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Etsy Alternatives: 5 Options for Creative Businesses

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Etsy is an online marketplace for independent sellers of handmade, vintage and craft products. For a fee, creative entrepreneurs can open their own ecommerce shop on the Etsy platform to sell goods and services. But it’s not the only platform artists and craft makers can use to sell their wares. Amazon Handmade, Depop and Zibbett offer similar marketplaces, while eBay is for sellers of all types of goods, not just handmade ones, and has size on its side. Or, you could rely on your own ecommerce site through a provider like Shopify.

We’ll break down the Etsy alternatives so you can determine your best way to share your handmade products.

Selling on Etsy: When to stay and when to go

Stay: Business owners who don’t yet have a customer base.

Etsy has more than 2,300 active sellers on the platform and more than 42,000 buyers; according to Jesse Tyler, marketing director of Classy Llama, an ecommerce agency based in Springfield, Missouri, entrepreneurs just starting out can benefit from that built-in audience that Etsy provides.

Sellers have the opportunity to be featured on the site, as Etsy handpicks shops to highlight throughout the marketplace. If selected, you could benefit from being exposed to hundreds of potential customers. Sellers could also promote their listings through paid ads on the site.

However, Etsy’s sellers are also bound to its policies and must keep up with changing rules to rank high in search results on the site. For instance, Etsy announced in July that it would encourage sellers to offer free shipping for orders totaling at least $35. Shops that don’t make the change to offer free shipping won’t receive priority placement in Etsy search results.

Stay: Those with limited time for site setup.

For creative entrepreneurs looking to sell goods online, Etsy could be an attractive starting point. Etsy provides tools to set up an online store, taking the burden off the business owner to build a site from scratch, Tyler said.

“If you’re using Etsy, it’s about leveraging what already exists,” he said. “There’s a lot less responsibility and a lot less work to get set up.”

If you’re not tech savvy or don’t want the hassle of constructing an ecommerce site, Etsy provides tools to quickly set up a shop. You’d need to provide information about your business and products, as well as how you want to accept payments, and Etsy would populate a website for you to manage. From there, you could rearrange items on your page to customize your store.

Etsy charges fees for listing and selling items — a $0.20 listing fee, 5% transaction fee and 3% plus $0.25 for payment processing — but in exchange Etsy takes on the technical aspects of running an ecommerce site.

Sellers must also adhere to Etsy’s policies, including restrictions on the type of products you can sell and shipping requirements, as mentioned earlier.

Stay: Entrepreneurs with limited marketing budgets.

Generating an audience for a new ecommerce site can be challenging, Tyler noted, especially if you don’t invest in advertising. Selling on Etsy would give you access to the high volume of people who visit the marketplace.

“If you’re a small seller and you’re not spending money on ads, you’re going to be better off sending them to Etsy and letting Etsy do the work,” he said.

Associating the business with Etsy could also increase the credibility of your brand, Tyler said. People may be more willing to interact with a business that appears on a trusted platform, like Etsy. Kickstarter would be a similar example, he said, and these platforms are often an effective “marketing engine” for new businesses.

The longer you sell on Etsy, the more reviews you would collect from customers. Positive reviews can boost your ranking within the Etsy marketplace, increasing the exposure of your shop, said Tyler. A positive reputation on Etsy can be immensely valuable to sellers.

“If you’re doing well on Etsy, it might not ever make sense to leave,” he said. “Your reviews and repeat customers, those are things that are kind of hard to replace if you go.”

Consider an Etsy alternative: Small businesses with greater ad budgets.

If you want to invest in advertisements, it would be best to direct customers to your own website rather than an Etsy domain, Tyler said. Instead of using Etsy’s paid ad campaigns, consider other, free ways to increase your Etsy ranking.

A new site would require you to make a significant marketing investment to gain traction. But if you were already planning to advertise your business, it could make sense.

Consider an Etsy alternative: Own your customer base.

When selling through your own ecommerce business, you could collect valuable information from your customers, such as email addresses. Etsy doesn’t allow sellers to collect email addresses from buyers to conduct further communication. But as a business owner, obtaining addresses allows you to directly connect with customers and generate new leads.

Operating outside of a marketplace like Etsy would allow you to control your communication with current and potential clients.

5 Etsy alternatives for crafty entrepreneurs

Etsy is considered a consumer to consumer (C2C) marketplace, meaning it serves as a neutral platform to sell goods. Etsy facilitates transactions and takes a percentage of sales, and other marketplace platforms do the same. On the other hand, software as a service (SaaS) providers give users their own URL and control of their domain in exchange for an ongoing fee.

