You already know your business ideas have to be on point to start a successful small business, but what you might not realize is how much location really matters. In fact, the city where you choose to start your business can play a huge hand in its fate, regardless of the industry you work in.
A recent GOBankingRates study analyzed eight factors affecting startups in major metropolitan areas of the United States to find the best and worst cities for a new small business. Take a look at some of the top findings.
Click here to learn about the best and worst states for starting a business.
Small Business Is Booming in Texas
Everything is bigger in Texas, including small-business success. Four of the top 10 cities for starting a business — Austin, Dallas, San Antonio and Houston — are in the Lone Star State.
These four cities offer a winning combination of fantastic entrepreneurial conditions, a cost of living that’s less than or only slightly higher than the U.S. average and solid job-growth projections. If you’re planning to start a new small business, it might be a good idea to move your headquarters to Texas.
Think You’re Ready? Take This Quiz to See If You Have What It Takes to Start a Small Business
Low Cost of Living Doesn’t Equal Small-Business Success
You can have the best small-business ideas in the world, but if you’re not based in a city that supports entrepreneurial efforts, your company might not ever get off the ground. In theory, starting a business in a city with a low cost of living seems like a smart way to reduce your overhead expenses — but it’s not that simple.
Of the 10 worst cities to start a small business, the majority have a cost of living that falls below the national average: Philadelphia; Orlando, Fla.; Jacksonville, Fla.; Pittsburgh; Detroit; and Milwaukee. These cities scored poorly in entrepreneurial-specific categories, meaning the affordable cost of living is offset by poor startup conditions.
It wasn’t always the case, but several of these cities — Philadelphia, Pittsburgh, Milwaukee and Detroit — also had poor job-growth projections. It’s hard for a small business to thrive if the local economy is on the decline, so this is a factor that prospective entrepreneurs should take seriously.
Final Ranking: Best and Worst Cities for Starting a Small Business
If you’re thinking about starting your own business, the city you choose as your launching pad can make all the difference. Here’s a list of 40 cities with the most and least potential for an entrepreneur to have success, ordered from best to worst:
1. Austin, Texas
5. Kansas City, Mo.
6. San Antonio
7. Los Angeles
8. San Diego
10. Columbus, Ohio
11. New York City
12. San Francisco
14. San Jose, Calif.
15. Nashville, Tenn.
17. Washington, D.C.
18. St. Louis
19. Providence, R.I.
21. Portland, Ore.
27. Tampa, Fla.
28. Riverside, Calif.
29. Charlotte, N.C.
30. Sacramento, Calif.
33. Orlando, Fla.
34. Jacksonville, Fla.
37. Las Vegas
38. Virginia Beach, Va.
Click through to find out which surprising costs you might not expect when starting a small business.
Methodology: These findings are the result of a GOBankingRates study of eight factors affecting startups in major metropolitan areas of the United States. The study assessed the following: (1) rate of new entrepreneurs, sourced from the 2017 Kauffman Index of Startup Activity data; (2) opportunity share of new entrepreneurs, from the 2017 Kauffman Index of Startup Activity data; (3) startup density, from the 2017 Kauffman Index of Startup Activity data; (4) rate of business owners; (5) survival rate of new businesses; (6) established small-business density, all from the 2017 Kauffman Index of Main Street Entrepreneurship. Each Kauffman metric corresponded to a year, so to get a more inclusive picture, the three-year average for each metric was calculated. Additional factors: (7) cost of living, sourced from Sperling’s Best Places; (8) projected job growth, from Sperling’s Best Places. Once the information was collected, it was assigned a ranking between zero and 1. Scores for each category were weighted equally. Scores were added together for a total ranking. Cities with lower scores were considered the most favorable for starting a business.