4 Criteria for Choosing the Right Location to Expand Your Startup

The latest study of 2,000 office workers by Gensler Research Institute in 2022, shows companies and employees alike are taking a growing interest in returning to the office. According to 2023 survey of 1,000 business owners by Resume Builder, 90% of companies will require employees to follow a hybrid model – or be in the office at least once a week. Luckily, findings from McKinsey & Company American Opportunity Survey of over 25,000 adults in 2022 show that 87% of Americans want a hybrid work environment.

For startups in particular, the ability to bring employees together in-person to collaborate, strengthen relationships and nurture culture can be helpful for growth. In fact, according to the 2023 Market Analysis Perspective report by IDC,  85% of business owners agree that a positive employee experience and increased employee engagement can result in better customer experiences and more revenue.

Startups that formed during COVID may never have had to think about where to 'open up shop' -- they were remote by default. But for those interested in embracing the benefits of hybrid work, identifying where the best place to open becomes part of strategic decision-making.

Whether you are looking to expand your startup to a new city or seeking a growth-friendly city to plant roots, here are four questions to consider when choosing a location for your business. 

1. Does it offer a high quality of life? 

Quality of life is a subjective, non-financial component associated with job and life satisfaction. Space, safety, affordability, and access to activities can be key factors for potential and existing talent — especially when employees are choosing work opportunities based on well-being related factors. According to a 2022 Gallup Workplace study of 13,000 U.S employees, over 61% of employees say greater work-life balance and better personal wellbeing as top considerations when deciding to accept a job offer.

Entrepreneurs like Rich Brancaccio, founder of Revibe Tech, chose his headquarters’ location to provide his employees higher quality of life:

“Raleigh is a fun, lighthearted city. For example, they shut the city down the first Friday of every month to have street festivals, parades, and concerts. It draws people in who like to celebrate other people, who like to try new things, who are adventurous. That is the key.” 

Easy access to entertainment, diverse culture and reasonably priced housing may help increase employee satisfaction at work. Resources like Niche or Livability can be good tools to provide insights on the best places to live in the U.S. 

2. Does it have a rich talent pipeline?

As the past few years have shown, talent acquisition can be a big pain point for businesses. In NFIB’s small business jobs report from March 2023, 43% of small businesses owners reported few or no qualified applicants for the positions they were trying to fill. Cities that offer a strong talent pipeline through local universities or established tech hubs can be strategic locations for startups.

Part of the reason we moved our headquarters to Austin is that some of the top 10 venture capital firms and growth equity groups moved there…the networking, culture, and community there is just incredible.

—Omair Tariq, CEO and co-founder, Cart.com

Access to a substantial and highly skilled talent pool may reduce common hiring hurdles. Taz Murray, co-founder of Tru Fru, explains why choosing Salt Lake City provided a steady stream for talent for his business:

"We’ve got a pretty good group of colleges around. You’ve got the university here in Salt Lake [City], UVU in Provo, Utah State in Logan, Weber State, and local community colleges all within about 50, 60 miles. So, there is a lot of talent to choose from.”

A skilled workforce can be a valuable asset for a business’s development and growth. Resources like “Changing the Map of Talent in the U.S.” or the U.S. Bureau of Labor Statistics can provide more insights about talent and employment trends across the country. 

3. Does it have a strong startup community?

Cities with reputable business and investment communities may provide helpful resources for startups. High concentrations of venture capital groups tend to have strong entrepreneurial networks and access to new funding opportunities. Omair Tariq, CEO and co-founder of Cart.com, says, “Part of the reason we moved our headquarters to Austin is that some of the top 10 venture capital firms and growth equity groups moved there…the networking, culture, and community there is just incredible.”  

Nonprofit organizations across the country have missions to spur growth and elevate businesses in local communities or regional areas. National organizations, like NVCA and NAIC, offer resources and data on investment and venture capital groups in your area of interest. Consider researching local groups that can help build your network through mentorship or community resources.

4. Does it offer low operational costs or other business advantages?

Operating costs can be a hurdle for some startups, especially when facing economic obstacles like inflation and high interest rates. Operating costs like licensing fees, employee salaries, office equipment, office space, and marketing efforts are considerations when choosing a location for expansion. Cities like Pittsburgh offer great opportunities for startups to scale because basic operating expenses are relatively low. For example, 2021 data from the Pittsburgh Regional Alliance shows the average office rent in Pittsburgh is less than $25.98 per square foot, nearly 30% below the national average.

If overhead costs are overwhelming and funding is difficult to find, entrepreneurs may not be able to afford critical investments that can help accelerate growth long-term. Local chambers of commerce are great resources to learn more about business costs and opportunities in cities that you’re considering for your company.

The Takeaway 

Expanding your business or investing in office space is a significant investment decision for many businesses. When determining the right location, consider cities that offer high quality of life, robust talent pipelines, supportive investment communities, and low operational costs. Weighing these factors carefully may help you choose the best location to expand your business. 

Photo: Getty Images