Whether you’re looking for another marketplace in which to sell your products or a site to host your own store, here are a few Etsy alternatives to check out for your small business.

 EtsyShopifyAmazon HandmadeDepopZibbeteBay
Subscription feeNoYesNo, for 40 items or lessNoYesYes
Starting costListing fee: 20 cents/item

Transaction fee: 5%

Payment processing fee: 3% plus 25 cents
Subscription: $29 to $299/month

Credit card fee: Starting at: 2.7% plus 0 cents (in-person rate); 2.9% + 30 cents (online rate)
Referral fee: $1 or 15% of the total sale price, whichever is higherFlat fee: 10% on each item sold

Payment fee: 2.9% plus 20 cents
Subscription: $5 or $6 per month, per channel (2 minimum), plus channel feesSubscription: $4.95 to $349.95/month

Insertion fee: 5 cents to 30 cents/item

Final value fee: 2% to 10%
Free trialNoYesNoNoYesNo
Choice of payment optionYesYes, for a feeYesNo (PayPal only)YesYes

1. Shopify

Shopify is an ecommerce platform that allows business owners to create a cloud-based online store. Users can buy their own domain name or connect an existing URL to their store. Shopify’s store builder tool makes it easy to design a site if you don’t have web development experience.

New users can try Shopify for free for 14 days. Shopify requires users to purchase a monthly subscription, offered starting with its entry plan:

  • Basic Shopify subscriptions start at $29 per month and include an ecommerce website and blog, space for unlimited products and full-time customer support. Basic plans include account access for two people and a 64% shipping discount. Shopify charges a fee to accept online credit card payments — 2.9% plus $0.30 for the Basic plan.

As you advance to more expensive subscription tiers, available site features increase, and credit card processing fees decrease.

2. Amazon Handmade

The Amazon Handmade marketplace is designed for artisans and craft makers who sell products online. Sellers must submit an application before setting up a shop. Upon receiving approval, you would choose your business name, payment method and provide your credit card information. You can then list products in categories such as artwork, beauty and personal care, clothing, jewelry and watches, among others.

You would need to register for a Professional selling plan, which is free, though if you plan to list more than 40 items in your shop, you would be subject to a $39.99 monthly fee. All sellers would owe a fee on each item sold. Amazon charges either 15% of the total sale price or $1, whichever is higher.

3. Depop

Depop is an app-based marketplace for creatives with a social component. Users can see what products others are liking, buying and selling. As a seller, you would create a Depop profile that would be featured in the app. You would need to provide a description of what you’re selling and your policy on shipping and returns. Sellers need at least four items to list when launching an account. Depop uses PayPal to facilitate transactions and you would need to connect a PayPal account for Depop to verify before you can accept payments.

Although sellers don’t have to pay listing or subscription fees, Depop charges a 10% flat rate on each item sold. Because Depop partners with PayPal to conduct secure transactions, sellers are also subject to a fee of 2.9%, plus $0.20 for payments. You can ship through Depop and choose whether you or the buyer would be covering shipping costs. You can generate a shipping label through the app, then drop off the item at a post office or with another courier.

4. Zibbet

Zibbet allows creative entrepreneurs to sell in the Zibbet marketplace, as well as through other sales channels — for example, Zibbet can connect to other platforms, including Etsy, letting you manage your sales in one place. Zibbet gives users the ability to customize their shop, list unlimited products and run sales and promotions. If you’ve connected your Zibbet store to other sales channels, all order details would be imported to Zibbet for you to manage, and any changes made to your store through your Zibbet dashboard would be updated on all channels.

Zibbet offers a 14-day free trial for new users. After that, the platform costs $5 per month if you choose to receive a yearly bill, or $6 per month if you’re billed monthly. Each channel that’s connected to your Zibbet account — there’s a two-channel minimum — would cost an additional $5 or $6, depending on your billing schedule. Zibbet doesn’t charge listing or transaction fees, but you would be subject to fees from other channels. For example, if you connect your Zibbet store to Etsy, you would owe Etsy’s fees.

