Posted by: Richie Bernardo

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 type of business and personal preferences.

Every small city offers unique advantages and disadvantages to new business owners. Some benefits include lower overhead costs, stronger relationships with customers and the potential to become a big fish in a little pond. But there are plenty of drawbacks, too. For one, 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.

To determine the best small cities to start a business, WalletHub compared the business-friendliness of more than 1,200 small-sized cities. Our data set of 18 key metrics ranges from average growth in number of small businesses to investor access to labor costs. Read on for our findings, insight from a panel of business experts and a full description of our methodology.

1. Main Findings
2. Ask the Experts
3. Methodology

Main Findings

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Best Small Cities for Starting a Business

Ask the Experts

Entrepreneurs who lack expert guidance are more likely to struggle. For insight into starting a business in a small city, we turned to a panel of experts for their thoughts on the following key questions:

1. What are the pros and cons of starting a business in a small city?
2. Would some types of small businesses (e.g., a retail store, restaurant, or tech startup) do better than others in a smaller city?
3. What tips do you have for an entrepreneur starting a business in a small city?
4. What impact do you think the Trump administration’s recent policies will have on entrepreneurs?
5. What can local authorities do to encourage entrepreneurial activity in their small city?

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• Thomas H. Allison Assistant Professor of Entrepreneurship in the Carson College of Business at Washington State University
• Michael Braun Professor and Poe Family Distinguished Fellow in Entrepreneurship in the Department of Management and Marketing at the University of Montana
• Ronald K. Mitchell Professor of Entrepreneurship and Jean Austin Bagley Regents Chair in Management in the Rawls College of Business at Texas Tech University
• George Langelett Professor in the Department of Economics at South Dakota State University
• Thomas M. Martin Executive Director of the Center for Economic Development, Entrepreneurship & Technology and Assistant Professor in the Department of Management, Marketing, and International Business at Eastern Kentucky University
• Lloyd Shefsky Clinical Professor of Family Enterprises in the Kellogg School of Management at Northwestern University
• Joshua J. Daspit Assistant Professor of Management in the Department of Management & Information Systems at Mississippi State University
• Michael P. Ciuchta Assistant Professor in the Department of Marketing, Entrepreneurship & Innovation at the University of Massachusetts Lowell
• Brad Bernthal Associate Professor of Law at The University of Colorado Law School and Director and Founder of the Silicon Flatirons Center’s Entrepreneurship Initiative
• Saurabh Biswas Associate Professor of Practice, Head of Innovation & Entrepreneurship and Entrepreneur-in-Residence in the Division of Commercialization & Entrepreneurship at Texas A&M University
• Nola Miyasaki Executive Director for the Entrepreneurship Program in the Warrington College of Business at the University of Florida
• Robert Sprague Professor of Legal Studies in Business in the Department of Management & Marketing at the University of Wyoming
• Ye-Sho Chen Professor in the Stephenson Department of Entrepreneurship and Information Systems & Director of International Experience in the E. J. Ourso College of Business at Louisiana State University
• Stewart Thornhill Executive Director of the Zell Lurie Institute for Entrepreneurial Studies, Eugene Applebaum Professor of Entrepreneurial Studies and Professor of Business Administration in the Stephen M. Ross School of Business at the University of Michigan
• Bruce Kingma Professor of Entrepreneurship in the School of Information Studies at the Whitman School of Management at Syracuse University
• Mark Cuban Business Magnate and Owner of the Dallas Mavericks
• Michael Glauser Professional Practice Professor and Executive Director of The Center for Entrepreneurship in the Huntsman School of Business at Utah State University
• Tim Michaelis Research Assistant Professor of Management, Innovation and Entrepreneurship at North Carolina State University
• Wade Martin Professor of Economics, Director of the Office of Economic Research and Director of the Institute for Innovation & Entrepreneurship at California State University Long Beach

Thomas H. Allison Assistant Professor of Entrepreneurship in the Carson College of Business at Washington State University

What are the pros and cons of starting a business in a small city?

Pros:

• Lower costs (land, property, some types of labor);
• Opportunity to make a meaningful impact on a community;
• Quality of life selling points for some employees.

Cons:

• Fewer local customers, suppliers, service providers;
• Harder to get media attention, harder to get investor interest;
• Labor pool may not be able to supply employees with the needed skills.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

It depends. Smaller cities can sometimes have useful resources for a startup that others haven’t seen. For retail and restaurants, if a small city has a prime location that already was a store or restaurant, leasing such a spot can save thousands of dollars in startup costs. Such locations tend to be snapped up much faster in big cities.

For tech startups, if a city has a company or companies that have many employees who have the skills you need for your employees, you can sometimes get well-trained employees at a cost much lower than in big cities. Historically, it has been important for a tech startup to locate close to venture capital and angel investors. However, VCs may be becoming more open to backing small city tech startups.

What tips do you have for an entrepreneur starting a business in a small city?

Focus on validating the demand for the business at the lowest level of risk/investment possible.

Tech startup -- don’t invest in specialized equipment/facilities. Produce the product/service from your garage or by contracting the work out. This won’t be efficient, or profitable. But early-stage, you want evidence of demand, without taking large risks or having to invest much capital.

Retail and restaurants -- find ways to offer some of the products before leasing a store location. Make sure your local customers are able and willing to buy. Consider initially selling at pop-up shops or farmer’s markets. After that, look for a location with excellent visibility and traffic. Don’t compromise -- wait for a good location. Location is the key marketing factor for a startup in a smaller city. Look for a location that was already a store or restaurant, and still has the necessary fixtures/furniture/equipment. Fitting-out a store or restaurant from scratch is a crippling expense for a small city startup.

What impact do you think the Trump administration’s newer policies will have on entrepreneurs?

Unclear. Business owner confidence does seem to be up, though I don’t know what relationship this has to policies.

What can local authorities do to encourage entrepreneurial activity in their small city?

• Ensure that cost-effective broadband (fiber, 100 Mbit) is available in city through franchise agreements or by building broadband access themselves;
• Minimize or eliminate the up-front barriers to founding (e.g. business licenses, etc.);
• Cultivate a good quality of life (culture, parks, diversity, education) that will attract businesses.

Michael Braun Professor and Poe Family Distinguished Fellow in Entrepreneurship in the Department of Management and Marketing at the University of Montana

What are the pros and cons of starting a business in a small city?

