Are some cities better for would-be business owners than others? We crunched the numbers and found the best 25 U.S. cities for new businesses in in 2022.
With remote working becoming permanent for many white-collar employees, a lot of people are looking at a map of the U.S. and making new choices about where they want to live. But what about people with entrepreneurial aspirations — could there be a reason to make a move in 2022 if you’re hoping to start your own business? To find out, we looked at available data from the Census Bureau, the Bureau of Labor Statistics, and other sources to determine the best cities for new business owners.
We chose cities where both the economy of the city itself was friendly to businesses — for example, a low median income, so that your wage overhead would be lower, but also a lower cost of living, so that both your employees and you would still be able to have a good quality of life — and where tax codes for businesses were friendly, too. We also wanted cities where there was an entrepreneurial culture, with a high number of new business applications, a high percentage of self-employed people, and a high survival rate for businesses. We also looked at workforce size, education of workforce, average workweek length, and unemployment rate.
Scottsdale, Arizona, tops our list of the top cities to start a business in part due to its attractive workforce. There are 141,869 workers in Scottsdale, most of whom have bachelor’s degrees or greater (51%). The average unemployment rate is 4.8%. Median annual income is $41,300, and cost of living is 1.3% below average. The city ranks well for tax friendliness, and the three-year business survival rate is right in line with the average. Add in that Scottsdale sees three times as many business applications (66,607) as the average city and has a higher than average percentage self-employed people (6.5%), and you’ll see why it tops our list of the best cities for starting a business in 2022.
A low unemployment rate (3.5%), large labor force (396,278 people), and above average percentage of the population with bachelor's degrees (30.6%) combine with a low cost of living (5.6% below average) and low median annual income at $40,650 (which is good for wage-payers). This all makes Nashville, Tennessee, a great place to hire good workers who can have a good quality of life without busting your bottom line. An above-average three-year business survival rate of 71.6% and a healthy community of other self-employed people (6.2%) round out this business-founder’s dream.
Charlotte, North Carolina has over half a million workers, nearly a third of whom have bachelor’s degrees. Cost of living is low (5.6% below average) and annual median income is also below the average at $41,410. Business survival rates are above average, and Charlotte is very tax friendly with a low score of 6 out of 50. As a business owner, you’ll be in good company, with self-employment at 4.1%, just above the average, and business applications at 27,064, exceeding the average by nearly 4,000. Plus 70.6% of businesses last three years.
With a low unemployment rate (3.4%), a large labor force (320,515 people), and a well-educated one (35.2% have bachelor’s degrees), Louisville, Kentucky, is a great place to start a business for the potential employees alone. Plus the city is super business friendly for its low median income, ($39,330), low cost of living (10.5% below average), and tax friendliness (ranking 19 overall, with 1 being the best). As a business owner, you’ll be in good company — 5.1% of people are self-employed. And the odds are good for business survival: 68.8% of businesses last at least three years.
Atlanta has a healthy number of business applications each year (51,935 in 2020) and boasts a 5% self-employment rate and 66.6% three-year business survival rate, making it a great place to find like-minded entrepreneurs. With a workforce of 276,677 people — 40% with bachelor's degrees — you’ll find a large pool to choose employees from. Cost of living is 2.1% below average, and tax-friendliness is also fairly good, with a ranking of 27.
With a super low unemployment rate (2.6%), a low cost of living (10.2% below average), a median income below the average ($39,080), and a good rate of tax-friendliness (ranking 16), the stars are aligned in Oklahoma City for new business owners. The three-year business survival rate is average at 69.2%, and 4.6% of people are self-employed.
An above-average number of businesses survive three years in Austin, Texas, which is just one of the data points that makes it number seven on our list of best places to start a business. Also in entrepreneurs’ favor are the low unemployment rate (3.8%), the large labor force (nearly 598,430 people), the large percentage of the population with bachelor's degrees (39.3%), and a super-high percentage of other self-employed people (6.8%).
Orlando, Florida, comes in at number eight on our list of the best cities to start a business, in part because it’s in the tax-friendliest state in the country (ranking number one), meaning you’ll keep more of your hard-earned dollars than in many of the other cities in our list. Also good for business: the below-average median income ($36,580) and relatively low cost of living (1% below average).
The second city in North Carolina on our list, Raleigh comes in at number nine. With a labor force 267,593 people strong, 34.3% of of whom have bachelor’s degrees, you’ll have lots of great candidates for your business. You’ll have good company, too: The self-employed make up 4.4% of the workforce, and 70.6% of businesses survive three years, both above average. And of course, Raleigh is tax-friendly to businesses, with a rank of six.
Coming in at number 10 on our list of the best cities to start a business, Cary, North Carolina, offers new business owners a highly educated workforce (46.5% have bachelor’s degrees), a healthy economy (unemployment is at just 3.7%), and a sizable cohort of other entrepreneurs, with 4.6% of people self-employed, 18,600 new business applications filed in 2020, and 70.6% of business surviving three years.