5. eBay

eBay offers a personal or business account, depending on what you plan to sell. A business account is best if you want to sell large amounts of items, handmade products or items that you bought with the intention to resell. Similar to other platforms, eBay allows you to create listings for items you want to sell, including shipping options and how customers will pay you. eBay’s Seller Hub provides tools like sales tracking to help business owners manage and grow their online store.

eBay charges a monthly subscription to run a store, which offers more listings and lower fees than selling without a store. There are a range of subscription tiers, including its entry plan:

  • Starter subscriptions costs $7.95 per month, or $4.95 per month if you sign up for a yearlong plan. The Starter plan also comes with 100 free listings, with each additional listing costing $0.30 per month. eBay also charges all sellers a percentage of each final sale. The final value fee ranges from 2-12% for Starter subscribers. Sellers also get a monthly allocation of “zero insertion fee listings,” which are items you could list for free.

Combining Etsy and alternatives

You can open both an Etsy shop and an ecommerce store on another platform, and it could be a smart strategy to do so, said Tyler. For instance, large enterprise companies typically sell through multiple channels, such as retail stores and their own store or website, he said.

You could take advantage of Etsy’s built-in audience while working on your own ecommerce site. You would likely have more freedom to design and customize your own domain, though you would need to make sure it appeals to customers. People can be hesitant to trust a new site, Tyler said, and it could help if you also have a presence on Etsy.

“If you set up a shop yourself and it doesn’t look great and there’s not a lot of reviews, people might be apprehensive about buying from it,” he said.

The bottom line

There are several places for business owners who want to sell handmade or craft products online to set up shop.

Creating your own ecommerce site on a hosting platform like Shopify would give you an independent domain for your business. You wouldn’t be associated with a larger marketplace and you wouldn’t need to compete with other sellers on the same platform.

But it takes time and commitment to bring people to a new website, and you may find that consumers can be wary of a startup ecommerce brand.

“A Shopify site might bring disappointment,” Tyler said. “You have to do a lot of work to bring traffic and build an audience.”

A marketplace with name recognition, like Etsy, could be a better starting point for new entrepreneurs. Etsy provides tools to simplify the process of setting up an online store. Though you would have to pay listing fees and face high competition, your brand could benefit from the exposure that Etsy provides, Tyler said: “If you haven’t built an audience, this is a great, safe place to do that.”

Still, keep in mind that you could sell products through Etsy and a secondary ecommerce site to see which is best for your small business. As Tyler put it, “it doesn’t hurt to have both.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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How to Avoid Pyramid Schemes

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Direct selling can provide a flexible way for you to run your own sales business from home or online, but it’s important to distinguish legitimate companies from pyramid schemes. The red flag is when such a system depends on recruiting an ever-increasing number of “investors” than the selling of a product. We’ll help you avoid pyramid schemes and identify legal direct selling companies worthy of your research.

Direct selling vs. pyramid schemes

Direct selling is a legal business practice conducted through single-level sales (think door-to-door salesperson), host or party-plan sales and multilevel marketing companies, which depend on individual distributors to sell products to the public, often in a group, party-like setting or through catalogs or online stores. Distributors often have the opportunity to earn commission on their sales and those of the salespeople they recruit.

A pyramid scheme may be disguised as a multilevel marketing business, but it is actually an illegal scam that emphasizes recruitment rather than the sale of actual products. Instead of earning most of their income through selling, distributors are heavily rewarded for bringing on new sellers, who may have to pay an entry fee.

“It’s going to take some healthy skepticism and research for someone to recognize that difference,” said Stacie Bosley, associate economics professor at Hamline University in St. Paul, Minn.

As of 2018, direct selling represents $35.4 billion in retail sales in the U.S. and 6.2 million people work full-time or part-time in the industry, according to the Direct Selling Association. Continue reading to find out how to avoid a pyramid scheme if you’re thinking about pursuing a multilevel marketing opportunity.

What is a pyramid scheme?

A pyramid scheme can be defined as a company that requires participants to make an investment in the business in exchange for the opportunity to sell products to consumers. Oftentimes, sellers are highly rewarded for recruiting newcomers, who then make a similar investment in the company.

Many types of businesses provide rewards for referrals, giving customers a small incentive to suggest a product or service to others, Bosley said. But if the recruitment model is the central feature of the company, it may be a pyramid scheme.

“Look for a really strong pay-and-recruit structure,” Bosley said. “If that’s there, I would worry about its legality.”

How pyramid schemes work

Here’s an example of a formula that a pyramid scheme could follow. Let’s say a seller makes a $500 investment to join the business. She is told she would be rewarded $150 per person if she recruits three more sellers, who would also make a $500 investment in the business.

From there, she would earn $30 for each new member that her recruits bring on. All of her recruits are given the same offer.