There is tremendous community encouragement and involvement for both lifestyle and high-growth startups in a small city. Moreover, the degrees of separation among members of the support ecosystem -- from bankers to legal services to angel investors -- are fewer in that people tend to know (of) one another. All of these factors can also work against startups, in that newcomers will have a more difficult time assimilating into the social and business fabric of the community to kick off their venture.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

To what extent some businesses do better than others in smaller cities depends on a number of factors. For one, it’s important to identify and evaluate the extent to which resources and capabilities are unique to a region. That is, some cities may have regional economies built on tourism, whereas others focus on specialty manufacturing or services. Local communities will always have a need for basic services such as retail, restaurants, legal services, etc. However, once the infrastructure for basic services is in place, the ground is fertile for additional layers of businesses that can compete in regional, national and even international marketplaces.

For knowledge-based companies, including high-tech businesses, one particular challenge can be access to talent in the immediate surroundings once the business needs to scale. However, smaller cities are increasingly benefitting from knowledge workers seeking a better work-life balance; these workers are making a conscious decision to take their know-how and experiences into these markets and starting and building companies with global reach.

What tips do you have for an entrepreneur starting a business in a small city?

Entrepreneurs looking to start businesses in a small city need to keep in mind a few things. First, are they targeting customers primarily in their immediate region or can they reach a wider buyer market? If the core customer segment is local, then the entrepreneur needs to evaluate if there are indeed enough customers to support the business. In effect, will the juice be worth the squeeze, so to speak. However, if the business reaches beyond the local area, then the entrepreneur needs to think more strategically with regard to competitors: how will the business stick out from the noise and attract and retain customers?

What can local authorities do to encourage entrepreneurial activity in their small city?

To encourage entrepreneurial activity in their small city, local authorities need to constantly cultivate and nurture a healthy and receptive ecosystem for small businesses. For one, they need to support local and regional development organizations, agencies and institutions that can help educate the community of would-be and existing entrepreneurs. Moreover, because financial start-up resources represent a significant hurdle to entrepreneurs, local and state authorities can work together to develop and implement business-oriented programs to support the entrepreneur’s capital needs.

Ronald K. Mitchell Professor of Entrepreneurship and Jean Austin Bagley Regents Chair in Management in the Rawls College of Business at Texas Tech University

What are the pros and cons of starting a business in a small city?

Pros: small cities are wonderful for having quality of life attributes that are attractive for certain lifestyles. Also, where they are well-served in the IT space, then these quality of life issues (lower crowding, less traffic, closer community connections, etc.) can outweigh the smaller market space.

Cons: starting any business has three primary uncertainties: informational, relational, and resource. A good Small Business Development Center may not be readily available (however, in West Texas, we have an outstanding Regional Outreach for our SBDC). Still, critical mass with fellow entrepreneurs does matter due to what we call “knowledge spillover” effects. And these often are less prevalent in smaller cities, just by definition.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

So, the “doing better” is a pretty broad term. Where “better” means that geographical proximity is required (like a restaurant), then the smallness factor enters into the “Do you have enough of a customer base?” question that would be especially important for restaurants, or retail stores with a bricks-and-mortar presence. However, where only an e-presence is required, this is maybe not so much of a problem.

Tech startups depend upon access to the key inputs for that technology. Depending on the technology requirements, some small cities may have more or less of these. Usually, it takes supplier research to get this in hand.

What tips do you have for an entrepreneur starting a business in a small city?

If you are starting a business in a small city, look for the indicators of a support system. Most new businesses suffer from “liabilities of newness” (an idea from a scholar in the late 1960s that has kind of stuck). These are as follows:

• Roles in the business aren’t well defined (usually city-size neutral);
• Relationships among the people in the new roles need to be worked through and stabilized (also likely to be city-size neutral);
• Stakeholders (i.e., the support system: customers, suppliers, financiers, community connections, etc.) are not identified or are not readily accessible (this is a city-size issue -- likely negative);
• Trust among the internal people (new) and the external people/entities (new) by nature grows over time (this can be a city-size issue; often on the positive size, due to approachability and proximity advantages).

What can local authorities do to encourage entrepreneurial activity in their small city?

Local authorities can have a big impact on the efficiency of the local “ecosystem.” Where it’s efficient: then entrepreneur time and money are more easily converted into success and jobs. Where it’s inefficient, then time and money (including governmental assistance) are more likely to be wasted. In our research, we call this the economic inductance (resistance) problem. Low inductance: better. High inductance: worse.

Local authorities can do a lot of seemingly small things to make the inductance problem in their community a non-issue. Chambers of Commerce are really good at this. City councils that are pro-small business help. Employees of all regulatory agencies (let’s assume that we need at least some regulation to keep the playing field clear and fair) can avoid becoming “players” in the economic game -- staying neutral and helping all fairly.

George Langelett Professor in the Department of Economics at South Dakota State University

What are the pros and cons of starting a business in a small city?

Before I talk about small cities, I first need to explain something. First, there has never been a better time to be an entrepreneur. For many businesses, location no longer matters.

The reality today is that with YouTube, anyone can obtain a worldwide audience, and with an Internet website and proper marketing, anyone can be part of a worldwide marketplace. With eBay, Amazon and Ali Baba, anyone can connect with suppliers from around the world.

The biggest pro of starting a business in a small city is cost. The key to entrepreneurship is, a person needs to make mistakes, large mistakes and learn from each mistake, when costs are low. In a small city or small town, overhead costs, including lease rates per square foot, are a fraction of the cost in a large city. There are towns and cities across the northern plains that will donate land, and even old school buildings to anyone who is willing to start a business.

The biggest cons include: the small labor pool and the perhaps absent needed workers with a particular skill set; transportation costs if the town is far from a distributor; and the relatively small local customer base.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

First, a tech company can start up anywhere in the world, but once established, they often move closer to a needed labor pool with a particular skill set. Starting with the smallest towns, obviously a church and a gas station are the only viable businesses. As the town’s size increases, a convenience store, grocery store, a bar or a restaurant become feasible. As town size increases, boutiques and specialty stores become a possible.

What tips do you have for an entrepreneur starting a business in a small city?

In any community, do your homework, talk with people, and actively listen to their input. Talk with a commercial loan officer at the local bank branch and find out the banker’s impression. If you are looking to start a restaurant, call a franchise of a similar restaurant chain and find out the minimum population of the community required for the franchise to be successful.

