How to Determine the Best City for Your Small Business

Despite recent economic disruptions, many small businesses are flourishing across the country – and not just in New York and San Francisco.

During the past two years, cultural, workplace, and market shifts have caused small business owners to re-evaluate their business strategies and models – including where and how they run their businesses.

For some small business owners, the shift to hybrid or remote work means renting office space in big cities is no longer a top priority. Other companies are crafting creative strategies and plans to entice employees back to the office, grasping an opportunity to build better, more affordable office spaces in smaller cities.

Whether you’re a small business owner looking to relocate or a startup seeking a growth-friendly city, here are four factors to consider before making a move.

1. Seek a Solid Quality of Life

The pandemic saw workers move away from big cities, and as the shift to remote work became more permanent, many people decided to stay in smaller towns with better housing prices.

But besides affordability, what do people want in a city? Many people prioritize both work and leisure to create a happier, more balanced life. Especially as workers increasingly focus on their well-being at and outside of work, they want to live in cities that offer a great quality of life, not just a swanky office environment. Space, safety, access to nature, and cultural activities can play key roles in determining that.

Selecting a city for your business that offers reasonably priced housing, a plethora of local events, cuisine, diversity, and activities will keep employees satisfied with their new home base. For example, Rich Brancaccio is the founder of Wake Forest, North Carolina-based Revibe Tech. He notes that the nearby city of Raleigh attracts entrepreneurs because it’s “fun [and] lighthearted.”

“They shut the city down the first Friday of every month to have street festivals, parades, and concerts, Brancaccio says. “It draws people in who like to celebrate other people, try new things, [and] are adventurous. That is the key."

Check out resources like Niche or Livability for insights on excellent places to live in the U.S.

2. Access Top-Tier Talent

Recruiting and hiring can be one of the biggest challenges for small business owners. According to a recent National Federation of Independent Businesses (NFIB) report, 94% of small businesses that were hiring in May found few or no qualified applicants for their open positions.

When starting a business, relocating, or expanding to a new location, it’s essential to identify cities with strong talent pipelines. These hurdles can be reduced by considering cities with substantial and highly educated talent pools coming from local academic institutions. While the move to a remote-first world has made location less important than before, companies choosing a hybrid work model may still want to consider the local talent pool when selecting a location. 

That said, employers can look beyond big cities like New York City, Boston, and Los Angeles. Taz Murray, co-founder of Utah-based food brand Trü Frü, notes that Salt Lake City is a talent hotbed because it’s close to so many colleges.

"Utah exports a lot of education," Murray says.

High-quality talent is a driving force for business development and economic growth. Resources like think tank Heartland Forward and the U.S. Bureau of Labor Statistics provide data on talent and employment trends across the country.

3. Collaborate with a Community

Collaboration can help you build your business better than doing it alone. Before small companies launch or move somewhere new, entrepreneurs should consider places with reputable business and investment communities – where other small businesses are already thriving – and where there are resources and organizations that offer support.

Other well-established businesses and founders can help form peer networks and provide access to funding that help entrepreneurs grow and expand their businesses. Cities with high concentrations of venture capital firms can also be worth considering.

“Part of the reason we moved our headquarters to Austin is that some of the top 10 venture capital firms and growth equity groups have moved there,” says Omair Tariq, CEO and co-founder of Cart.com. “The networking, culture, and community is just incredible.”

Choosing a city with credible peers can help you network, find mentorship, and boost your business further. Many cities have regional groups that help spur local economic growth and elevate businesses in specific regions. Check national organizations like the National Venture Capital Association (NVCA) for data and resources on various locations.

4. Contain Business Costs

Entrepreneurs could be in the city of their business dreams, but if overhead costs are overwhelming, they may not be able to afford much else, like investing in strategies to accelerate business growth.

Operating costs are one of the biggest factors in successfully getting and keeping a business up and running. Costs can include licensing fees, salaries, equipment, marketing, and office space.

Smaller cities can offer tremendous growth opportunities for tech startups and small businesses. For example, the average office rent in Pittsburgh, Pennsylvania is $23.45 per square foot per year – much lower than in major tech hubs like Silicon Valley, according to Technical.ly.

Still, businesses shouldn’t immediately flock to a trending city without doing more research. A recent report from real estate company Redfin noted that the rushes to certain cities, such as Phoenix, Arizona and Atlanta, Georgia, will diminish over time. It’s also worth noting that inflation isn’t equal across all 50 states: as people flocked to those seemingly more affordable cities, inflation there increased.

Visit local Chambers of Commerce websites to learn more about business costs and opportunities.

The Takeaway

Starting a new company or moving one to a new city is a very important decision that requires thought and research. When determining the right location, consider a city’s quality of life, access to talent, networking opportunities, and operational costs. Weighing these factors carefully can help you find the best fit. To learn more, read our guide to the top eight U.S. cities where entrepreneurs can thrive.

Photo: Getty Images