The original seller stands to make an increasing profit on her $500 investment, depending on how many people her recruits bring into the company. But each new member would make $450 at the first level, $50 short of their break-even point if they only recruit three more people. If they can’t pass the first level, they won’t get a return on their investment. Meanwhile, the company would continue to collect $500 from every new recruit, although it would have to pay commission to those who recruit more new members.

There could be instances where legitimate companies follow a similar model of rewarding recruitment. But if new member recruitment earns you more money than selling actual products or services, then the company would likely be a pyramid scheme.

Why are pyramid schemes illegal?

Pyramid schemes are illegal because they defraud investors who are promised their money back. In reality, money from bottom-level investors is used to pay other investors farther up the pyramid. And products in these schemes are often unsellable.

Pyramid schemes took off in the U.S. in the 1970s. One-on-one selling became popular for consumer items, such as cosmetics, kitchen tools and branded items like Tupperware, and pyramid schemes took advantage of the trend. The Federal Trade Commission began cracking down on scams that emphasized networking over selling actual goods, and the organization has continued to monitor the direct sales industry.

Another wave of pyramid schemes swept through the U.S. in the 1990s with the rise of email and internet access. Such scams still pop up today, though the FTC continues to bring cases against deceitful companies.

“Fraud goes in cycles, just like economies,” said Cheryl Jarvis, marketing professor and department head at Florida Atlantic University in Boca Raton, Fla.

The problem with pyramid schemes is the people at the top of the chain are the only ones who make money, Jarvis said. The majority of participants don’t see a return on their investment and ultimately lose money. Pyramid schemes are often short-lived because eventually, distributors run out of people to recruit and the operation stops growing.

“Mathematically, they’re unsustainable,” Jarvis said.

Report suspicious behavior. In addition to the FTC, state agencies investigate pyramid schemes. For instance, any fraudulent activity in New York should be reported to The New York State Attorney General’s Office. You could also file complaints with the Better Business Bureau.

How to avoid pyramid schemes

In addition to an emphasis on recruitment, here are other indicators that a direct sales opportunity may be a scam.

It’s sold as a passive income or easy money opportunity. As a recruitment strategy, distributors often emphasize how little effort is needed to make an income. In any business, selling enough product to turn a profit takes hard work, so be cautious if the company makes it sound simple.

Promise of unrealistic returns in a short amount of time. If you’re earning fast cash despite low sales, you’re likely receiving returns on people getting recruited to the company. Generating revenue too quickly could be a red flag.

No buy-back system. Pyramid schemes and legitimate multilevel marketing companies both typically require new members to purchase product to sell to consumers. However, reputable companies should offer a buy-back option if you want to leave the business. A company that doesn’t refund members for unsold product may be a part of a pyramid scheme.

High upfront fees. Be wary if the buy-in fee or initial investment seems high or exceeds the value of the products. High upfront fees combined with the lack of a buy-back program could indicate the business is a scam. Legitimate direct selling companies have a median startup fee of $99, according to the Direct Selling Association.

Abstract language. Take note if the company is unclear about processes or structures within the business. Product descriptions, prices and claims may also be vague or questionable. Recruiters could make inflated income claims as well to attract new sellers.

Do your own research rather than relying on what you hear from distributors, Bosley said. They are incentivized to recruit you and may not objectively present information.

“Of course, scheme operators aren’t going to make it easy for you,” she said. “There are layers of rhetoric and that makes it difficult to see the bones of the scheme.”

One way to quickly check a company’s legitimacy would be searching the Direct Selling Association’s database. Although not all existing direct sales companies are listed, a company that is a member of the DSA could be considered a reputable multilevel marketing business.

How to say ‘no’ to a direct sales recruiter

Social media has become a conduit for pyramid schemes. When people are approached about multilevel marketing opportunities, the sales pitch is often coming from someone they know, which can make it difficult to turn down, Bosley said.

“There’s feelings of obligation, allegiance, [of] not wanting to let someone down,” Bosley said. “We underestimate how powerful those kinds of emotions can be.”

The person asking you to join the company could be unknowingly participating in a pyramid scheme. If you’re skeptical about the operation, it’s best to reject them outright in a way you feel comfortable, Bosley said.

“If you give them any room, their incentives just keep coming,” she said.

First, you should be honest about your suspicions that there may be something illegal in the structure of the company. You could take a more thoughtful approach, communicating that you’re concerned about their involvement and well-being. You may want to point out that they could potentially harm others in the recruitment process.

