10 Best and Worst Cities to Start a Business

entrepreneurs from different internet start-up companies work side-by-side - Joseph Eid/AFP/Getty Images
Joseph Eid/AFP/Getty Images

America can be a polarizing place, and that can hold especially true for entrepreneurs. The success of a small business may depend on a whole lot more than work ethic and planning, and the success or failure of many enterprises may come down to one simple variable: location.

In an effort to find out which locations across America are the most friendly and unfriendly for entrepreneurs looking to get an idea off the ground, WalletHub looked at a variety of factors from 150 different major and medium-sized cities. By weighing variables like the cost of living, taxes, and access to resources, WalletHub was able to compile a comprehensive list of the nation’s metro areas and rank them accordingly.

The results, which can be seen geographically in the map below, may hold a number of surprises.

Source: WalletHub

“We did break it up into resources and business environment,” said WalleHub spokesperson Jill Gonzalez, during a call with The Cheat Sheet, referencing the methodology used to produce the rankings. “One big additional cost is office space rental.”

“A place like Springfield, Missouri,” Gonzalez added, “costs about $11 per square foot, and somewhere like San Francisco or New York is going to cost upward of $50 per square foot.”

And that’s just one of several factors that make relatively smaller cities, and particularly cities in the country’s interior, more attractive places to start a business. Though Shreveport, Louisiana (which topped the rankings) doesn’t have the talent pool or infrastructure that San Jose, California does, it has way less competition and therefore more room to grow.

Best Cities to Start a Business Worst Cities to Start a Business
1 Shreveport, LA 141 Anaheim, CA
2 Tulsa, OK 142 San Jose, CA
3 Springfield, MO 143 Santa Ana, CA
4 Chattanooga, TN 144 Oakland, CA
5 Jackson, MS 145 Ontario, CA
6 Sioux Falls, SD 146 Fremont, CA
7 Memphis, TN 147 Yonkers, NY
8 Augusta, GA 148 Garden Grove, CA
9 Greensboro, NC 149 Jersey City, NJ
10 Columbus, GA 150 Newark, NJ

That becomes clear when we look at the two poles, so to speak, in the rankings. The top 10, seen in the left column above, are generally mid-major cities, located in states that we don’t typically think of as entrepreneurial powerhouses. The cities on the other end of the spectrum, seen in the right-hand column, are cities in which most people would probably jump at the chance to open a business, with access to huge markets like Los Angeles, San Francisco, and New York.

One giant surprise? The resiliency of the South, which as a region has seen a boon in small business growth recently. “Over the past five or ten years, we’ve seen a boom in the South as far as entrepreneurial activity is concerned,” Gonzalez said. “You’re getting the same amount of resources for a lot cheaper, basically,” she added, which explains how cities like those seen above are attracting business.

But one big thing to keep in mind is that these rankings are looking at business activity in general — a lot of the specifics will come down to what individual industry entrepreneurs are looking to get into. For example, a tech company may be hard-pressed to successfully incubate in Jackson, Mississippi, whereas another business, say a bakery or confectionery, might find great success. That’s due to numerous variables such as an ability to find and hire talent, or attracting talent to certain areas.

Another thing that Gonzalez says to keep in mind is that the success of other industries also helps propel the growth or death of small business sectors in local economies. South Dakota, she says, has benefited from the drastic increase in oil and natural gas production, bringing tens of thousands of workers to areas that were previously sparsely populated. To support the energy industry in South Dakota, many other businesses are needed — restaurants, entertainment, etc.

If there’s one huge factor that really determines where a particular city lands in WalletHub’s rankings, it is probably the local cost of living. We touched on the price of office space, but in more expensive cities, employees cost more, as does just about everything else.

To see where your city wound up, or to try and find the next great American boomtown, check out WalletHub’s complete 150-city list.

Follow Sam on Twitter @Sliceofginger

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