Size matters when choosing a city in which to launch a startup. As many veteran entrepreneurs and failed startups understand well, bigger is not always better. A city with a smaller population can offer a greater chance of success, depending on an entrepreneur’s personal preferences and the type of business they’re starting. The best cities can even help new businesses survive economic shocks such as pandemics or inflation.
To determine the best small cities to start a business, WalletHub compared the business-friendliness of more than 1,300 small-sized cities. Our data set of 18 key metrics ranges from the growth rate of the number of small businesses to investor access and labor costs.
Cassandra Happe, WalletHub Analyst
Main Findings
Best Small Cities for Starting a Business
Note: With the exception of “Total Score,” the columns in the table above depict the relative rank of a city, where a rank of 1 represents the best conditions for that category.
- Most
- T-1. St. Cloud, MN
- T-1. Florence, AL
- T-1. Michigan City, IN
- T-1. Aberdeen, SD
- 5. Ithaca, NY
- Least
- T-1030. Sun City West, AZ
- T-1030. Avondale, AZ
- T-1030. Goodyear, AZ
- T-1030. Buckeye, AZ
- T-1030. Casa Grande, AZ
- Highest
- T-1. Calexico, CA
- T-1. San Luis, AZ
- T-1. Delano, CA
- T-1. Reedley, CA
- 5. Brawley, CA
- Lowest
- T-1172. Harrisburg, PA
- T-1172. York, PA
- T-1172. Lawrenceville, GA
- T-1172. Myrtle Beach, SC
- T-1172. Sarasota, FL
- Most
- 1. Bethesda, MD
- 2. Los Altos, CA
- 3. Wellesley, MA
- 4. Princeton, NJ
- 5. McLean, VA
- Least
- 1330. Immokalee, FL
- 1331. Bell Gardens, CA
- 1332. Soledad, CA
- 1333. Wasco, CA
- 1334. Coachella, CA
- Cheapest
- 1. Kentwood, MI
- 2. Barberton, OH
- 3. Salisbury, MD
- 4. Cape Girardeau, MO
- 5. Raytown, MO
- Most Expensive
- T-1290. Santa Monica, CA
- T-1290. West Hollywood, CA
- T-1290. Beverly Hills, CA
- T-1290. Menlo Park, CA
- T-1290. Mountain View, CA
- Lowest
- 1. Isla Vista, CA
- 2. Carbondale, IL
- 3. East St. Louis, IL
- 4. West Lafayette, IN
- 5. Meridian, MS
- Highest
- T-1319. Cupertino, CA
- T-1319. Saratoga, CA
- T-1319. McLean, VA
- T-1319. Los Altos, CA
- T-1319. Wellesley, MA
- Longest
- 1. Fort Hood, TX
- 2. West Odessa, TX
- 3. Williston, ND
- 4. Hoboken, NJ
- 5. Jacksonville, NC
- Shortest
- 1330. Rexburg, ID
- 1331. West Lafayette, IN
- 1332. Blacksburg, VA
- 1333. East Lansing, MI
- 1334. Isla Vista, CA
- Highest
- T-1. Washington, UT
- T-1. St. George, UT
- T-1. Dover, DE
- 4. The Villages, FL
- 5. Cedar City, UT
- Lowest
- 1330. Pine Bluff, AR
- 1331. Farmington, NM
- 1332. St. Joseph, MO
- T-1333. Charleston, WV
- T-1333. Midland, MI
- Most
- T-1. Bozeman, MT
- T-1. Key West, FL
- T-1. Washington, UT
- T-1. St. George, UT
- T-1. Parkland, FL
- Fewest
- 1330. Auburn, NY
- 1331. Austin, MN
- 1332. Del Rio, TX
- 1333. Danville, IL
- 1334. Galesburg, IL
- Highest
- T-1. Allen Park, MI
- T-1. Foster City, CA
- T-1. Deer Park, TX
- T-1. Port Arthur, TX
- T-1. San Lorenzo, CA
- Lowest
- 1303. Horizon West, FL
- 1304. Valrico, FL
- 1305. Saratoga Springs, UT
- 1306. Herriman, UT
- 1307. Leisure City, FL
- Most
- 1. Atascocita, TX
- 2. Belmont, MA
- 3. Leander, TX
- 4. San Lorenzo, CA
- 5. Melrose, MA
- Least
- T-1261. Sun City West, AZ
- T-1261. University City, MO
- T-1261. Ilchester, MD
- T-1261. Florissant, MO
- T-1261. Horizon West, FL
In-Depth Look at the Best Small Cities to Start a Business
Cedar City, UT
Cedar City, UT, is the best small city to start a business. It has one of the highest rates of startups per capita, as well as the fourth-highest growth in the number of small businesses between 2015 and 2021, at over 33%. This growth is significant because it shows that the city has the conditions to keep small businesses afloat even during this period of economic difficulty.