“It doesn’t just affect you; it affects the person who recruited you and it affects the people you pass it on to,” Bosley said.

Request documentation. You could then ask for company documents, such as marketing plans or audited financial statements. The recruiter may not be able to provide this information, but if they can’t get such forms from someone else in the company, you could use that as a reason to reject their offer, Jarvis said.

“Whenever you get strong-arm social pressure, I’d say that’s a red flag,” she said.

Pyramid schemes vs. multi-level marketing companies

If you’re considering getting into the direct sales industry, here’s how to spot a pyramid scheme compared to a multilevel marketing company.

MLM company

Pyramid scheme

Recruitment rewards may be offered, but product sales drive income.

Recruitment is the primary revenue driver.

Buy-back program and exit strategy available for sellers.

No repurchase plan for unused inventory.

Initial investment cost is relative to the value of products.

Steep fees to join the business and receive products.

There is an actual consumer demand for products.

Product descriptions and claims are vague or misleading.

When direct selling could pay off

Not all multilevel marketing companies are pyramid schemes in disguise. A direct sales business could have a lower startup risk and lower cost of entry compared to other business opportunities, like buying a franchise, said Joseph Aquilina, ethics and compliance counsel for the Direct Selling Association. Although the payoff could be miniscule — as low as 70 cents or less per hour — sellers are usually independent contractors and can work on their own schedule.

“This is a very low-cost and low-risk opportunity for people to build their own businesses,” he said.

People often fall prey to pyramid schemes because of a need to supplement their household income, Aquilina said. While direct selling could provide a solution, scams and illegitimate businesses could turn people off the entire industry.

“It can take only a few bad apples to present a reputation challenge for the whole bunch,” he said.

You could also start a hobby-based business to monetize a personal interest. You would be able to follow your entrepreneurial instincts without answering to a larger organization. But getting a business up and running — and reaching profitability — takes time and commitment, even more so than direct selling.

Keep in mind that multilevel marketing depends on sales, and you have to be willing to put in effort to become successful, Jarvis said. Chasing a quick-fix or easy way to make income would likely land you in a pyramid scheme rather than a legitimate company.

“You’re going to be spending a lot more time than you think to make sales,” she said. “Those who are successful are the ones who make it a full-time job.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Where Very Small Businesses Dominate

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Though it may seem like giant corporations like Amazon command the U.S. business landscape, small businesses continue to be the backbone of most local economies.

The U.S. Small Business Administration estimates that 99.9% of ventures, or 30.7 million companies, qualify as small businesses. However, the SBA’s definition of a small business is broad. To qualify, businesses must meet or fall below the maximum revenue and employee count that the SBA sets for each industry. Revenue limits span $750,000 to $38.5 million, while employee requirements range between 100 and 1,500 people.

But the vast majority of small businesses are much smaller — 89% have 20 or fewer employees. For this study, MagnifyMoney researchers only considered businesses with fewer than 10 paid employees, firms that may include younger companies and mom-and-pop operations with slim resources.

Researchers found that these extremely small companies come close to matching — and in one case exceeding — average payrolls of all businesses in their cities. We ranked the 50 largest U.S. metros by payroll relative to metro averages, growth among companies with fewer than 10 employees and the percentage of workers employed by these firms to see where they dominate.

Key Findings

  • Miami comes out on top with a large and growing number of small businesses: 84% of businesses here have fewer than 10 employees with 15% of the city’s total workforce employed by these extremely small companies.
  • Los Angeles takes second place, also with a large number of small-scale businesses, but what’s striking about these companies is that their payroll is 94% of the metro average, second only to Las Vegas where companies with fewer than 10 employees actually exceed the average payroll.
  • Louisville, Ky. is at the bottom of the list — just 7% of all workers are employed by companies with fewer than 10 employees. Additionally, the number of such small businesses in Louisville is dropping, which could be a bad sign for those still operating in the area.
  • Memphis, Tenn. comes in one spot above Louisville, Ky. This metro area had the lowest share of extremely small businesses on our list, as well as one of the lowest shares of all metro workers employed by these companies.
  • The average small business rate is 72% among all cities. In other words, roughly three quarters of businesses in the 50 largest metro areas have less than 10 employees on the payroll.
  • Generally, payroll per employee at these small businesses tends to be lower than the metro average. On average across all 50 metros, payroll per worker at companies with fewer than 10 employees is 79% of the metro average.

