I did an evaluation today comparing some the major cities in California for the purposes of opening a business. The results were very interesting and are posted below. (I also included my home town Phoenix out of curiosity). I evaluated three elements related to my field - advertising and marketing:
- Cost of Living: Salaries, Amenities, etc.
- Talent Pool: Competitors in market, colleges and universities
- Pro-business Climate: Rents, businesses license fees and payroll tax
Interestingly, Phoenix would beat all California cities for the reasons you would suspect - cost of living is the best and the climate is pro-business, but places a lousy 5th overall because the talent pool (for consulting, marketing and advertising) is dead last compared to the other cities.
San Francisco, where I live, places dead last because the cost of living is highest, government taxes the most, and the relative combined lower totals of advertising related companies and colleges compared to other areas.
A couple of caveats, I did not weight the standings of the colleges and universities in the areas otherwise Phoenix and San Francisco would have had stronger talent pools (Cal, Stanford, Arizona State are all class top universities pumping out thousands of talented individuals each year). I also did not measure things like MBAs per capita, etc. Correct or not, the working assumption in this evaluation was that things even out with volume.
The biggest surprise was that both LA and San Francisco do not cap annual city fees which sends their fees skyrocketing when your business starts to ramp up. In my scenario, assuming a $15MM annual revenue yield for a consulting business, the following fees would be due to each city:
- San Francisco: $135,500
- Los Angeles: $62,050
- Sacramento: $5,000
- San Jose: $1,800
- San Diego: $514
- Phoenix: $50
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