5 Best and Worst Places to Start a Small Business in the US

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ByJulija A.
October 15,2021

As the US successfully overcomes many of the challenges brought on by the COVID-19 pandemic, it seems like the right time for entrepreneurs to launch their businesses. While this is never a simple task, new business owners now don’t have to juggle as much as they’d have to last year. 2020’s struggles with health, safety, and social distancing, all while having to turn a tidy profit, seem a bit easier this year, even if COVID-19 is nowhere near done with us yet.

So, since now is as good a time as any, here is a helpful list of the best and worst places to open a business in America.  While by no means an indicator to pack up and move to one of those places right now, the research done by LendingTree provides excellent insight into which places are the best for starting your business.

The Five Best Cities to Open a Business in the US

North Carolina is a clear leader here and definitely the first state to consider if you want to open a new business. Its cities currently occupy the first, third, and fourth positions as the best cities to open a business in 2021.

Raleigh, NC

The capital of North Carolina, Raleigh, is listed as the best place to make a new business venture. Its new ventures have a 78.2% business survival rate and a low percentage of housing costs compared to the income at 18.5%. It also has a decent tax climate at 5.51 (including corporate, individual income, sales, unemployment insurance, and property taxes).

Austin, TX

Austin, Taxes is the next best place to be when you’re about to start a new business. It has an even higher business survival rate of 79.6%, but also higher housing costs at 21.4% of the income. It also beats Raleigh’s entrepreneurship rate, with 3.8%, compared to Raleigh’s 3.1%. Still, the higher living costs and a lower percentage of residents with at least a bachelor’s degree make it just that little bit less favorable compared to Raleigh.

Charlotte, NC

Charlotte and Durham, the other two North Carolina cities on the list, share similar metrics to Raleigh. Charlotte landed in third place because of its slightly higher housing costs, which stand at 19.9%, and a somewhat higher unemployment rate at 4.4%, compared to Raleigh’s 3.9%.

Durham, NC

Compared to Charlotte, NC, Durham just slipped to fourth place, even though the cities’ metrics are almost the same. Durham has a lower percentage of self-employed people and people in their prime working years.

Boise, ID

This Idaho city has some excellent metrics to show. Its business survival rate is 80.4%, and it has a tiny 3% unemployment rate. However, the business formation rate is at 14.0%. The number of residents with at least a bachelor’s degree is significantly lower compared to the cities we’ve mentioned above, at just 33.3%.

The Five Worst Cities to Open a Business in the US

If North Carolina is the best state to start your new business, California is probably the worst. With four out of five cities on this list, it is even more dominant as a state to avoid than NC was as one to look out for. Bakersfield gets the unceremonious title of being the worst among the one hundred ranked cities. It is followed closely by Stockton, Fresno, and Riverside. These four do have a high business survival rate, though, at  81.8%. The problem is everything else. Toledo, Ohio, takes the fourth spot among the worst-ranking cities, breaking Cali’s dominance in this field.

Bakersfield, CA

Bakersfield, unfortunately, finished last in two categories: unemployment (10.7%) and the proportion of residents with at least a bachelor’s degree (17.1%). Just these two metrics wouldn’t have landed it in the last spot, though. Unfortunately, it also has high housing costs as a percentage of income, a poor tax climate, and a low percentage of self-employed residents (2.4%)

Stockton, CA

When compared to Bakersfield’s metrics, Stockton is not far off. It has 2.9% more residents with bachelors’ degrees (20% total) and a lower unemployment percentage (9.0%). Unfortunately, it also has higher housing costs at 24.7% of the overall income.

Fresno, CA

Another Cali city and more dire figures to note. It has a lower cost of living at 24.0% and a higher proportion of self-employed people than the previous two cities, but otherwise, the figures are some of the worst in the US.

Toledo, OH

Toledo, Ohio, is also another city that is not the optimal place to start your business. While marginally better than the abovementioned options on this list, it also has a lower business survival rate and a mere 7.9% business formation rate, featuring a tiny self-employed population of just 2.6% of its residents.

Riverside, CA

The fifth on the list of the worst cities to start a business in is Riverside. Here the primary metrics are in line with Bakersfield’s. What saves it from an even worse place on the list are a better unemployment rate (7.9%), a higher percentage of bachelors’ degrees (23.0%), and a higher proportion of self-employed people (3.0%).

Bottom Line

As we’ve already mentioned, these metrics shouldn’t necessarily make you jump ship and change cities unless you already have other reasons for doing so. Still, they are a good indicator of the chances a new enterprise will have in various cities across the US.

For some businesses, you cannot avoid moving. Unless it is 100% online, your business will likely serve the local community. Opening up a real estate company is always an excellent choice, for example. But if the city’s real estate market is slow, you should perhaps consider putting those dollars you’ve set aside for property management software toward opening a barbershop instead.

Looking into the small business scene and living in a city with a high percentage of self-employed or surviving businesses can be very helpful. Such a community can help you overcome beginner’s pitfalls and get your business moving faster.

Some communities have more educated workers than others. This is certainly something you should look into if you consider expanding and hiring. There is a lot of excellent HR software out there, but it will be of little use if the local workforce doesn’t have the qualifications you need.

Lastly, you want to choose a location that will allow you to put money back into your business, rather than consuming all of your profits for rent and utilities. Hopefully, once you get these factors pinned down, you’ll be able to get your new business rolling, regardless of where you’ve chosen to start it.

About the author

Julia A. is a writer at SmallBizGenius.net. With experience in both finance and marketing industries, she enjoys staying up to date with the current economic affairs and writing opinion pieces on the state of small businesses in America. As an avid reader, she spends most of her time poring over history books, fantasy novels, and old classics. Tech, finance, and marketing are her passions, and she’s a frequent contributor at various small business blogs.

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