Do a feasibility study/marketing research study to find out if there is enough demand to warrant starting a business. It is better to spend a few thousand dollars to find out a business is not feasible than to spend many tens or hundreds of thousands of dollars to discover it will not work.

But the key to business success in a small town is the labor force. Before taking any concrete steps to starting a business, see if you can find enough reliable workers to run the business. Working 14 or 16-hour days, 6 or 7 days a week, 365 days a year is an unpleasant reality if an entrepreneur cannot find reliable and competent help within a small city community.

What impact do you think the Trump administration’s newer policies will have on entrepreneurs?

In spite of the media’s criticism, Trump is a businessman and is pro-small business. He understands that entrepreneurship is the lifeblood of both local communities and the larger market economy of the U.S. The reduced regulatory burden will benefit businesses, both large and small.

There is an issue that has been stifling entrepreneurship, in 2013, U.S. patent law was changed from first-to-invent to first-to-file. Many individual entrepreneurs fear this change in patent law primarily benefits larger corporations at the expense of the small entrepreneur. Many potential inventors are afraid to share their ideas or bring their new ideas to fruition in fear that someone will steal one’s idea and get the patent first on the new technology.

What can local authorities do to encourage entrepreneurial activity in their small city?

There are many things that local authorities can do. It may start with an invitation of local businesses and potential entrepreneurs to the city council meetings, and actively listening to each business with regards to the needs, bottlenecks, and concerns of each business.

For any new business startup, there are three needed inputs: land/building, labor, and capital. Local authorities can help entrepreneurs find land or a building for their startup, work with the entrepreneur to help locate an adequate labor pool and help facilitate funding with access to local banks and angel investors. With active local authorities who care about entrepreneurship, startups can thrive in any small city, to the benefit of everyone in the community.

Thomas M. Martin Executive Director of the Center for Economic Development, Entrepreneurship & Technology and Assistant Professor in the Department of Management, Marketing, and International Business at Eastern Kentucky University

What are the pros and cons of starting a business in a small city?

Pros:

• If you know the right people, you can get up and running quickly;
• Smaller communities, if you are active, want to see you succeed and will support your small business;
• Fewer distractions, so you can focus on building your product.

Cons:

• If you don’t know the right people, small cities have regulations and/or ordinances that may not be keeping up with the pace of commerce, and it can be prohibitively expensive or onerous to start your business;
• Those regulations are not consistent from town to town -- so you may try to open a restaurant in one town and have a great experience, but five miles down the road, run into all sorts of problems;
• Access to capital and networking can be limited.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

It depends -- Home Depot doesn’t put a new store in smaller cities because they don’t have the capacity to justify the investment, so there are several examples where that doesn’t work.

If you are a tech startup that requires a lot of broadband capacity and you want to move to a town that doesn’t have the upload and download speeds for you to be successful, then you shouldn’t move there (do your homework).

However, if you are a one- or two-person operation, small cities are just as good as larger cities in helping you get off the ground. Most entrepreneurs need a coffee shop, a desk and a chair. You can do that from anywhere.

What tips do you have for an entrepreneur starting a business in a small city?

Do your homework -- make sure that where you want to start the business, the community is conducive to helping you succeed; ask yourself what your strategic, competitive advantage is for choosing a town of 15,000, versus a city of 250,000 and then capitalize on it. What does the labor market look like?

Be active in the community -- your number one goal is working your product, but being active and knowing the players is always a positive.

Focus on product-market fit -- is your product or service solving a problem, or are you starting a company in search of a product? The former will be successful, the latter will not.

What impact do you think the Trump administration’s newer policies will have on entrepreneurs?

Reducing regulation may not be helpful in every case, but a community that continually reviews its policies and regulations to make sure they are current, adaptive and meeting the needs of the community helps everyone, including entrepreneurs.

The Trump administration’s tariff policy is a disaster for entrepreneurs who want to effectively compete in a global market. Tariffs may be good for certain industries, but the long-run negative impacts are significant.

What can local authorities do to encourage entrepreneurial activity in their small city?

• Develop recruiting letters to encourage small businesses to move to their community;
• Routinely review, streamline, and where appropriate, adjust ordinances, regulations;
• The local chamber should have a list of available property and contact information for location or re-location;
• Work with the local university’s faculty and students to identify research and commercialization activities that have market potential, and then provide incentives to encourage startups that move from the campus to the community -- this can also improve the town-gown partnership;
• Might seem like a small issue, but it’s not -- walkable sidewalks and parking plans;
• Also work with the university to provide classes;
• Provide access to capital, small business loans, and grants;
• Work with the local chamber and other entities to create more “social collisions” between entrepreneurs.

Lloyd Shefsky Clinical Professor of Family Enterprises in the Kellogg School of Management at Northwestern University

What are the pros and cons of starting a business in a small city?

Generally, small towns enjoy lower costs (rent, salaries, etc.), but that’s because there’s a smaller population, which translates into reduced demand (for those selling to locals). There also may be a smaller pool of available employees, especially critical when experts are needed.

Where local customers are relevant, there may be neighborly acceptance of flextime for proprietors.

While advertising (traditional) expenses should be lower, there is likely enhanced opportunity for direct, one-on-one contact and promotion.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

It always comes down to supply and demand, and entrepreneurs must identify and gauge accordingly. Are there existing competitors, are they fulfilling local needs, what is the degree of local customer loyalty? That’s true everywhere, but often more compelling (and easier to measure) in smaller cities.

Tech startups may be tough in smaller cities where tech-savvy employees are unavailable.

What tips do you have for an entrepreneur starting a business in a small city?

Be sure to understand the town -- people, attitudes, habits, likes and dislikes, history of other businesses’ successes and failures (including reasons). Have someone independent analyze how well you will fit in (tolerance levels of and by you). You’ll probably need to be more hands-on and relating to public (less anonymity). Are you up to that?

What impact do you think the Trump administration’s newer policies will have on entrepreneurs?

Reduced regulations will be beneficial. Tax breaks -- maybe, but likely less so. Immigration will affect different businesses differently (what level of education and skills are required?). Some may be fluid, e.g., if troops are used to patrol borders, this may increase prospects for local stores.

What can local authorities do to encourage entrepreneurial activity in their small city?

