5 Worst Cities To Start a Business In, According To A Study (and 5 Cities You Should Consider Instead)

Choosing the right city is essential for a successful business. While many entrepreneurs prefer to launch their startups in big cities, some understand the untapped potential of small towns. These small cities offer a unique blend of affordability, community support, and growth potential that big cities cannot match. You can even safeguard against economic shocks by strategically selecting the right city.

In 2024, numerous small cities emerged as the best places to start your entrepreneurial journey, while some became the worst and can pose significant challenges. Let’s explore the WalletHub ranking to discover the best and worst cities for starting a business.

Cupertino, CA

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Cupertino, CA, ranks the lowest for launching a startup, primarily due to its high cost of living. Housing expenses are 448% higher than the national average, and bus fares and gas prices are 24% higher, placing a significant financial burden on entrepreneurs. The city’s highly competitive job market demands high salaries due to the abundance of skilled individuals. Additionally, many big tech giants in the city, including Apple, make it challenging for new startups to stand out.

Saratoga, CA

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Saratoga, CA, ranks second to last among the best small cities to launch a startup. The city has limited commercial space, which leads to high rent costs. Job opportunities within the town are also low, forcing many people to commute to nearby areas for work. The soaring prices of almost everything make it extremely challenging for entrepreneurs to manage both personal and professional expenses while maintaining the budget. Additionally, due to inflation and the presence of tech giants, salary expectations in the region are high, making Saratoga an impractical choice for aspiring entrepreneurs.

Oakley, CA

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Oakley, CA, lacks a robust business ecosystem and infrastructure, making it a poor choice for budding startups. The cost of living in the city is much higher than the national average, adding significant financial strain on new businesses. Additionally, the city’s non-strategic location isolates it from urban areas and vital networking opportunities. All these factors make it challenging to launch a sustainable startup in Oakley.

Pacifica, CA

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The real estate costs in Pacifica are quite high, with the average home value around $1.2 million, making it difficult for entrepreneurs to afford a commercial space at reasonable prices. The cost of living is more than 50 percent higher than the national average, further complicating the task of managing personal and professional expenses. Additionally, the city’s proximity to larger cities like San Francisco also impacts the networking opportunities and local business ecosystem for new startups.

Potomac, MD

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Potomac, MD, is ranked as the worst small city for new startups due to its high cost of living. The city prioritizes residential space, resulting in limited and expensive commercial spaces. Average housing prices exceed $1.1 million, making it significantly challenging for entrepreneurs to manage expenses. Furthermore, the city lacks a robust business ecosystem, favorable working conditions, and networking opportunities, making it difficult to establish new businesses in Potomac.

Let’s look at which cities are good to start a business as of now.

Cedar City, UT

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Cedar City is one of the best small cities to launch a startup. Its strategic location and low cost of living make it an ideal and affordable choice for new startups. Between 2015 and 2021, the city experienced the fourth-highest growth in small business openings. Additionally, Cedar City boasts the shortest commute time, allowing people to spend less time in traffic and more time being productive at work.

The city hosts several manufacturing and renewable energy companies, and the government is actively introducing new policies to create a more business-friendly environment. Cedar City offers various amenities to help entrepreneurs build a successful business.

St. George, UT

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According to the ranking, St. George is the second-best small city for launching startups. Its rapidly growing economy, favorable business policies, and excellent working conditions significantly boost new ventures. The city offers a short commute of 16 minutes, affordable office space, and an exceptional quality of life, helping establish a sustainable business. The low unemployment rate also indicates a robust job market, creating a conducive environment for startups to thrive.

Fort Myers, FL

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Fort Myers ranks third on the list of the best small cities to start a business, offering a favorable environment for entrepreneurs. According to WalletHub, the city has the most investors, making it easier for entrepreneurs to secure funding. Additionally, the city has a low cost of living, affordable office space, a supportive local community, and business-friendly tax policies. These factors collectively make the city an ideal place to launch a startup with minimum expenditure and maximum profit potential.

Washington, UT

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Ranked fourth place, Washington, UT, is an outstanding city to launch a startup. The city offers an abundance of resources to entrepreneurs, including supportive economic conditions, favorable tax policies, a rapidly growing economy, and a rising population. With a low unemployment rate, Washington provides ample opportunities and a strong job market. The government also provides grants to businesses that meet certain criteria, helping them expand operations and reduce financial burdens. Additionally, the city is home to several Fortune 500 companies, making it an ideal place for startups to thrive and grow.

Post Falls, ID

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Post Falls, ID, ranks fifth among the best small cities to start a business. Idaho saw a significant increase in new startups between 2021 and 2022, rising from 8,171 to 10,115. This growth is attributed to the city’s strategic location, favorable working conditions, and high quality of life. Post Falls boasts the lowest overall business costs in the country, and the government offers thoughtful programs to assist startups, expansion, and productivity. With its supportive, business-friendly policies, the city stands out as an ideal location for startups in 2024.

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