15 Best and Worst Cities in America to Start a Small Business

Starting a small business is a huge life event. If you’re thinking of taking the plunge, you’ll need more than a great idea to stay afloat. You might not realize it, but the city you choose as your launching pad has a major impact on your business' success or demise.

If you’re ready to make your entrepreneurial dreams a reality, but you aren’t sure where to put down roots, GOBankingRates has you covered. Using data from the 2017 Kauffman Index of Startup Activity and Sperling’s Best Places, they ranked cities according to five factors:

Rate of new entrepreneurs
Opportunity share of new entrepreneurs
Startup density
Cost of living
Projected job growth

Find out which cities are the best as you make plans to start a small business and which cities you should avoid.

(By Laura Woods)

The best cities in America to start a small business

To help your small business succeed, you'll want to set up shop in a city that fosters success. A thriving entrepreneurial community filled with people striking out on their own for all the right reasons can provide the right platform to launch a thriving small business.

Cost of living is another major factor for a new small business. Some of the following cities are more affordable than others, but when all contributing factors are combined, each is a great choice for entrepreneurs to put down roots.

Las Vegas

Rate of new entrepreneurs: 0.42 percent
Opportunity share of new entrepreneurs: 81.93 percent
Startup density: 120.7
Cost of living: 104.5
Projected job growth: 39.87 percent

There’s a lot more to Las Vegas than the famed Strip. The city has the highest startup density on the list and a seriously impressive rate of new entrepreneurs, making it a fantastic place to grow a small business. It’s also worth noting that more than eight in 10 Las Vegas entrepreneurs were employed before starting their small business, meaning they chose to head out on their own.

The only potential drawback of starting a small business in Las Vegas is the higher-than-average cost of living. Housing is the most inflated expense, but entrepreneurs willing to rent a two-bedroom apartment or smaller won’t pay much more than the national average. However, Nevada residents don’t pay income tax, so some of this could be offset.

Austin, Texas

Rate of new entrepreneurs: 0.51 percent
Opportunity share of new entrepreneurs: 84.73 percent
Startup density: 104.5
Cost of living: 117.4
Projected job growth: 43.13 percent

Austin is the best city in the U.S. to start a small business. This fun, quirky city has the second-highest rate of new entrepreneurs on the list and a seriously impressive startup density. The opportunity share of new entrepreneurs also reveals passion is driving people to start their own business, which makes for a vibrant startup community.

The cost of living is higher than average, but you get what you pay for. U.S. News & World Report named Austin the best place to live in 2017, so Austin clearly offers the best of both worlds. Yet another bonus is Texas’ status as a tax-free state, meaning income tax is non-existent.

Miami

Rate of new entrepreneurs: 0.56 percent
Opportunity share of new entrepreneurs: 81.09 percent
Startup density: 107.8
Cost of living: 122.8
Projected job growth: 38.12 percent

So much more than the average beach town, Miami has the highest rate of new entrepreneurs of any city on the list. Rich with culture, this glamorous coastal paradise also has the second-highest startup density on the list, making it an entrepreneurial hot spot.

The high cost of living is the main drawback of starting a small business in Miami. Even without having to pay income tax in Florida, above-average costs of everything from housing to healthcare could make paying the bills a challenge for cash-strapped entrepreneurs. Job growth over the next 10 years is expected to be just above the national average. However, Miami’s unemployment rate topped the national average several times in the first half of 2017.

Dallas

Rate of new entrepreneurs: 0.37 percent
Opportunity share of new entrepreneurs: 85.18 percent
Startup density: 94.2
Cost of living: 95.2
Projected job growth: 42.29 percent

Crowned Forbes’ Best Big City for Jobs in 2017, Dallas has an incredible base for starting a small business. The city has experienced 20.3 percent job growth since 2011, and it’s expected to remain above average, signifying a solid local economy.