Celebrate entrepreneurs and entrepreneurship, and support funding:

• Encourage banks to loan;
• Organize local, successful businesspeople to be active angel investors or crowd-funding sources;
• Develop necessary infrastructure to lure and keep employees and patrons (consider the story of Columbus, Indiana development to support Cummins Engines);
• Create incubators and mentor programs, invite (and pay for) guest speakers on subjects related to entrepreneurship;
• Learn to be civic visionaries and planners;
• Create a city department to support and be ombudsmen to entrepreneurs;
• Establish policies to balance protecting existing entrepreneurs and inviting new entrepreneurs.

Joshua J. Daspit Assistant Professor of Management in the Department of Management & Information Systems at Mississippi State University

What are the pros and cons of starting a business in a small city?

Starting a business in any city can be exciting, and yet at the same time, challenging. However, pursuing an entrepreneurial venture in a small city can offer unique benefits and challenges.

For instance, in small cities, many business decisions are governed by pre-existing relationships, which can be both an asset and a liability. If the entrepreneur has established social capital in the city by building trust-based relationships, then he or she can greatly benefit from these relationships. Having close connections with city officials, business leaders, and others gives an entrepreneurship an advantage of being in the “in-group” and better understanding how decisions are made in the city. Of course, becoming part of this integrated network can be difficult, and even more challenging for individuals not from the local area.

Along the same line, the prevalence of such relationships in a small city helps to spread the word when a new business opens. For example, I live in Starkville, Mississippi -- the home of Mississippi State University -- and the city has a population of approximately 25,000 residents. Everyone knows when a new, local business opens. For entrepreneurs, word-of-mouth can help save advertising dollars, but talk also travels quickly about businesses that fail to deliver on quality service or products.

So, while the closely integrated networks of a small city can be helpful to a new business, these same networks can also quickly undermine the success of a startup.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

When considering whether to pursue a new venture in a small city, entrepreneurs should be cautious of their consumer market. Specifically, by the very nature of a smaller city, the number of local consumers is potentially limited, which can be problematic for overly specialized businesses.

In my small city of about 25,000 residents, we have had several niche businesses: a popcorn store, biscuit shop, popsicle store, candy store, cupcake store, and even a bakery that specializes in the art of bread making. While these are all great concepts (and delicious ideas), these businesses have faced the difficulties of thriving in a smaller city with a limited consumer market for such specialized goods (side note: nearly all of the businesses named have opened within the past four years, and only a few remain).

In short, it pays (literally) to know the local consumer market. If the demand exists for a specialized business, then such a pursuit may be a worthwhile venture; however, if such demand is limited, developing a business concept with broader appeal may be more sustainable.

What tips do you have for an entrepreneur starting a business in a small city?

The core piece of advice I have for any entrepreneur -- but certainly for an entrepreneur starting a business in a small city -- is to do your homework.

Do your homework to understand the environment in which your business will operate. Specifically, who are your customers, and what relationships will you need to survive in the local market? Is it important to know local city leaders, change makers, leaders of local civic organizations, and to have these individuals on your side? Further, who are your suppliers, competitors, and potential future competitors?

Do your homework to understand the uniqueness of your business. Know precisely what differentiates your business from competitors, and have a plan for how to leverage what makes your business unique.

Do your homework to understand your financials. Know what it will take to break even, and even further, to make a profit. Know what your backup plan is if sales do not reach expected levels.

Many resources exist for helping entrepreneurs build and pursue a business plan. Use these resources, do your homework, plan, and then make it happen.

What can local authorities do to encourage entrepreneurial activity in their small city?

For a city that has no (or a limited) history of supporting entrepreneurial activity and is interested in doing so, the first step is to start small. Changing the culture of a city, and finding resources to support such entrepreneurial efforts, can be difficult and time-consuming. However, city leaders can begin this pursuit by first identifying entrepreneurs in the community who have experienced success in starting a local business.

Once these experienced entrepreneurs are identified, their experiences can be leveraged to help those interested in pursuing future entrepreneurial activities. There are likely individuals in the community that have an interest in starting a business, but they may lack the experience, resources, and/or confidence to do so. Thus, by identifying individuals with this interest and connecting them with local, successful entrepreneurs, the city may benefit from new businesses with minimal effort.

However, if city leaders are interested in creating a more salient entrepreneurial culture in the city, then leaders should consider strategic investments in developing a local entrepreneurial ecosystem. This can begin with offering financial support (e.g., tax incentives), ensuring local professionals are available (e.g., lawyers, accountants, investment bankers), facilitating partnerships with nearby educational institutions to offer training or access to consultants, and working to connect early-stage entrepreneurs with those who have experienced success.

Michael P. Ciuchta Assistant Professor in the Department of Marketing, Entrepreneurship & Innovation at the University of Massachusetts Lowell

What are the pros and cons of starting a business in a small city?

Larger cities have more resources, such as a strong labor force and the availability of financial capital, that are important for entrepreneurial activity. On the other hand, competition for and the cost of those resources is much less in a small city. Some research shows that established firms in small cities are less likely to be displaced by later waves of entrepreneurial entrants.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

Retail is tricky. Small cities lack the potential foot traffic that may be necessary for some retail businesses. And certain retail businesses in larger markets may be susceptible to the competitive threats of big-box chains. But there are many retail niche opportunities in small cities that can cater to the preferences of the local market. It used to be that starting a knowledge-based business in a small city was extremely difficult. But the digital economy has changed that. Now, increased access to resources such as website design, fulfillment, cloud computing and crowdfunding has created new business opportunities for the enterprising entrepreneur in the smallest of cities.

What tips do you have for an entrepreneur starting a business in a small city?

Think effectually. Without going into too much detail, there is a line of thinking among entrepreneurship scholars that emphasizes effectual rather than causal thinking for entrepreneurs. This perspective suggests that potential entrepreneurs should focus on their current means rather than target the perfect opportunity. Entrepreneurs should take action based on what they have available -- who they are, what they know, and who they know. Potential entrepreneurs should also evaluate opportunities based on whether the downside is acceptable rather than on the potential for a home run. Although embracing effectual thinking is beneficial for all entrepreneurs, it is likely to be especially helpful for entrepreneurs in smaller cities.

What can local authorities do to encourage entrepreneurial activity in their small city?

