With National Small Business Week approaching and many employers still struggling to hire new workers, the personal-finance website WalletHub this week released its report on 2025’s Best Small Cities to Start a Business, as well as expert commentary.
To determine the most business-friendly small markets in the U.S., WalletHub compared more than 1,300 cities with fewer than 100,000 residents across 18 key metrics. The data set ranges from small business growth rates and accessibility of financing to investor access and labor costs.
National Small Business Week will be observed May 4 through 10.
Top 20 Small Cities to Start a Business
The number one ranking went to St. George, UT, followed by Fort Myers, FL; Cedar City, UT; Washington, UT; Bozeman, MT; Holland, MI; Bend, OR; Redmond, OR; Greenville, SC; and rounding out the top 10, LaGrange, GA.
Rated 11 through 20 were Post Falls, ID; Midvale, UT; Aberdeen, SD; Rapid City, SD; Carrollton, GA; Helena, MT; Caldwell, ID; Nampa, ID; South Bradenton, FL; and at number 20, Boca Raton, FL.
Key Stats
Bozeman, Montana, has the highest number of startups per 100,000 residents, which is 14.7 times higher than in Salisbury, Maryland, the city with the lowest.
Los Altos, California, has the highest share of the population with at least a bachelor’s degree, which is 15.6 times higher than in Coachella, California, the city with the lowest.
Kentwood, Michigan, has the most affordable office spaces, which is 6.8 times lower than in Mountain View, California, the city with the least affordable.
Isla Vista, California, has the lowest labor costs (median annual income), which is 10.2 times lower than in Los Altos, California, among the cities with the highest.
West Odessa, Texas, has the longest work week, which is 1.8 times longer than in Isla Vista, California, the city with the shortest.
“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,” noted WalletHub Analyst Chip Lupo. “St. George, UT, is the best small city to start a business, ranking among the top cities in the country for both startups per capita and growth in the number of small businesses. The city 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. In addition, St. George has a very high annual job growth rate. All of these factors allow entrepreneurs to minimize costs while maximizing their chances of success.”
To view the full report, visit: https://wallethub.com/edu/best-small-cities-to-start-a-business/20180
Expert Commentary
What are the pros and cons of starting a business in a small city?
“Pros: It is easier to engage with customers and learn their needs and wants so that your offering(s) resonates with those needs and desires. In marketing, this is called the ‘product-market fit.’ Along the same line, it is easier to establish your brand more quickly through social capital building. The ability to have closer relationships with your customers makes establishing trust easier. There is typically less competition. If you can establish your moat (what makes your offering unique), you can position your business to capture a larger share of the local market.
Cons: The available market is typically smaller than it would be in a larger city. There tends to be less support for small businesses than in larger cities (i.e., professional services, financing, business development assistance, technical support, etc.). The insularity of small communities (everyone knows everyone else) can provide comfort and security, but it can often stifle creativity and innovation. Much creativity in business comes from the serendipitous interactions among people that are less common in smaller populations. The kind of diversity of perspective that creates essential creative tensions is less common in smaller places.”
Thomas S. Lyons, PhD – Professor; Executive Director, Center for Innovation and Entrepreneurship, University of Tennessee at Chattanooga
“Easier (not easy, but easier) to develop relationships with banks, investors, government, economic development initiatives, etc. In a larger market while there would be more resources potentially available, it is also harder to develop close relationships with key decision makers and competition for their attention and resources is abundant. There are potential limitations to scaling, depending on the type of business. That said I’ve seen homegrown small-market companies grow to billion-dollar enterprises, so there are exceptions. However, there may be critical infrastructure that exists in larger markets that is necessary for production and distribution. I have seen companies outgrow their smaller cities and have to move to larger ones for this reason. On a similar note, the talent pool is limited. But that can also present an opportunity to work in conjunction with colleges and community leaders to develop a workforce and significantly contribute to a smaller economy by doing so.”
Chris Wessell – Professor, University at Albany
What tips do you have for an entrepreneur starting a business in a small city?
“Get to know your prospective customers, especially your early adopters. Engage with them and listen to what they have to say about the problem they need you to solve for them. Use this to ‘design’ the solution you are bringing to them. Think bigger about your market. How might you attract customers from the larger region and beyond? Keep in mind that, especially in small towns, your relationship with your customers and your reputation are vital to your success. Get to know the local entrepreneurship support organizations (ESOs) – SBDC, SCORE chapter, startup financing providers, business incubator, etc. Do your homework to understand when the resources they provide are appropriate to your skill level as an entrepreneur and to the stage in its life cycle your business is in.”
Thomas S. Lyons, PhD – Professor; Executive Director, Center for Innovation and Entrepreneurship, University of Tennessee at Chattanooga
“Networking is key. Gaining access to the right people to grow your business is monumentally easier than in a major metro. There may be less players, but they are far more accessible through some strategic networking.”
Chris Wessell – Professor, University at Albany
What can local authorities do to encourage entrepreneurial activity in their small cities?
“Actively encourage the strengthening of the local entrepreneurial ecosystem or the intentional building of such an ecosystem, if it does not currently exist. This will require local authorities to be ‘civic entrepreneurs’ – thinking and acting like entrepreneurs in the public sector. Work to improve the quality of life in the small city, which can make it a magnate for entrepreneurs and their customer base. Build bridging social capital: network with other communities (large and small) in your region to address resource deficiencies for entrepreneurs in your small city (i.e., professional services, financing, business development assistance, technical support, etc.) and market size. In other words, create a regional entrepreneurial ecosystem. Understand that merely providing resources to entrepreneurs is not enough. Many entrepreneurs are not adequately prepared to effectively use the resources provided – they lack the necessary skills. Entrepreneurship skill building should be an essential element of any local entrepreneur-focused economic development strategy.”
Thomas S. Lyons, PhD – Professor; Executive Director, Center for Innovation and Entrepreneurship, University of Tennessee at Chattanooga
“Certainly, the first thing most of us would think of is providing funding, but I think the local economic development organizations that connect entrepreneurs with resources are where great things happen. As a local leader, even if you don’t have a way to fund a small business from your own budget, you can absolutely be a connector, and that’s very powerful and impactful.”
Chris Wessell – Professor, University at Albany