The startup density is well above the national average, and the 85.18 percent opportunity share of new entrepreneurs indicates new small-business owners are driven by desire, not need. A below-average cost of living makes Dallas a more economical choice for entrepreneurs on a tight budget. No income tax in Texas is another bonus of doing business in the city.

Phoenix

Rate of new entrepreneurs: 0.38 percent
Opportunity share of new entrepreneurs: 87.15 percent
Startup density: 92.1
Cost of living: 99.4
Projected job growth: 40.84 percent

Phoenix has a lower percentage of people starting a small business than many other cities on the list, but it makes up for it in quality. The opportunity share of new entrepreneurs increased 10.5 percent from 2014 to 2016, meaning more people are striking out on their own because they want to, instead of being driven by necessity.

The hearty startup density is above the national average. This likely has at least a little to do with the below-average cost of living and the year-round warm temperatures. Job growth is slated to be above the national average for the next 10 years, making the local economy a great place to grow a small business.

San Antonio

Rate of new entrepreneurs: 0.38 percent
Opportunity share of new entrepreneurs: 89.97 percent
Startup density: 87.2
Cost of living: 93.2
Projected job growth: 39.97 percent

San Antonio’s below-average cost of living and lack of state income tax provide entrepreneurs with a comfortable base for starting a small business. The local economy is strong, with an unemployment rate steadily below the national average and above-average job growth projected over the next 10 years.

Among the best cities to build a small business, Kansas City has a rate of entrepreneurs and a startup density that are on the low end. However, nearly nine out of 10 entrepreneurs are fueled by opportunity, instead of necessity, so it’s likely San Antonio has just been flying under the radar -- until now.

Kansas City, Mo.

Rate of new entrepreneurs: 0.37 percent
Opportunity share of new entrepreneurs: 77.81 percent
Startup density: 83.6
Cost of living: 87
Projected job growth: 42.81 percent

Among the best cities to start a small business, Kansas City ranked lowest in startup density, tied for last place with Dallas on the rate of new entrepreneurs and came in second-to-last for opportunity share of new entrepreneurs. Despite this, the city is clearly in the midst of an entrepreneurial renaissance. Its rate of new entrepreneurs has increased 14 percent in the past two years, meaning people are starting to discover this hidden gem.

Kansas City’s cost of living is the lowest on the best of list. Entrepreneurs living in the Paris of the Plains can focus more time on business and spend less time worrying about paying the rent, considering housing is 59 percent less than the national average.

San Diego

Rate of new entrepreneurs: 0.49 percent
Opportunity share of new entrepreneurs: 82.54 percent
Startup density: 95.9
Cost of living: 166
Projected job growth: 39.54 percent

San Diego is quickly becoming a hotbed for small business. Both the rate of new entrepreneurs and startup density notably increased from 2015 -- 0.33 percent and 88.2 percent, respectively -- indicating entrepreneurs aren’t detracted by the city’s high cost of living.

A healthy projected job growth over the next 10 years and 70 miles of coastline in the county make this beach city a delightful place for entrepreneurs to put down roots. Since there’s never a dull moment there, it’s also worth noting that U.S. News and World Report ranked San Diego the ninth-best city in the U.S. for nightlife. Small-business owners who don’t follow the all work and no play philosophy have plenty of options after hours.

Orlando, Fla.

Rate of new entrepreneurs: 0.25 percent
Opportunity share of new entrepreneurs: 80.25 percent
Startup density: 105.5
Cost of living: 96.3
Projected job growth: 41.02 percent

More than just a popular tourist destination, Orlando is a hub for entrepreneurs. The city’s startup density is well above the national average, and 80 percent of small businesses are started from opportunity, not necessity. The rate of new entrepreneurs is the second-lowest among the best cities to start a small business, but it’s been steadily rising over the past few years.

Orlando’s cost of living is below the national average, making it an affordable place to live and work. The median home price of $214,700 is far below the national average, meaning entrepreneurs could reasonably enjoy the perks of home ownership -- and business ownership.