Regulatory or other bureaucratic processes frustrate and discourage entrepreneurs. Therefore, local authorities need to make sure these are as streamlined as possible. Entrepreneurship is a team sport. Therefore, local authorities should also facilitate the formation of connections and relationships within their communities. Access to financial capital is critical for entrepreneurial activity, so policies that promote its access, either through traditional forms, such as banks or SBIR grants, or new ones such as crowdfunding, should be embraced and promoted. Small cities should also foster a strong community identity. They may find that creating startups is not the challenge, but keeping them local is. Therefore, it’s important to build identity as well as to promote ancillary business and cultural services so that successful startups stay local.

Brad Bernthal Associate Professor of Law at The University of Colorado Law School and Director and Founder of the Silicon Flatirons Center’s Entrepreneurship Initiative

What are the pros and cons of starting a business in a small city?

Boulder is a big enough platform to build a world-class company. But it is small enough that individuals’ behavior matters. Good conduct gets credit. Bad actors are accountable for their actions. It is a location where, by and large, reputation markets work to reward the right kinds of community behaviors.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

Scalability is the key differentiator. A lifestyle business, typically, is not looking to rapidly grow and expand. In contrast, a tech startup is a high fixed cost and low marginal cost undertaking. Once a tech startup gets traction, it needs a ton of resources from outside the company’s boundaries in order to scale. This includes labor pool, mentors, financing, functional specialists, service providers that know startups, and senior executives who can join and grow teams. The key question for a small city is whether it can provide these resources. A unique part of Boulder is that it combines a small town with a rich array of the startup resources required to scale a startup.

What tips do you have for an entrepreneur starting a business in a small city?

Consider the resources that you will eventually need from outside your company’s boundaries in order to scale. Make sure that those resources exist in your desired geography or, if not, make sure you have a plan as to how you can gain access to those resources if needed.

What impact do you think the Trump administration’s newer policies will have on entrepreneurs?

Near-term, the general hostility to immigration is chilling the ability of best and brightest international entrepreneurs to build their companies in the United States. Longer-term, some concern about what trade wars could mean for supply chains and the ability to contract with international suppliers and customers.

What can local authorities do to encourage entrepreneurial activity in their small city?

There is a great term from Brian Eno: scenius. This is the group form of genius. Where you find scenius, there you will find successful new companies. Local authorities should try to create places where scenius can flourish.

Saurabh Biswas Associate Professor of Practice, Head of Innovation & Entrepreneurship and Entrepreneur-in-Residence in the Division of Commercialization & Entrepreneurship at Texas A&M University

What are the pros and cons of starting a business in a small city?

Based on a simple classifier that tech startup and other service-related businesses (retail, food, restaurant, etc.) are two main domains of small businesses, they have different workforce and capital needs. The real disadvantage when it comes to tech business startup in a small city is the skill set of mid- to high-level employees/managers and also funding ecosystem. Specifically, College Station being a large university town, some of the talent need is mitigated by the vast pool of young talent, but still there is a challenge to hire mid- to senior-level talent with experience in scaling up and building venture-funded businesses. This challenge is much lesser for service-related business, as availability of a well-qualified, large student employee base helps small businesses a lot on quickly scaling up, and also keep cost structure low. But because of favorable cost of living, starting companies and bootstrapping unto certain level of growth is certainly a big plus in a small city.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

As mentioned above in my prior answer, the service-related businesses (retail, food, etc.) do better in a growing small city because of the ease of hiring as business picks up, though it might need some movement of talent, but it’s not a critical bottleneck and capital can be accessed from more conventional sources, like banks. For tech startups, there is a point after which attracting talent could become a challenge in a small city, where it’s sometime difficult to move families where dual-career couples might have different industry needs. Also, most of the venture and late-stage investment funds operate in large cities with basic concentration in the east and west coast.

What tips do you have for an entrepreneur starting a business in a small city?

Seek a strong incubator/accelerator ecosystem, as that can answer lot of basic resource issues before starting a business. Depending on the experience of the founders, finding a mentor sometimes is very helpful, as they can share based on prior experience a valuable set of dos and don’ts that can prevent some expensive mistakes. Do some strong market survey, as a niche, fast-growing business can certainly be built in small city quickly, but there should be a plan to grow as customer base is finite, and a plan should be there to scale up or manage growth. Also build an engaged advisory or board of directors comprised of local successful entrepreneurs or investors if viable.

What impact do you think the Trump administration’s newer policies will have on entrepreneurs?

Certainly, this administration has been pro-business from the beginning and has been a strong proponent of policies to help small businesses, so surely, there is no indication that entrepreneurs will slow down in this strong economic environment. Tax laws have also created a very positive business environment. Small service-related businesses and technology startups will stay strong in coming years as access to global capital and also low interest rates help all kinds of businesses.

What can local authorities do to encourage entrepreneurial activity in their small city?

U.S. small cities typically have a strong economic development office to encourage entrepreneurs to start and maintain viable businesses, but there is always an opportunity to grow that pool by creating a helpful chamber of commerce office and a landing web page for new entrepreneurs who are open to moving to new, high-growth cities or college towns that are now attracting a strong population growth. Having a very helpful local business development office to provide the needed resources to quickly start a company and provide the information of resources, like SBDC, can help to create a strong reputation of being business-friendly. In some cities, a small angel network of high net worth individuals is also sometimes very helpful in attracting entrepreneurs, because of access to early stage capital along with experienced team members.

Nola Miyasaki Executive Director for the Entrepreneurship Program in the Warrington College of Business at the University of Florida

What are the pros and cons of starting a business in a small city?

• Pros: small communities are accessible in terms of other entrepreneurs and resources, and folks want to see you succeed;
• Cons: conversely, those resources are not very deep or broad. Most importantly, small cities lack much in the way of an entrepreneurial ecosystem to support startups. There is a limited customer base, lack of investment capital options, and limited diversity and depth in mentors and experts. Service providers with experience in growth-oriented startups are also few and far between. Typically, there are not enough lawyers who know how to work with startups, their issues and how to advise them for potential investment.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

The key to the kinds of businesses that can make it in a small city is finding unique niches that reflect the nature of the community and the region in which it is located (e.g., location near nature attractions, near the water, near highways and railways, near farming areas that specialize in certain crops, and so forth). Small niches are less attractive to the big-box retailers or larger firms. Tech ventures struggle in small cities because of lack of growth funding and lack of access to a qualified labor force.

What tips do you have for an entrepreneur starting a business in a small city?

Take advantage of your surroundings, find creative ways to leverage local resources, engage in clever guerrilla tactics, look for ways to bootstrap the business, find mentors and experts to help.

