Starting a successful business is one of the most coveted ways to earn a living. It can provide a steady income and a chance to save for major expenditures, like buying a home, saving for the children’s college education, and building a retirement nest egg — all without having to answer to a boss.
The successfully self-employed tend to be wealthier than the employed, and according to 2019 Federal Reserve data, business ownership makes up 34% of non-financial assets — meaning that business owners (especially non-Hispanic whites) tend to have significant intergenerational wealth.
There are risks involved, however. According to the U.S. Small Business Administration (SBA), there are about 32 million small businesses in the country. But on average, about one in five startups closes within 12 months of opening, while more whither soon after. (What is considered a “small” business depends on the industry. The SBA maintains a table of industry-specific standards for defining the size of a business based on maximum number of employees or average annual revenue.)
The average cost of starting a business depends on so many factors that it’s impossible to come up with a reliable estimate. Some enterprises require office and/or warehouse space and employees to staff them, while others require only (for instance) a CPA certification, a home-office, and a computer.
For any kind of business, though, expenses like insurance, taxes, legal fees, etc. can add up quickly. That’s why location is an important factor to consider when starting out. Launching a small business from scratch in New York City, for instance, will cost much more than doing the same upstate in Ithaca. (There are, however, large cities where starting a business is worth the risk.)
To identify the best small cities to start a business in every state, 24/7 Wall St. reviewed data from WalletHub which ranked 1,337 U.S. cities across three key dimensions: business environment, access to resources, and business costs. The site evaluated these dimensions using 21 relevant metrics, such as startups per capita (for business environment), working-age population growth (for access to resources), and cost of living (for business costs). A weighted average of the 21 metrics was calculated to determine an overall score.
Though there’s at least one small city that’s good for starting a business in every state, WalletHub’s data revealed that the state overall for small-business startup is Utah, which claims almost half the top 50 entries on the site’s list. (Here’s a list, not arranged by state, of the country’s best small cities to start a business.)
“Small city” was defined as one with a population of between 25,000 and 100,000 people, and only cities themselves were considered, not the surrounding metropolitan areas. (Population estimates and median household income were obtained from the U.S. Census Bureau’s American Community Survey for 2019. Unemployment rates came from the Bureau of Labor Statistics and are not seasonally adjusted estimates for July 2021.)