barr Engineering Co., Jerry’s Foods and Regis Corp. Businesses making their mark in Edina include Wuollet Bakery, Tavern on France, Edina Grill and Corepower Yoga. Entrepreneurs can turn to the Edina Chamber of Commerce for opportunities to network and grow their businesses.
4. Eden Prairie
Eden Prairie lies about a dozen miles southwest of downtown Minneapolis. With a population of 61,516, it’s the largest city in the top 10. Eden Prairie made it to No. 4 thanks to its high average revenue per business, low unemployment rate and high percentage of businesses with paid employees. The city, on the north bank of the Minnesota River, has more than 750 wetlands, lakes and ponds. Major employers include UnitedHealth, C.H. Robinson Worldwide and Cigna. The Eden Prairie Chamber of Commerce provides over 125 networking opportunities annually for members, according to its website.
Roseville is a city of 34,164 east of Minneapolis and just north of St. Paul. The city is home to the Roseville Library, billed as the busiest library in Minnesota; the Rosedale Center mall; Bennett Lake, which is known for its bank fishing; and the Oval, an outdoor ice rink. With an unemployment rate of 2.8%, Roseville’s jobless figure is among the lowest on our list. Major employers here include the Minnesota Department of Transportation, Target and Symantec. Roseville’s taxes are low for the Twin Cities area, according to the city’s website. The Twin Cities North Chamber of Commerce serves Roseville businesses.
6. Little Canada
Little Canada, about 5 miles north of St. Paul, has a population just under 10,000, making it the second-smallest city in the top 10. Little Canada ranked sixth on our list due to its high average revenue per business ($2.3 million) and percentage of businesses with paid employees (41%).
7. Thief River Falls
Thief River Falls is just 70 miles south of the Canadian border. With a population of 8,652, it is the smallest city in our top 10. The city is home to Seven Clans Casinos; Arctic Cat, a snowmobile manufacturer; and Digi-Key, an electronic parts supplier. The city benefits from a low unemployment rate (2.8%), and high average revenue per business ($3.0 million). The Thief River Falls Chamber of Commerce offers members benefits, including networking events, business workshops and help with promotional activities.
Rogers is a city of 10,913 about 25 miles northwest of Minneapolis. The city has the third-lowest unemployment rate on the list at 2.5%, and nearly 40% of businesses here have paid employees, which ranks as the 14th highest on the list. The I-94 West Chamber of Commerce represents 10 local communities, including Rogers, and offers members networking and promotional opportunities.
9. Mendota Heights
The city of Mendota Heights had a median household income of $95,083 from 2009 to 2013, well above the state median of $59,836, according to the U.S. Census Bureau. The city has one of the highest number of businesses per 100 people on our list and a low unemployment rate of 3.7%. Mendota Heights businesses are served by the Dakota County Regional Chamber of Commerce.
Alexandria is a small city of 11,357 off Interstate 94, roughly equidistant from Fargo, North Dakota, and Minneapolis. Major employers in the city include 3M, Tastefully Simple, Douglas County Hospital and Alexandria public schools. Alexandria business owners can turn to the Alexandria Lakes Chamber of Commerce for networking, marketing and volunteer opportunities.
Best places to start a business in Minnesota data
NerdWallet analyzed 123 places in Minnesota with a population of 5,000 or more. We excluded places with fewer than 500 businesses, regardless of the population. The overall 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.
Experts tell what makes Minnesota special for business, what needs to improve
Saint Mary’s University of Minnesota
University of Minnesota Duluth
Winona State University
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.
NerdWallet staff writer Steve Nicastro contributed to this article.
Update: A link in earlier versions of the methodology has been changed.
Carlson Towers in Minnetonka, Minnesota, image via iStock.