Best & Worst Small Cities to Start a Business 

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. 

“The benefits of starting a business in a small city include lower overhead costs, stronger relationships with customers and the potential to become a big fish in a little pond. But there are drawbacks, too. Entrepreneurs who want to build a large professional network aren’t likely to make as many connections in a town with fewer residents. Other restrictions might include limited industry options, a less diverse customer base, and difficulty attracting and keeping top talent.” 

Chip Lupo, WalletHub Analyst

In-Depth Look at the Best Small Cities to Start a Business

St. George, UT

St. George, UT, is the best small city for starting a business, ranking among the top cities in the country for both startups per capita and growth in the number of small businesses (nearly 42% between 2017 and 2023). 

St. George also has very cheap office space, costing around $10.73 per square foot. In contrast, the most expensive city charges nearly $62 per square foot. St. George residents have short commutes, too, at around 17 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 second-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 nearly 21% between 2017 and 2023.

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.

Washington City, UT

Washington City, UT, is the third-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 2017 and 2023, at nearly 42%. 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. 

Washington City ranks among the cities with the lowest average commute time, too, at around 18 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.

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 the city proper and excludes the surrounding metro area. 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. The full study can be read here.