What impact do you think the Trump administration’s newer policies will have on entrepreneurs?

Removal of regulations that hurt small businesses helps, although many startups are not affected by these regulations until they are a bit larger. The tax cuts certainly will free up money for reinvestment in the business once profits are achieved.

What can local authorities do to encourage entrepreneurial activity in their small city?

Overall, local authorities should consciously develop and support a local entrepreneurial ecosystem. They should realize that startups take the form of survival, lifestyle, managed growth and aggressive growth ventures, and each has distinct needs. The city should buy from small businesses, remove local regulatory and licensing obstacles. They should put money (and encourage private sector matches) in microcredit funds and early stage investment financing pools. They should create online networks that connect small businesses to one another. They should facilitate networks of potential entrepreneurs as well as existing entrepreneurs. Making the city culturally interesting, entertaining, welcoming to diverse people and newcomers helps. It is also important to find ways to help young people with talent stay in the area and create ways to bring likeminded people together.

Universities in small towns can also make huge impact by reaching out with student leveraged classes, such as consulting from Masters students and free website development by engineering students and more. University faculty are a wealth of knowledge, as well as a great source of novel ideas and inventions.

Robert Sprague Professor of Legal Studies in Business in the Department of Management & Marketing at the University of Wyoming

What are the pros and cons of starting a business in a small city?

There can be a number of advantages to starting a business in a small city: less competition for talent, lower rents, and generally lower costs of living and overhead. There can also be downsides: restricted talent pool, inadequate or inferior infrastructure, and limited transportation options.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

There is no one factor that dictates what type of business will be more successful in a small city vs. a larger city. A restaurant can thrive if it provides food customers want at a price appropriate for the area. Retail can be successful, but that depends on offering a product better suited for in-person purchasing vs. online, coupled with outstanding, personalized service. With remote affiliations, a tech startup can equally be successful. The key to success in a small city is matching product/service offered with available infrastructure and support. For example, being significantly dependent on ground transportation in an area that is not close to an interstate and/or major highway could be problematic.

What tips do you have for an entrepreneur starting a business in a small city?

Networking: get to know local business people, city administrators, local politicians. Get to be known in the city -- that means sponsoring and attending local activities. Become a part of the community. Half the time, success will depend more on who you know vs. what you know.

What can local authorities do to encourage entrepreneurial activity in their small city?

Small business development loans and grants. Friendly zoning and ordinances. Minimize administrative bureaucracy. Maintaining infrastructure.

Ye-Sho Chen Professor in the Stephenson Department of Entrepreneurship and Information Systems & Director of International Experience in the E. J. Ourso College of Business at Louisiana State University

What are the pros and cons of starting a business in a small city?

In general, the pros of starting a business in a small city include lower cost, less competition, and better customer services. The cons include smaller market, harder to recruit talented people, and harder to find suppliers. If a small city has a good entrepreneurship ecosystem for startups, it may be easier to test the business concept in the city first. For example, Baton Rouge is a small city comparing with New Orleans, but many food entrepreneurs come to the Food Incubator at Louisiana State University in Baton Rouge for their needs at the different stages of business ventures. Once they have successful startups, some go to New Orleans to leverage the tourism cluster for scaling up their businesses.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

It depends on the environment of the city. For example, Baton Rouge has a large chemical manufacturing cluster near the city. Many small businesses do well in addressing the needs of the supply chains in the cluster, including construction, piping, and technologies. Some small businesses grow significantly by leveraging the global networks of the cluster.

What tips do you have for an entrepreneur starting a business in a small city?

Identify the need in the environment and connect the dots to address the need. For example, Louisiana coastal wetlands have been significantly damaged by nutria. Marsh Dog, a Baton Rouge startup, used LSU Incubator and Food Incubator to turn nutria meat into dog treats. The company now sells its products nationally. The more it sells, the more it helps save the wetlands.

Stewart Thornhill Executive Director of the Zell Lurie Institute for Entrepreneurial Studies, Eugene Applebaum Professor of Entrepreneurial Studies and Professor of Business Administration in the Stephen M. Ross School of Business at the University of Michigan

What are the pros and cons of starting a business in a small city? Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

It’s worth distinguishing between companies that operate in a given location and sell to customers in that location (e.g., retail stores, restaurants) and those that are housed in one place but may have customers around the country or around the world (e-tail, SAAS). For both types, operating costs may be lower in a small city (rent, etc.) but it may be harder to attract and retain talent. Residents of some small cities may prefer to deal with local retailers, but the decimation of that sector by Walmart and Amazon suggests that’s a risky bet. Perhaps the strongest upside is the network an entrepreneur may already have, or can develop quickly. Learning quickly from small-market feedback may enable faster response and adaptation. And let’s not forget quality of life. A small city may simply be better for the non-business aspects of one’s life and that shouldn’t be overlooked.

What tips do you have for an entrepreneur starting a business in a small city?

Get to know the people who make the city work. The permit-approvers, the city council, the local bankers, and your fellow entrepreneurs. Outside of a few narrow sectors, relationships are what enable businesses to grow and thrive. Tech is necessary, but not sufficient. Relationships are essential.

What can local authorities do to encourage entrepreneurial activity in their small city?

Reduce friction. Every lost hour on process, every lost dollar on fees or taxes, represent time and money that aren’t available for the business. Lower the burden of doing business and more businesses will want to be there.

Bruce Kingma Professor of Entrepreneurship in the School of Information Studies at the Whitman School of Management at Syracuse University

What are the pros and cons of starting a business in a small city?

Small cities typically have a lower cost of living. With technology, it doesn’t matter where you start, you are networked to the world.

The disadvantage is the lack of access to venture capitalists, other technology entrepreneurs, and the startup ecosystem that exists in San Francisco, New York City, or Boston.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

Obviously, if you are serving a rural population -- farming, small retail -- it is better to be near your clients. However, technology startups can take advantage of the lower costs of a rural market and do well. BrandYourself.com recently moved from New York City to Lancaster, Pennsylvania and seem to be doing well.

What tips do you have for an entrepreneur starting a business in a small city?

Embrace technology and the Amazon effect. It will enable you to reach more customers.

What impact do you think the Trump administration’s newer policies will have on entrepreneurs?