Cedar City has the fourth-lowest average commute time, too, at just 13 minutes, so people can spend less time sitting in traffic and more time being productive. It ranks in the top 100 cities (out of more than 1,300) when it comes to annual employment growth and working-age population growth. There will be plenty of people for new businesses to hire in the future.
St. George, UT
St. George, UT, is the second-best small city for starting a business, ranking at the top of the country for both startups per capita and growth in the number of small businesses (over 42% between 2015 and 2021).
St. George also has very cheap office space, costing around $10.73 per square foot. In contrast, the most expensive city charges over $60 per square foot. St. George residents have short commutes, too, at around 16 minutes on average. In addition, the city has a very high annual job growth rate. All of these factors allow entrepreneurs to minimize costs while maximizing their chances of success.
Fort Myers, FL
Fort Myers, FL, is the third-best small city to start a business, with one of the highest numbers of investors per capita in the country, which improves the chances of startups finding the funding they need. This investment access allowed the number of small businesses in the city to grow by over 21% between 2015 and 2021.
Fort Myers also ranks in the top 100 cities (out of more than 1,300) for office-space affordability, at $12.20 per square foot, and for the number of startups per capita. Since current businesses are thriving and have access to good capital and low building costs, it’s a great time for startups to get a piece of the pie.
Ask the Experts
Entrepreneurs who lack expert guidance are more likely to struggle. For insight into starting a business in a small city, we turned to a panel of experts for their thoughts on the following key questions:
- What are the pros and cons of starting a business in a small city?
- Would some types of small businesses – i.e., a retail store, restaurant, or tech startup – do better than others in a smaller city?
- What tips do you have for an entrepreneur starting a business in a small city?
- What are the trends for small city businesses in 2024?
- What can local authorities do to encourage entrepreneurial activity in their small city?
Ask the Experts
Methodology
In order to determine the best small cities in which to start a business, WalletHub compared 1,334 cities across three key dimensions: 1) Business Environment, 2) Access to Resources and 3) Business Costs. For our sample, we chose cities with a population of between 25,000 and 100,000 residents. “City” refers to city proper and excludes the surrounding metro area.
We evaluated each of the three key dimensions using 18 relevant metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the most favorable conditions for launching a business.
We then determined each city’s weighted average across all metrics to calculate its overall score and used the resulting scores to rank-order our sample.
Business Environment – Total Points: 50
- Average Length of Work Week (in Hours): Full Weight (~5.56 Points)
- Average Commute Time: Full Weight (~5.56 Points)
- Average Growth in Number of Small Businesses: Double Weight (~11.11 Points)
- Startups per Capita: Double Weight (~11.11 Points)
- Average Revenue per Business: Full Weight (~5.56 Points)
- Average Growth of Business Revenues: Full Weight (~5.56 Points)
- Industry Variety: Full Weight (~5.56 Points)
Access to Resources – Total Points: 25
- Financing Accessibility: Double Weight (~5.56 Points)
Note: This metric was calculated as follows: Total Annual Value of Small-Business Loans / Total Number of Small Businesses. - Investor Access: Double Weight (~5.56 Points)
- Human-Resource Availability: Full Weight (~2.78 Points)
Note: This metric was calculated by subtracting the “unemployment rate” from the “number of job openings per number of people in labor force.” - Higher-Education Assets: Full Weight (~2.78 Points)
Note: This metric is based on WalletHub’s “College & University Rankings.” - Workforce Educational Attainment: Full Weight (~2.78 Points)
Note: This metric measures the percentage of the population aged 25 and older with at least a bachelor’s degree. - Working-Age Population Growth: Full Weight (~2.78 Points)
Note: “Working-Age Population” includes those aged 16 to 64. - Job Growth (2022 vs. 2018): Full Weight (~2.78 Points)
Business Costs – Total Points: 25
- Office-Space Affordability: Full Weight (~6.25 Points)
Note: This metric measures the per-square-foot cost of commercial office space. - Labor Costs: Full Weight (~6.25 Points)
Note: This metric measures the median annual income. - Corporate Taxes: Full Weight (~6.25 Points)
Note: Data for this metric were available only at the state level. - Cost of Living: Full Weight (~6.25 Points)
Sources: Data used to create this ranking were collected as of April 2, 2024 from the U.S. Census Bureau, Bureau of Labor Statistics, Federal Deposit Insurance Corporation, AreaVibes, Yelp, Indeed, Tax Foundation, LoopNet, and WalletHub research.
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