Metro areas where very small businesses dominate

Small businesses support the local economy in these high-ranking metros.

1. Miami

The South Florida city boasts the highest percentage of businesses with fewer than 10 employees as well as the largest percentage of its workforce employed at such companies, despite a relatively small business rate increase in one year’s time, just a 0.2% change. Average payroll per employee is 86% of the relative metro average.

The economic development council in Miami-Dade County identifies and promotes industries that are poised for job and wage growth including aviation, banking and finance, creative design, hospitality and tourism, technology, life sciences and health care, and trade and logistics. Tourism has long been a lucrative sector for Miami. Small businesses in the industry can promote their services at the City of Miami Beach Visitors Center, which has more than 120,000 annual visitors.

2. Los Angeles

Los Angeles holds the No. 2 spot thanks to a strong average payroll, second only to Las Vegas among extremely small businesses. Business rate growth was flat in one year’s time but 12% of LA’s workforce is employed by small businesses with fewer than 10 employees.

Entertainment is unsurprisingly among the top industries in Los Angeles, alongside aerospace, bioscience, transportation and fashion. The City of Los Angeles offers several resources and incentives to support small businesses, such as the Restaurant and Hospitality Express Program, which streamlines the permit approval process for food service establishments. The cyber threat protection program also helps small business owners learn best practices to prevent cyber attacks or breaches.

3. Tampa, Fla.

Another Florida metro rounds out the top three. Though it tops No. 2 Los Angeles by small business rate, Tampa has lower employment numbers: 11% of its workforce is employed by a small business with fewer than 10 employees. The average payroll of those companies is 81% of the metro average. Tampa has seen a 0.1% one-year change in the small business rate.

The metro area’s key industries include financial and professional services, manufacturing, distribution and logistics, life sciences and health care, information technology and defense and security. Tampa Bay is also a popular location for corporate headquarters.

Areas with a lesser impact from very small businesses

These metro areas see less economic influence from local small businesses.

48. Nashville, Tenn.

Nashville has one of the lowest small business rates in our study at 67%. Just 8% of workers in the area are employed by a small business with fewer than 10 employees, which see an average payroll per employee at 79% of the metro average. Nashville has seen a -1.0% one-year drop in its small business rate.

Nashville once had a population growth rate of nearly 100 people per day. That growth slowed this year, according to a report from The Tennessean newspaper, but the area has felt the effects of a rapid influx of new residents, including high tourism, expensive housing and displacement of low-income residents. Large retail chains like Trader Joe’s also continue opening throughout the area.

49. Memphis, Tenn.

The other Tennessee metro near the bottom of our list has a small business rate of 62%, the lowest of all metros we ranked. In Memphis, 7% of all employees work for a small business with fewer than 10 employees with average payroll per employee at 79% of the metro average. During one year’s time, Memphis had a -0.8% drop in the small business rate.

Memphis is among the poorest metropolitan areas in America, and residents face economic barriers such as high poverty as well as segregated and devalued neighborhoods. The Memphis River Parks Partnership, a nonprofit focused on transforming the area of Memphis closest to the Mississippi River, is working to support local businesses. Part of the organization’s efforts include contractor development strategies that position minority- and women-owned businesses for success.

50. Louisville, Ky.

In last place, Louisville has a 66% small business rate and a significant drop of -1.2% in growth during a one-year period, tying with Milwaukee. Just 7% of Louisville employees work for a small business with fewer than 10 employees where payroll per employee is 78% of the local average.

Louisville is working to grow its tech workforce to become an emerging technology hub. The city has invested in job programs and initiatives such as Code Louisville and Bit502, according to The Lane Report. Louisville has also partnered with educational institutions, nonprofits and local businesses to boost the city’s tech output.

Methodology

To rank the places where very small businesses dominate, we looked at data for 50 of the largest metropolitan areas. Specifically, we evaluated these four metrics:

  • Small business rate. This is the percentage of businesses with fewer than 10 employees.
  • One-year change in small business rate. This is the change from 2015 to 2016 in the small business rate.
  • Percent of workforce employed at small businesses. This is the percentage of all paid employees who work in small businesses with fewer than 10 employees.
  • Relative pay of small business employees. This is average payroll per employee of these small businesses divided by the metro area average payroll per employee.

We then ranked each metro in each of these metrics. Each metro area was scored based on the average rank received across the four areas. Data for all metrics comes from the Census Bureau’s 2016 and 2015 Survey of Entrepreneurs.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.