Top 10 Best (and Worst) Cities for Small Businesses

Starting a small business is no easy feat. Outside of finding the right idea, getting funding and filing paperwork, you’ll also need to decide where your small business should reside. And though we’re all aware that some states are more tax-friendly than others, did you know that some cities are also better suited for entrepreneurs than others?

To help new entrepreneurs find the best city for their upcoming venture, we took a deep dive into the tax brackets, financial status, median income and several other factors to determine which cities will help (and hurt) your budding business. See if your favorite city made the cut, and when you’re ready to get started, use our complete guide to starting a business.

Best Cities for Small Businesses	Worst Cities for Small Businesses
1. Plano, TX	1. Newark, NJ
2. Anchorage, AK	2. San Bernardino, CA
3. Raleigh, NC	3. Fresno, CA
4. Charlotte, NC	4. New Orleans, LA
5. Chandler, AZ	5. Stockton, CA
6. Chesapeake, VA	6. Philadelphia, PA
7. Henderson, NV	7. Buffalo, NY
8. Scottsdale, AZ	8. Rochester, NY
9. Virginia Beach, VA	9. Los Angeles, CA
10. Arlington, TX	10. Baton Rouge, LA

Best Cities for Small Businesses

From the heat of the south to the snowy landscape of Anchorage, there are a lot of options when it comes to great cities to start your small business. Learn more about why the top four cities on our list are so ripe for entrepreneurial success with our breakdown below.

Want to know more about where we got our data and what it all means? Head down to our methodology section to learn more. 

1. Plano, TX

Just 20 miles outside of Dallas sits the best city for small businesses, Plano, Texas. And though Dallas might be known as the hub of Fortune 500 companies in the technology and financial industries, its neighbor to the north is much better suited for those looking to start a business of the smaller variety.

In fact, Plano is one of 24 cities studied that has no state income tax, meaning more money goes back to the small business owner. In addition, the city boasts a really high median income — a.k.a, its residents have more discretionary funds to spend at local businesses.

Open to moving before starting your entrepreneurial journey? Settle down in Plano and open an LLC in Texas to take advantage of all these perks and more.

Cost of Living	109.3
Median Income of Residents	$82,944
State Business Tax Climate Index Ranking	14
Average State Income Tax Rate	0%
Unemployment Rate	3.20%

2. Anchorage, AK

Life in Anchorage is a bit different than living in any city in the continental United States. With 22 hours of sun per day during the summer months and easy access to glaciers and mountains, Anchorage is a surprisingly great place for small business owners to make their mark.

This highly populated and diverse city has the lowest Tax Climate Ranking of all 100 cities studied, no state income tax and the sixth highest median income. Plus, the state is home to the Alaska Permanent Fund Corporation, an investment firm dedicated to helping Alaskan businesses and residents thrive for years to come. 

Cost of Living	123.5
Median Income of Residents	$78,121
State Business Tax Climate Index Ranking	3
Average State Income Tax Rate	0%
Unemployment Rate	4.30%

3. Raleigh, NC

If you’re looking to start your business in a city just hours from the coast — with southern hospitality to boot — look no further than Raleigh, North Carolina. Home to low taxes, low unemployment rates and a median income just shy of $55,000 a year, Raleigh residents are living in a sweet spot of high economic opportunity. But that doesn’t mean they turn their nose up at local businesses. Just the opposite! 

They have an entire website dedicated to helping residents find the best local businesses for their needs, proving just how seriously Raleighites take preserving their local charm. Get your business listed on their directory in no time by starting a business in North Carolina. 

Cost of Living	102.3
Median Income of Residents	$54,581
State Business Tax Climate Index Ranking	11
Average State Income Tax Rate	2.50%
Unemployment Rate	2.90%

4. Charlotte, NC

Rounding out our list of the top four cities to start a small business is Charlotte, NC. Charlotte is the second city on our list in the Carolinas, and it’s not hard to see why. With a cost of living lower than the national average, a relatively high median income and a low Tax Climate Ranking, Charlotte is a good option for small business owners wanting to ensure financial success.

Stuck between settling down in Charlotte or Raleigh? If you’re looking for a big-city feel, or you’re planning to open a brewery or tech company, Charlotte is definitely the better fit. While Raleigh provides the small-town feel some business owners crave, the reality is that Charlotte will provide more opportunities for growth just due to its sheer size.

Cost of Living	98.9
Median Income of Residents	$53,274
State Business Tax Climate Index Ranking	11
Average State Income Tax Rate	2.50%
Unemployment Rate	3.20%

Worst Cities for Small Businesses

The worst cities for small businesses are Newark, San Bernardino and Fresno. While these cities seem like they couldn’t be more different — they are on opposite sides of the country, after all — they have a lot in common that prevents them from helping small businesses succeed.

All three cities have a high cost of living and a low median income, meaning it’s hard to stretch your dollar when getting your business off the ground. Add to that high taxes and unemployment rates and it's clear to see how difficult it can be to turn a profit in these cities. That’s not to say it can’t be done, but if you’re looking for a city to grow in, we recommend looking elsewhere.

	Newark, NJ	San Bernardino, CA	Fresno, CA
Cost of Living	119.5	110.4	102.6
Median Income of Residents	$34,012	$38,774	$41,455
State Business Tax Climate Index Ranking	50	48	48
Average State Income Tax Rate	9.00%	8.84%	8.84%
Unemployment Rate	4.20%	3.80%	6.00%

At the end of the day, finding the perfect city for your small business is an individual journey. And while some cities may offer a culture or nightlife that’s hard to turn down, if you want your business to succeed, you’ll need to consider the numbers.

Once you’ve picked your business new home, make sure you have a helping hand along the way. We’ve helped over 1,000,000 small business owners reach their dreams since 2004, and we can’t wait to help you do the same. Learn more about how to start a business from the ground up with Bizee.

 

Methodology 

To determine what cities were the best and worst for small businesses, the Bizee team collected the following data sets for the 100 most populated cities in the U.S. Each data set was given a weight based on importance, and then the total score was calculated and each city was given a ranking. The cities that had the highest scores were given the attribute of best cities for small business owners.

• Cost of Living (Source: BestPlaces)
• Weight: .13
• Median Income (Source: BestPlaces)
• Weight: .26
• State Business Tax Climate Index Ranking (Source: Tax Foundation)
• Weight: .34
• Average State Income Tax Rate (Source: Federation of Tax Administrators)
• Weight: .10
• City Unemployment Rate as of April 2022 (Source: U.S. Bureau of Labor Statistics)
• Weight: .17

This study was conducted from June to July 2022.