Lower taxes and reduced regulations help all businesses, particularly startups. Job growth unfortunately means that it is difficult to find talented workers to help. A change in immigration policy from lottery to merit would help infused more 21st century workers into startups.

What can local authorities do to encourage entrepreneurial activity in their small city?

Make certain there is easy access to high-speed internet. Other than that, stay out of the way. Trying to determine which business will succeed and which will fail or implementing policies to attract startups to your community or state is a game for fools.

Mark Cuban Business Magnate and Owner of the Dallas Mavericks

What are the pros and cons of starting a business in a small city?

It depends on what kind of business it is. A smaller town often allows you to have more personal relationships with your potential customers and possibly lead to early sales.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

Not really. It depends on the quality of the business and the skills of the entrepreneur. Poor skills fail everywhere. Great skills tend to find a way to succeed.

What tips do you have for an entrepreneur starting a business in a small city?

Do your homework. Make sure there is a market that you can reach. Make sure there are enough customers to make you profitable. The rules of running a smart business apply in any town, regardless of size.

What impact do you think the Trump administration’s newer policies will have on entrepreneurs?

It depends on what business you are in. For some, the tax benefits and reduction in regulations can be beneficial. For some, tariffs and uncertainty can be troublesome.

What can local authorities do to encourage entrepreneurial activity in their small city?

Reduce the amount of friction, i.e., paperwork and fees required to start and run a business and simplify it enough so it can be done via an app or a single webpage. If an entrepreneur needs to hire help to set up a business, then it’s a problem.

Michael Glauser Professional Practice Professor and Executive Director of The Center for Entrepreneurship in the Huntsman School of Business at Utah State University

What are the pros and cons of starting a business in a small city?

Pros -- people who live in smaller towns love it when someone opens a business in their town. I have seen tremendous support for small town businesses from local leaders, schools, and residents. One small business owner I know has a store in a small town and one in a large town. He gets far more support and stronger sales in his small-town operation. People want him to succeed and stick around.

Smaller towns are often more attractive places to live and raise a family -- less traffic, less crime, less pollution, etc. They also offer more recreation and scenic beauty in many cases.

Cons -- there are fewer people to support the business if it caters to a geographic community, like a restaurant, hardware store, etc. However, many people I have met sell to the local market and then also sell their products online. I met a blacksmith in a small town who does local building projects, but also sells a host of items online: door knobs, fireplace implements, towel racks, etc. This is an essential ingredient for surviving and thriving in a smaller town.

Sometimes, it is difficult to find personnel in a smaller town, especially if you need highly trained and skilled individuals.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

Any business that can serve the local market and a broader market can do well in a smaller town. Tech companies, in particular, can thrive in smaller towns if they can find the right personnel to live there. Pitch Engine is killing it in Lander, Wyoming because Lander is such an attractive place to live for people who love the outdoors.

What tips do you have for an entrepreneur starting a business in a small city?

Get very involved in the local community. Join business organizations, school boards, etc. Get to know the people you will be serving. Diversify your product line to include complete, one-stop solutions for your customers. Figure out a way to sell to your geographic niche, as well as a broader niche online.

What impact do you think the Trump administration’s newer policies will have on entrepreneurs?

People are more interested in starting and growing their businesses when they perceive we have a business-friendly administration. If business owners feel they are targets of tax hungry politicians, business activity often slows down. The lifting of excessive regulations also gets business owners enthused.

What can local authorities do to encourage entrepreneurial activity in their small city?

Provide land and resources at attractive prices. Offer mentoring and support through SBDC offices and SCORE chapters. Create an attractive downtown environment for businesses. Encourage town members to shop local and support their fellow citizens.

Tim Michaelis Research Assistant Professor of Management, Innovation and Entrepreneurship at North Carolina State University

What are the pros and cons of starting a business in a small city? Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

Pro -- in a smaller city, there may be more tightly connected social networks (i.e., everybody knows everybody) that entrepreneurs can leverage when they get stuck in creating their new venture. Social networks and social capital are two powerful drivers of entrepreneurial success in a number of ways; e.g., the right social connections can help an entrepreneur receive seed funding easier, help them validate product ideas faster, and may also help provide access to potential strategic partners.

Con -- in entrepreneurship, having the right social network with access to the right resources is important too (i.e., resource fit). Smaller cities may have less diverse resources than larger cities, less access to angel investors and venture capital. In addition to funding, smaller cities may lack diversity in their overall social networks and in potential customers. Without such diversity, it is difficult to validate new product ideas across different customer segments. Furthermore, smaller cities have fewer people by definition, which indicates a smaller market size to test and sell one’s products. Getting traction and validation for new products is difficult and perhaps, in some cases, much more difficult in smaller cities due to the aforementioned reasons.

However, a solution to this problem is to engage in customer discovery and validation online (e.g., online focus groups, customer interviews, and surveys). This brings up a very important issue, which is how digitization will change startups. This may seem like an outdated or already solved problem, but many large companies see the issue of developing a digital business strategy as a core priority to survive in the near future (e.g., see McKinsey report on ”Why digital strategies fail”). Some business models transition very easily to digitally enhanced business models (e.g., software as a service), but new ventures that require brick-and-mortar stores to sell products may find a digital transition of their business model more difficult and more necessary over time.

What tips do you have for an entrepreneur starting a business in a small city?

The main limitation in smaller cities is fewer resources in general, as well as fewer potential customers. To remedy this situation, I’d recommend entrepreneurs in small towns create their own digital strategy, or some way to convert their revenue model into one that can sustain itself online. Online offers access to both resources and new customers, which significantly helps a nascent entrepreneur get feedback on their product ideas and scale their business. A common method is to change the pricing model of one’s product or services to a subscription-based service or having multiple “packages” of products to more easily accommodate the needs of multiple customers segments.

Second, as online does not always work perfectly, I would recommend that entrepreneurs in smaller cities find the community or adjacent city that has someone else (i.e., another entrepreneur) working on a similar business model. More often than not, other entrepreneurs are also looking for help, so if you can find a complementary skill set in another entrepreneur who has the same passion for solving the same problem, then a number of potential benefits emerge. For example, with the new social connection in a new city you have access to more diverse ideas, can learn from their failures, understand a potentially new customer segment (i.e., new customer needs), and also gain access to a completely new social network. Great places to reach out for help are:

• Local universities;
• Local government centers;
• Incubators;
• Coworking spaces
• ;
• Ask local business owners directly for their help.

