Entrepreneurs

Best and worst small cities to start a business

Share

The best city for business is...

A worker during the manufacturing process of coffee grinders at the MPE Corporation facility in Chicago, Illinois.
Tim Boyle | Bloomberg | Getty Images

Owning your own business can be tough no matter where you live, but choosing an entrepreneur-friendly city can make a big difference.

However, big cities might not always be the best option for entrepreneurs, according to WalletHub.

"Of course, every small city offers unique advantages and disadvantages to prospective ventures," the company said in study it released on Monday. "Lower overhead costs, stronger relationships with customers and the potential to become a big fish in a little pond are among the benefits."

The company compared more than 1,200 small cities with a population size between 25,000 and 100,000 and ranked them based on 15 metrics, including business costs, access to resources and the length of the average work week.

Read on for the 5 best and worst U.S. cities in which to start a small business.

— By CNBC's Sarah Whitten
First published 19 April 2016

Best: No. 5: La Vergne, TN

Source: This Is LaVergne | Facebook

In the heart of Tennessee, the city of La Vergne has about 34,000 residents. Despite its small size, the city had the sixth-highest business environment ranking, according to Wallethub.

La Vergne is home to several industrial, distribution and warehousing facilities including,Bridgestone North America, Venture Express, Hennessy Industries, Ajax Turner and Saks Fifth Avenue, among others, according to the city.

Top 3 strengths
Average work week: 40 hrs.
Average revenue per business: $34 million
Median annual income: $53,600

Biggest weakness
Low employee availability

No. 4: Jefferson City, MO

Source: Downtown Jefferson City, Missouri

The capital of Missouri, Jefferson City, has about 43,000 residents and is the 15th-largest city in the state. The city is also the fourth best in which to start a small business.

Top 3 strengths
Average work week: 39 hrs.
Average revenue per business: $6.1 million
Median annual income: $47,900

Biggest weakness
Negative average growth in number of small businesses

No. 3: Brighton, NY

Source: Town of Brighton, New York

The city of Brighton in New York is home to almost 37,000 residents and clinched the No. 3 spot in Wallethub's best places to start a business.

Brighton has one of the shortest work weeks — 38 hours — and one of the highest rates of residents with at least a bachelor's degree.

Top 3 strengths
Average work week: 38 hrs.
Average growth in number of small businesses: 2.9 percent
Median annual income: $61,891

Biggest weakness
Low number of start-ups

No. 2: North Chicago, IL

Source: North Chicago | Facebook

North Chicago in Illinois may have one of the longest average work weeks when compared to other cities, but it also has one of the highest averages for revenue per business.

The city struggles with small business growth, having seen a more than 2 percent decrease in the number of small businesses, according to Wallethub.

Top 3 strengths
Average work week: 47 hrs.
Average revenue per business: $66 million
Median annual income: $41,800

Biggest weakness
Expensive office spaces

No. 1: Holland, MI

Source: Michigan Municipal League | Flickr

With a population of 32,000, Holland, Michigan is home to two airports, six colleges and a wide variety of other industries that contribute to the city's economy.

Holland's businesses see an average growth of 43 percent, according to Wallethub, garnering an average of $8.5 million per business. The city has one of the lowest average work weeks — 35 hours — and has a high prevalence of investors.

Top 3 strengths
Average work week: 35 hrs.
Average revenue per business: $8.5 million
Median annual income: $44,619

Biggest weakness
Only 30 percent of residents have at least a bachelor's degree

Worst: No. 5: Seaside, CA

Source: Ken Lund | Flickr

Perhaps the most striking connection between the lowest scoring cities is their location. The bottom 24 cities noted in Wallethub's comprehensive list are all located in California.

"Many small cities in California are still struggling from an economic stand point and have not fully recovered from the recession," Jill Gonzalez, a WalletHub analyst, told CNBC. "While some northern cities are still recruiting top talent, many southern California cities are not as fortunate in the startup department."

Seaside, California may have a short work week — 36 hours — but the city struggles with small business growth, having seen a more than 5.7 percent decrease in the number of small businesses, according to Wallethub.

Top 3 weaknesses
Low office affordability
Negative growth in number of small businesses
Low financing access

Biggest strength
Median annual income: $52,500

No. 4: Pacifica, CA

Amit Basu | Getty Images

While 40 percent of Pacifica, California's population has a bachelor's degree or higher, the city struggles to grow its number of small businesses and the revenues of its existing businesses.

The city does, however, have a high median annual income — around $96,000 — and has a wide variety of industries contributing to its economy.

Top 3 weaknesses
Average revenue per business: $850,000
Low office space availability
Poor growth in average business revenues

Biggest strength
Median annual income: $96,000

No. 3: Castro Valley, CA

Source: Mark Bult | Flickr

The city of Castro Valley in California has about 61,000 residents and is located just 30 miles outside of San Francisco.

The median annual income of its citizens is around $83,000; however, the city has seen negative growth in the number of it small businesses and has limited financing access for entrepreneurs.

Top 3 weaknesses
Low office space availability
Poor growth in number of small businesses
Average revenue per business: $1.2 million

Biggest strength
High number of investors

No. 2: Eastvale, CA

Source: Ken Lund | Flickr

Eastvale, California has similiar struggles to Castro Valley and Seaside in that it has seen negative growth in small businesses and has limited financing for entrepreneurs.

The city also has a high median annual income — $109,000 — and a short work week.

Top 3 weaknesses
Limited financial accessibility
Low number of investors
High cost of living

Biggest strength
Median annual income: $109,000

No. 1: Suisun City, CA

Source: LPS.1 | Wikipedia Commons

Suisun City has a population of almost 29,000 and is nestled between San Francisco and Sacramento.

The city struggles with small business growth, having seen a more than 7.8 percent decrease in the number of small businesses, according to WalletHub.

Suisun City has also seen negative growth in average business revenues, down a whopping 68 percent. The average business garners around $663,000.

Representatives for Suisun City did not immediately respond to CNBC's request for comment.

Top 3 weaknesses
Limited office space availability
Negative business revenue growth
Low number of start-ups

Biggest strength
Median annual income: $71,000