Denver

Rate of new entrepreneurs: 0.39 percent
Opportunity share of new entrepreneurs: 82.87 percent
Startup density: 92.3
Cost of living: 127.5
Projected job growth: 39.88 percent

Denver topped the charts of Forbes’ Best Places for Business and Careers list in 2016, and it’s easy to see why. The rate of entrepreneurs is above the national average and so is the startup density, making it clear entrepreneurs are flocking to Colorado’s capital city.

The cost of living is well above average, but so is the quality of life, considering U.S. News & World Report named it the second best place to live in the U.S. for 2017. The unemployment rate has remained steadily below the national average. Projected future job growth indicates this trend will continue, as Denver is expected to outpace the rest of the country for the next 10 years. Even better, it's among the best cities to own investment property.

Jacksonville, Fla.

Rate of new entrepreneurs: 0.11 percent
Opportunity share of new entrepreneurs: 95.9 percent
Startup density: 89.4
Cost of living: 92
Projected job growth: 39.21 percent

Starting a small business in Jacksonville is a great idea for so many reasons. The opportunity share of new entrepreneurs is the highest among the best cities for starting a small business, but the rate of new entrepreneurs is by far the lowest. This indicates there’s probably tons of untapped potential waiting to be found in the area.

Jacksonville also has the second-lowest cost of living on the best cities list, meaning entrepreneurs can enjoy a comfortable life in this coastal city while chasing their dream. Plus, Florida has no state income tax, so that’s even more money saved.

Riverside, Calif.

Rate of new entrepreneurs: 0.36 percent
Opportunity share of new entrepreneurs: 80.93 percent
Startup density: 92.4
Cost of living: 128.6
Projected job growth: 40.4 percent

Located roughly 60 miles southeast of Los Angeles, the birthplace of California citrus can be a great place to start a small business. Riverside has about 325,000 residents, but with a population of 4.5 million people in the Riverside-San Bernardino-Ontario metro area, the Inland Empire has a large population base for entrepreneurs to tap.

Riverside’s above-average cost of living is largely driven by housing, but entrepreneurs looking to rent a small apartment won’t pay much more than the national average. Riverside’s 92.4 percent startup density is higher than the national average, meaning the entrepreneurial spirit is thriving, but the market isn’t saturated.

Los Angeles

Rate of new entrepreneurs: 0.56 percent
Opportunity share of new entrepreneurs: 80.03 percent
Startup density: 92.3
Cost of living: 166.2
Projected job growth: 37.25 percent

Among the best cities for starting a small business, Los Angeles has the highest cost of living on this list but ties with Miami for the highest rate of new entrepreneurs. Sure, living in the City of Angels is expensive, but it comes with the opportunity to be surrounded by like-minded people -- and of course, excellent weather year-round.

Housing and utilities are the main factors driving the over-the-top cost of living in Los Angeles, so entrepreneurs willing to share space with roommates might be able to keep this expense to a minimum. Home to new startup enclave Silicon Beach, there might be something in the water, considering startups such as Snap Inc. and Ring rose to success in the Los Angeles area.

Houston

Rate of new entrepreneurs: 0.4 percent
Opportunity share of new entrepreneurs: 81.93 percent
Startup density: 92.6
Cost of living: 102.3
Projected job growth: 36.68 percent

Considering the rate of new entrepreneurs in Houston is notably larger than the national average of 0.31 percent, more than a few people think starting a small business in the city is a great idea. Not surprisingly, the startup density is higher than the national average, meaning a thriving entrepreneurial community is alive and happening.

The median age of Houston residents is 32.6 years old -- compared with the U.S. average of 37.4 -- and less than half the population is married, making the city a great place to start a business that serves young, single professionals. The cost of living in Houston is slightly higher than the national average, but Texas does not have state income tax, so small-business owners don’t have to pay taxes on their wages.

Charlotte, N.C.

Rate of new entrepreneurs: 0.37 percent
Opportunity share of new entrepreneurs: 71.21 percent
Startup density: 87.5
Cost of living: 97.2
Projected job growth: 42.49 percent

A below-average cost of living and above-average projected job growth over the next 10 years make Charlotte a solid base for startups. The rate of new entrepreneurs has been on the rise since 2013, indicating its appeal is growing fast.