Boise City, Idaho, is number 11 on our list of best cities to start a business. This entrepreneurial city boasts a 5.2% self-employment rate and a 71.4% three-year business survival rate. Also good for business owners: a low annual median income ($38,080), a low cost of living (6.4% below average) and relatively good tax-friendliness (the city has a ranking of 18).
A super low unemployment rate (2.9%) and a super low cost of living (11.4% below average) help make Tulsa, Oklahoma, a great place to start a business. With a workforce of 205,089 people and a self-employed percentage of 4.2%, you’ll not only find good employees, but good peers, too.
Sandy Springs, Georgia, comes in at 13 on our list of the best cities to start a business, in part because of its high rate of self employment (5.5% versus the average of 4%). Other leading indicators of its business friendliness: the high percentage of the population with bachelor’s degrees (52.7%), the below-average median income ($42,220), and low cost of living (2.1% below average).
In Sioux Falls, South Dakota, business owners will enjoy a low unemployment rate (2.4%), a low cost of living (8.8% below average), and a low median income ($39,050). Some 71.3% of businesses make it three years, and 4.5% of workers are self employed.
St, Petersburg, Florida, is 15 on our list, partly because of its extreme tax-friendliness to business owners; like other Florida cities, it ranks number one. You’ll also enjoy a sizable workforce (148,886 people), many of them educated (30.3% have bachelors degrees). Median income is below average at $38,930, and cost of living is low, too (1.2% below average).
Broken Arrow, Oklahoma, comes in at 16 on our list of best cities for new business owners, in part because of its high rate of self-employed workers (5.2%). Also in its favor are a low median income ($38,210) and very low cost of living (11.4% below average).
Tampa, Florida, hits our list of best cities for new businesses at number 17. Business owners will benefit from very low taxes, a low median income ($38,930), and a low cost of living (1.2% below average). The economy is good, with unemployment at 4.5%, and a sizable workforce of 208,525 people.
Also on our list of top cities for business owners is Miami. Though the cost of living is high (11.7% above average) the tax-friendliness of Florida — it ranks number one in the country for businesses — can make up for it, perhaps best displayed by the good rate of business survival (69.7) and self employment (5.4%).
Roswell, Georgia, is 19 on our list of best cities to open a business in the U.S., in part for its low cost of living (2.1% below average) and low median income ($42,220). Roswell has a very high rate of other self-employed people (6.5%) and also a high percentage of workers with bachelor's degrees (40.2%).
Fort Lauderdale, Florida, comes in at number 20 on our list of best cities for new businesses. In addition to Florida’s business-friendly tax rates, you’ll also be able to benefit from a low median income ($38,690). Some 5% of workers are also self-employed, and Fort Lauderdale saw 69,815 business applications in 2020. The three-year business survival rate is 68.7%.
With a low unemployment rate (3.7%) and low cost of living (8.9% below the average), the economy in Carmel, Indiana, is great for new business owners. The city enjoys a higher-than-average percentage of successful businesses after three years (70.8%).
Plano, Texas, is 22 on our list of best cities for new businesses. The unemployment rate is below average (4.7%) and annual income is just below average, too ($42,710). Some 5.1% of workers are self-employed, so you’ll be in good company, and at 70.7%, the three-year business survival rate is above average.
Coming in at 23 on our list of the best cities to start a business, Indianapolis offers a below-average median income ($40,910) and a cost of living nearly 9% lower than the average. Business survival rate over three years is 70.8%, above average.
If downtown Miami isn’t your bag, you’re in luck, because Miami Beach, Florida, is also on our list of the best cities to start a business. You’d be in great company as a business owner in this beach town: 8.1% of people are self employed, and there were 106,810 new business applications in 2020. Best of all, even with the high numbers of new business being created, the three-year survival rate remains high at 68.7%.
If the Midwest is calling, Edmond, Oklahoma, is a great place to land to start your new business. The economy is thriving with a low unemployment rate (2.6%) and a cost of living that is 10.2% below average. Some 6.8% of people are self employed, and the three-year business survival rate is 69.2%.