What can local authorities do to encourage entrepreneurial activity in their small city?

A very popular and growing model for developing an entrepreneurial ecosystem in a city or region is being referred to as a Clinical Model of Entrepreneurship (E-Clinic). A good example of this model is the E-Clinic run out of NC State University, which won best emerging program in entrepreneurship in 2017 from the United States Association of Small Business and Entrepreneurship (USASBE). Essentially, this model connects multiple stakeholders in the ecosystem in a way that benefits all parties involved. For example, professors connect their students to work on real projects with actual entrepreneurs, and in turn collect data to better understand how to solve the problems that emerge during the new venture creation process.

Similarly, local entrepreneurs get access to expert advice and students to help them validate new products and grow their business. Unlike traditional entrepreneurship programs, the E-clinic model goes one step further and connects multiple actors in the entrepreneurship space in addition to researchers, students, and practicing entrepreneurs. For example, each student is required to develop their own ideas and refine them through multiple courses, in addition to learning practical skills and necessary real-work experience by working with real entrepreneurs. As each student starts to validate their own ideas, they are connected directly with mentors (i.e., local business owners, serial entrepreneurs, lawyers, accountants, etc.), schedule weekly meetings with these mentors, and also begin to develop relationships with local investors, all with the purpose to create real companies that last. This is an important point, as the focus on the E-clinic model is to create quality companies rather than a high number of new ventures that have not been properly vetted.

The E-clinic model was formed based upon the hospital teaching model, where students learning different medical skills are embedded within a hospital and supervised by doctors while developing their skillset. This new program simply replaces the doctors with entrepreneurs, professors, mentors, investors, local government, and multiple other community stakeholders in order to help emerging ventures create real value in their communities.

Wade Martin Professor of Economics, Director of the Office of Economic Research and Director of the Institute for Innovation & Entrepreneurship at California State University Long Beach

What are the pros and cons of starting a business in a small city?

The answer to this question really depends on the type of business. For example, if you are starting an online business in a small city, then access to customers isn’t really an issue. On the other hand, if you are doing a startup that needs access to a well-educated talent pool, then you may be constrained with attracting talent. The benefit of a small city is the potential appeal to a certain lifestyle, employee or entrepreneur. The personal relationships that evolve with the more closely developed network, including the potential for public-private partnerships to develop innovative solutions and test them in a more manageable environment.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

Yes, some types of businesses would work better than others. The problem with a retail store, for example, is the limited number of customers in the market, depending on the isolation of the small city (i.e., Paramount is a small city in southern California, but is a suburb of Los Angeles and Long Beach). A tech startup could do well, as long as it can attract the talent it needs to grow or develop the product. A manufacturer could do well if the small city is located strategically in the supply chain (i.e., close to their markets, easy access to international markets, etc.) A high-end restaurant will need a certain clientele to sustain the business, a small family neighborhood restaurant will have different needs. The essence of the success for a particular entrepreneur boils down to the determination if there is a market for their product or service.

What tips do you have for an entrepreneur starting a business in a small city?

I believe the best advice is to get to know the people in the local government, business community and people of the community. Understanding the ecosystem, you will be operating in is critical to success. In a small town you won’t be an anonymous business, what you do will impact the local tax base, the employees, the community organizations, etc. Is this an ecosystem that fits your business model and ethic?

What impact do you think the Trump administration’s newer policies will have on entrepreneurs?

The reduction in regulations could be beneficial to many businesses, particularly if they are subject to environmental regulations. The changes to the tax laws could also be beneficial. A potential negative is the impact that actions like tariffs and trade restrictions may have on international markets. If the startup is focused on domestic customers, only then it may benefit from the reduced competition.

What can local authorities do to encourage entrepreneurial activity in their small city?

Streamlining the business permitting or licensing process would be an important first step. Using city resources to create network economies would also be beneficial. For example, using zoning laws to create spaces that encourage companies and their suppliers to locate in close proximity would result in strategic alliances that could have positive spillover effects for the community and accelerate economic development.

Methodology

In order to determine the best small cities in which to start a business, WalletHub compared 1,261 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 city proper and excludes the surrounding metro area.

We evaluated each of the three key dimensions using 18 relevant metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the most favorable conditions for launching a business.

We then determined each city’s weighted average across all metrics to calculate its total score and used the resulting scores to rank-order our sample.

Business Environment – Total Points: 50

• Average Length of Work Week (in Hours): Full Weight (~5.56 Points)
• Average Commute Time: Full Weight (~5.56 Points)
• Average Growth in Number of Small Businesses: Double Weight (~11.11 Points)
• Startups per Capita: Double Weight (~11.11 Points)
• Average Revenue per Business: Full Weight (~5.56 Points)
• Average Growth of Business Revenues: Full Weight (~5.56 Points)
• Industry Variety: Full Weight (~5.56 Points)

Access to Resources – Total Points: 25

• Financing Accessibility: Double Weight (~5.56 Points)Note: This metric was calculated as follows: Total Annual Value of Small-Business Loans / Total Number of Small Businesses
• Investor Access: Double Weight (~5.56 Points)
• Human-Resource Availability: Full Weight (~2.78 Points)Note: This metric was calculated by subtracting the “unemployment rate” from the “number of job openings per number of population in labor force.”
• Higher-Education Assets: Full Weight (~2.78 Points)Note: This metric is based on WalletHub’s 2018’s College & University Rankings.
• Workforce Educational Attainment: Full Weight (~2.78 Points)Note: This metric measures the percentage of the population with at least a bachelor’s degree.
• Working-Age Population Growth: Full Weight (~2.78 Points)Note: “Working-Age Population” includes those aged 16 to 64.
• Job Growth (2016 vs. 2012): Full Weight (~2.78 Points)

Business Costs – Total Points: 25

• Office-Space Affordability: Full Weight (~6.25 Points)Note: This metric measures the per-square-foot cost of commercial office space.
• Labor Costs: Full Weight (~6.25 Points)Note: This metric measures the median annual income.
• Corporate Taxes: Full* Weight (~6.25 Points)Note: Data for this metric were available only at the state level.
• Cost of Living: Full Weight (~6.25 Points)

 

Sources: Data used to create this ranking were collected from the U.S. Census Bureau, Bureau of Labor Statistics, Federal Deposit Insurance Corporation, AreaVibes, Yelp, Indeed, Tax Foundation, LoopNet and WalletHub research.

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