The second-largest banking hub in the country is an especially savvy location for financial industry startups. The Queen City also is home to several high-profile colleges and universities, including the University of North Carolina at Charlotte, making it convenient to find brilliant interns and forward-thinking young employees. Consequently, Charlotte should be high on your list places to get your small business off the ground.

The worst cities in America to start a business

Some cities are an excellent choice to start a small business, but others don’t share the same status. Several big names on both the east and west coasts -- and everywhere in between -- should be avoided by entrepreneurs.

Find out why putting down roots in these cities is not ideal when starting a small business.

Milwaukee

Rate of new entrepreneurs: 0.15 percent
Opportunity share of new entrepreneurs: 67.53 percent
Startup density: 60.7
Cost of living: 84.1
Projected job growth: 35.15 percent

Milwaukee ranks as the worst city in America to start a small business. The cost of living is low, and the unemployment rate is consistently lower than the national average, but that’s where the favorable statistics end.

The opportunity share of new entrepreneurs is the lowest of any city on the list, so even when people do start a small business in Milwaukee, they’re frequently driven by joblessness. As expected, the rate of new entrepreneurs and startup density both rank low on the list, painting a dismal startup picture. And if that weren’t bad enough, the city’s projected job growth falls short of the national average, so this could indicate a less-than-stable local economy over the next 10 years.

Pittsburgh

Rate of new entrepreneurs: 0.13 percent
Opportunity share of new entrepreneurs: 71.92 percent
Startup density: 57.2
Cost of living: 88
Projected job growth: 36.1 percent

It’s hard to effectively gauge Pittsburgh’s startup environment because so few entrepreneurs are using the city to launch their business. The Steel City’s rate of new entrepreneurs and startup density are the second-lowest on the list. Not surprisingly, its opportunity share of new entrepreneurs is also in nearly a three-way tie for last place, indicating far too many small businesses are started from necessity.

Pittsburgh’s unemployment rate has trended higher than the national average every month in 2017 so far, and this might not change anytime soon. The city’s projected job rate is slightly below the national average, which should be considered a red flag for anyone starting a small business.

Detroit

Rate of new entrepreneurs: 0.25 percent
Opportunity share of new entrepreneurs: 76.01 percent
Startup density: 71
Cost of living: 72.9
Projected job growth: 30.87 percent

Anyone thinking of starting a small business should steer clear of Detroit. The city’s projected job growth over the next 10 years is well below the national average, and its unemployment rate is consistently higher than the national average. Detroit’s cost of living is the lowest of all cities on the list, but even that doesn’t help matters.

People just aren’t starting enough small businesses in Detroit. The rate of new entrepreneurs, opportunity share of new entrepreneurs and startup density all fall below the national average. Interestingly, the opportunity share of new entrepreneurs has steadily increased since 2014, so only time will tell if this is an indicator that the city’s startup culture is in for a shift.

Philadelphia

Rate of new entrepreneurs: 0.21 percent
Opportunity share of new entrepreneurs: 75.89 percent
Startup density: 69.7
Cost of living: 99.5
Projected job growth: 37.47 percent

The City of Brotherly Love doesn’t have much affection for new entrepreneurs. The rate of new entrepreneurs and startup density have been on a steady decline since 2014. Even those who do start a small business in the city are motivated by unemployment more so than in most other cities on the list.

Philadelphia’s projected job growth is just slightly below the national average, but this probably wouldn’t be a concern if it were the only unfavorable characteristic. While the city’s cost of living is slightly below the national average, it’s not enough to offset the lack of new small-business activity.

