Bang for Your Buck: The Best Cities for Small Business in America

By Business.com Editorial Staff
Business.com / Starting a Business / Last Modified: February 22, 2017

The top cities for small business might surprise you. Before you pack up and move to Sioux Falls, make sure to consider why these rank.

Looking to start your own business? If you had to pick any U.S. city to set up shop, where would you like to go?

New York? Los Angeles? The Silicon Valley area?

Let’s forget for the moment any personal preferences where you might want to live or visit. What city has the best prospects to offer a small business?

How about Sioux Falls, South Dakota? It does, at least according to the 16 criteria set by Wallet Hub’s 2016 analysis of the most populated U.S. cities.

The metrics used to come that conclusion were the following:

Business Environment

  • Length of Average Work Week
  • Average Growth of Number of Small Businesses
  • Number of Startups per 100,000 Residents
  • Average Growth of Business Revenues
  • Five-Year Business-Survival Rate: Full* Weight
  • Industry Variety

Access to Resources

  • Financing Accessibility
  • Venture Investment (amount) per Capita
  • Prevalence of Investors
  • Human-Capital Availability
  • Higher Education Assets
  • College-Educated Workforce

Costs

  • Office-Space Affordability
  • Labor Costs
  • Corporate Taxes
  • Cost of Living

Related Article:Get Packing: The 10 Best U.S. Cities to Get a Job In

A Top Ten

According to these measurements, the top 10 best cities in 2016 for small business are (envelope, please):

  1. Sioux Falls, South Dakota
  2. Grand Rapids, Michigan
  3. Oklahoma City, Oklahoma
  4. Lincoln, Nebraska
  5. St. Louis, Missouri
  6. Salt Lake City, Utah
  7. Charlotte, North Carolina
  8. Springfield, Missouri
  9. Tulsa, Oklahoma
  10. Amarillo, Texas

New York City, by the way, ranked 89; Los Angeles 48; and San Jose, the center of Silicon Valley, comes in at 114.

Of course, none of this actually means anything. No one is going to move to Sioux Falls just to start a business because some website says so.

They might do so because they a.) like living in the Midwest, b.) grew up there, c.) went to school there and liked it a lot, d.) have a couple of rich uncles willing to invest in the company or e.) all of the above. Indeed, how you weigh certain criteria as more important than others is going to come up with a whole different ranking.

Biz2Credit’s 2016 survey of the best cities to start a business, for example, comes up with a much different ranking that reflects more typical expectations. San Jose is at the top, followed by New York City, the San Francisco-Oakland area, Miami-Fort Lauderdale, and Los Angeles.

USA TODAY has a different ranking altogether, with Shreveport, Louisiana, getting top billing; though it does have more in common with the Wallet Hub rankings. Sioux Falls is ranked sixth, and also ignores the top contenders cited by Biz2Credit.

Related Article:Pack Your Bags: 10 Great Startup Cities That Aren’t San Francisco

Factors to Consider

There is a variety of factors to consider in deciding what’s the best location for you to start a business. What some “experts” consider vital may be unimportant to you personally and irrelevant to the specific nature of your business.

If you are looking at possible real estate for a small business, here are some key factors we think you need to think about:

  • Do you need to be close to your customers and/or suppliers?
  • Availability of city/state incentives for small businesses, including loans, tax breaks and special development zones.
  • City infrastructure: access to public transportation, major highways, transportation ports, industrial parks.
  • Quality and availability of labor pool: Are there sufficient numbers of qualified workers with the required skill sets willing to work at salary levels you can afford to offer?
  • Ready availability of office space and associated rental expenses.
  • Amenities provided in rental spaces, e.g., security service, access to high-speed Internet, health clubs, in-house food courts.
  • Condition of potential office spaces, options for future expansion, and relative safety of location.
  • Cost of utilities, insurance, janitorial services.
  • Accessibility of local financing.
  • Growth rates of neighboring small businesses.
  • Synergies between your business and other local companies.
  • Potential competition.
  • Demographics: Is the local population part of your target base, and is it sufficient to help support your business model?
  • Economic condition: Is the city financially stable, or at least has prospects of financial stability?
  • Image: Does the area have a reputation for business innovation or in some way can be associated with your products or services? Conversely, is there a possibility potential customers could be put off by a company located in “Pallookaville”?
  • Zoning and other local ordinances that could possibly restrict or otherwise affect the conduct of your business operations.

Related Article: Best and Worst Places to Start a Business in the U.S.

To a business owner, perhaps the overriding question is whether this is someplace you want to live and work. Almost equally important is whether is is someplace your employees will want to live and work as well.

The New York Daily News points out that most large corporations hire consultants to consider all these factors and come up with a plan of action. As a small business owner, you most likely don’t have the budget for this.

But there is a number of free resources, such as ZoomProspector.com and City-Data.com, that provide detailed profiles of just about any city or small town. Or, head out to Sioux Falls and see how things work out.

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