Minneapolis

Rate of new entrepreneurs: 0.2 percent
Opportunity share of new entrepreneurs: 76.31 percent
Startup density: 72.5
Cost of living: 109.4
Projected job growth: 38.78 percent

Minneapolis isn’t a great place for entrepreneurs. The rate of new entrepreneurs, opportunity share of new entrepreneurs and startup density indicate there’s not much of a startup culture right now. It’s worth noting that a shift might be in store, as all three of these statistics have increased since 2015.

The cost of living in Minneapolis is higher than the national average. This might not be an issue for most residents -- the average annual salary is $55,010, compared with the national average of $49,630 -- but it presents yet another challenge for someone starting a small business.

Chicago

Rate of new entrepreneurs: 0.22 percent
Opportunity share of new entrepreneurs: 80.4 percent
Startup density: 74.7
Cost of living: 110.9
Projected job growth: 35.98 percent

Chicago is a fantastic city, but it’s not the best choice to grow a small business. Despite the size of the city, its rate of new entrepreneurs, opportunity share of new entrepreneurs and startup density all fall below the national average. In short, not enough people are starting new small businesses, and of those who are, too many are prompted by unemployment.

The above-average cost of living further decreases Chicago’s appeal to entrepreneurs. For example, Zumper cites the average rent for a one-bedroom apartment at $1,680 per month, which easily can break the shoestring budget of someone starting a small business. Also concerning is the city’s below-average projected job growth rate.

Indianapolis

Rate of new entrepreneurs: 0.16 percent
Opportunity share of new entrepreneurs: 71.7 percent
Startup density: 72.7
Cost of living: 90.4
Projected job growth: 40.88 percent

Indianapolis has some makings of a strong entrepreneurial climate, but ultimately, it’s just not there. The low cost of living and high projected job growth are favorable when starting a small business. In fact, Zillow puts the city’s median home value at just $137,600, compared with the national average of $198,000.

Unfortunately, this is where the favorable statistics end. The city’s rate of new entrepreneurs is among the lowest on the list, and its startup density isn’t much better. Equally concerning is the opportunity share of new entrepreneurs, which indicates many small businesses in Indianapolis are started out of necessity.

Virginia Beach, Va.

Rate of new entrepreneurs: 0.18 percent
Opportunity share of new entrepreneurs: 86.54 percent
Startup density: 68.1
Cost of living: 110.2
Projected job growth: 35.64 percent

A brave few are still starting small businesses in Virginia Beach. The opportunity share of new entrepreneurs indicates these people are largely motivated by desire, which is inspiring. Despite this, future entrepreneurs need to face that both the rate of new entrepreneurs and startup density have been on the decline since 2014.

Virginia Beach’s projected job growth falls below the national average, only adding to the mounting reasons why this isn’t the place for a new small business. So while Virginia Beach might be among the best places to live if you're trying to save money, it's not great place for starting a small business.

Baltimore

Rate of new entrepreneurs: 0.2 percent
Opportunity share of new entrepreneurs: 81.02 percent
Startup density: 69.2
Cost of living: 90
Projected job growth: 36.25 percent

Baltimore’s startup density is among the lowest of all cities on the list, and its rate of new entrepreneurs isn’t much better. However, it’s worth noting that the city’s opportunity share of new entrepreneurs is on the high end, so the few people starting a small business are likely driven by passion.

The city’s low cost of living is great, but projected job growth over the next 10 years is below average. So far in 2017, Baltimore’s unemployment rate has hovered around the national average, but the local economy likely will take a hit in the future if job growth begins to lag.

Providence, R.I.

Rate of new entrepreneurs: 0.18 percent
Opportunity share of new entrepreneurs: 87.32 percent
Startup density: 61.0
Cost of living: 106.4
Projected job growth: 36.68 percent

In its current state, Providence is a challenging place to for a new small business. Both the city’s rate of new entrepreneurs and startup density are among the lowest on the list. Paired with a higher-than-average cost of living, even a healthy projected job growth rate can’t justify starting a small business in the city.

Don’t give up on Providence just yet, though. Change could be on the horizon, thanks to Brown University’s new $25 million Jonathan M. Nelson Center for Entrepreneurship. Completed in 2016, this could draw entrepreneurial types to the Ivy League university, who might use the college town as their launching pad.

Boston

Rate of new entrepreneurs: 0.33 percent
Opportunity share of new entrepreneurs: 79.85 percent
Startup density: 68.2
Cost of living: 169.9
Projected job growth: 38.71 percent

In 2017, Boston ranked in the Top 10 on the U.S. News & World Report Best Places to Live list -- just not for new small-business owners. The rate of new entrepreneurs surpassed the national average, but the startup density is among the lowest on the list. Even the opportunity share of new entrepreneurs doesn’t display incredible confidence.

Boston’s projected job growth over the next 10 years is solid, but its excessive cost of living makes it an unrealistic place for starting a small business. Average rent for a one-bedroom apartment is $2,200 -- the fourth-highest in the country -- according to apartment rental platform Zumper, which can be hard to swing for entrepreneurs trying to pinch pennies.

While Boston might not be the best place to start a small business, entrepreneurs shouldn't discount Massachusetts as a whole. The state ranks No. 15 on a list of the best states to start a business.

Cleveland

Rate of new entrepreneurs: 0.19 percent
Opportunity share of new entrepreneurs: 95.99 percent
Startup density: 54.3
Cost of living: 78.8
Projected job growth: 33.3 percent

Cleveland just isn’t the place for a new small business. The startup density is the lowest on the list, and the rate of new entrepreneurs isn’t far behind. However, those who are heading out on their own appear to be motivated by opportunity.

Things don’t look great for the Cleveland economy. Projected job growth over the next 10 years is below the national average, so lack of spending power would make it hard for the city to support another small business. The low cost of living is quite nice, but that still can’t justify starting a small business in the city.

Seattle

Rate of new entrepreneurs: 0.25 percent
Opportunity share of new entrepreneurs: 80.84 percent
Startup density: 85
Cost of living: 176.5
Projected job growth: 39.38 percent

Considering Seattle ranked No. 4 on Forbes’ 2016 list of Best Places for Business and Careers, it might be a bit surprising to find it on the list of cities new entrepreneurs should avoid. Two key factors can explain this status: low rate of new entrepreneurs and excessively high cost of living.

Seattle’s startup density is actually higher than many of the best cities for starting a small business, and its opportunity share of new entrepreneurs is also quite impressive. Even when a respectable projected job growth is thrown into the mix, the Emerald City’s cost of living still makes it a poor choice as a place to settle to start a small business.

Washington, D.C.

Rate of new entrepreneurs: 0.28 percent
Opportunity share of new entrepreneurs: 76.51 percent
Startup density: 78
Cost of living: 158.5
Projected job growth: 41.25 percent

The nation’s capital is the country’s largest political hub, but the same can’t be said for new small businesses. Despite a moderately decent startup density and opportunity share of new entrepreneurs, Washington, D.C., just isn’t seeing a lot of new small-business activity.

A notably high cost of living is likely the deterrent, as entrepreneurs can’t balance sky-high fixed expenses with an unreliable income stream. While the city’s projected job growth over the next 10 years is healthy, the local economy isn’t currently at its best. So far in 2017, the unemployment rate has been notably higher than the national average.

San Francisco

Rate of new entrepreneurs: 0.37 percent
Opportunity share of new entrepreneurs: 77.78 percent
Startup density: 86.5
Cost of living: 272.6
Projected job growth: 44.19 percent

Once a startup mecca, San Francisco is no longer a smart choice for entrepreneurs. Despite the city's high startup density, strong projected job growth and decent opportunity share of new entrepreneurs, the outsized cost of living makes it a deal breaker.

Not surprisingly, San Francisco’s cost of living is higher than any other city on the list. The median rent for a one-bedroom apartment in the city is $3,370, according to the May 2017 Zumper National Rent Report, making it hard to even survive paycheck to paycheck. Starting a small business often means entrepreneurs must get by on a limited budget, but that’s essentially impossible in this city.

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