|Rank||City||Unemployment rate||Labor force size||% of pop w bachelors degree||Avg length of work week (hours)||Annual median income||Cost of living||Cost of living vs. national average||Business applications||Business survival rate||Tax friendliness rank (out of 50)||Self employment|
|3||Charlotte, North Carolina||4.3%||507,586||30.6%||39.6||$41,410||94.4||-5.6||27,064||70.6%||6||4.1%|
|6||Oklahoma City, Oklahoma||2.6%||336,220||19.7%||39.8||$39,080||89.8||-10.2||12,724||69.2%||16||4.6%|
|9||Raleigh, North Carolina||3.7%||267,593||34.3%||39.3||$43,500||96.1||-3.9||18,600||70.6%||6||4.4%|
|10||Cary, North Carolina||3.7%||92,926||46.5%||39.3||$43,500||96.1||-3.9||18,600||70.6%||6||4.7%|
|11||Boise City, Idaho||2.7%||131,547||28.4%||38.2||$38,080||93.6||-6.4||7,326||71.4%||18||5.2%|
|13||Sandy Springs, Georgia||3.1%||68,056||52.7%||40.3||$42,220||97.9||-2.1||51,935||66.6%||27||5.5%|
|14||Sioux Falls, South Dakota||2.4%||105,558||23.0%||40.3||$39,050||91.2||-8.8||2,137||71.3%||10||4.5%|
|15||St. Petersburg, Florida||4.5%||148,086||30.3%||39.5||$38,930||98.8||-1.2||19,133||68.7%||1||4.2%|
|16||Broken Arrow, Oklahoma||2.9%||60,581||22.1%||39.8||$38,210||88.6||-11.4||8,982||69.2%||16||5.2%|
|20||Fort Lauderdale, Florida||5.6%||102,402||29.5%||40||$38,690||111.7||11.7||69,815||68.7%||1||5.0%|
|24||Miami Beach, Florida||5.6%||50,923||37.6%||40||$38,690||111.7||11.7||106,810||68.7%||1||8.1%|
Expert advice on jumping in to the real estate market as an investor, from Policygenius experts and interviews:
1. Focus on your “why.” Lisa Barnett, president and founder of baby food startup Little Spoon, says that “when you are clear about why you do what you do, the hard tradeoffs, problems and inevitable setbacks are easier to digest.”
2. Charge for your time. “[One] hard thing about starting a business is knowing how to value your time and charge accordingly,” says certified professional organizer and founder of the Time Butler, Lisa Mark. “So many new business owners don’t do that and then realize that there is a whole lot of unbilled background work that goes into running a business that they were unaware of when they started, and that eats into their profits and time spent.”
3. Don’t get stuck in the weeds. Jason Feifer, editor in chief of Entrepreneur Magazine, says the mistake he sees most often from new or would-be business owners is analysis paralysis. “People will try to come up with the perfect path before they start going down the path,” he says. But his experience interviewing successful business owners has taught him that this is a losing strategy. “What I try and reinforce over and over again when people put themselves in this situation is that you cannot know the path before you’re on the path,” says Feifer.
4. Try a side-hustle before you go all in. “Give yourself permission to experiment,” says Nick Loper, founder of Side Hustle nation. “Test out the side hustle ideas that sound intriguing to you. Find out what you like and don’t like. As long as you keep your expenses low, positioning a side hustle as an experiment in your head gives you permission to fail and keeps the thrill of discovery alive.
5. Don’t forget about insurance. Even if you’re starting your business with a team of one (you) from an office you already have (your house), you may need home-based business insurance, says Policygenius homeowners insurance expert Pat Howard. A home-based business insurance policy will cover your work equipment and provide liability coverage for your business, neither of which are fully covered by your homeowners insurance or renters insurance policy.
To determine the best cities in the U.S. to start a business in 2022, we looked at 417 of the largest cities in the country and compared them across 10 data points:
Unemployment rate: The unemployment rate in August 2021. Data comes from the Bureau of Labor Statistics (BLS) and is at the metropolitan statistical area (MSA) level.
Labor force size: The number of people in the city who are 16 or older and in the labor force. Data is for 2019 and comes from the Census Bureau.
Percentage of the population with a bachelor’s degree: The proportion of the city’s population that has a bachelor’s degree or a higher level of education. Data is for 2019 and comes from the Census Bureau.
Length of the average work week: The average number of hours worked in the city, based on 2019 data from the Census Bureau.
Median annual income: The median annual income in 2020. Data comes from the BLS and is at the MSA level.
Cost of living: The cost of living in an area (including the prices of all goods and rents) compared to the national average in 2019. Data is from the Bureau of Economic Analysis and is at the MSA level.
Percentage of the population that’s self-employed: The proportion of the city’s population that earned any self-employment income in 2019, according to the Census Bureau.
Annual business applications: The number of businesses in 2020 that have applied for an employer identification number (EIN) for their taxes. Data from the Census Bureau and is at the county level.
Business survival rate: The percentage of businesses started in 2019 that have remained in business through March 2021. Data comes from the BLS and is at the state level.
Tax friendliness: Our tax friendliness score is based on the 2021 State Business Tax Climate Index, from the Tax Foundation, which measures the general tax friendliness for businesses in a state by considering five types of taxes: corporate, individual income, sales, property, and unemployment insurance.
We ranked cities based on their scores for each factor, weighing each factor equally. Top rankings are based on a low unemployment rate (generally a positive sign for a city’s economy); a large labor force (more potential employees for a new business); a large percentage of the population having at least bachelor’s degrees (for greater access to a highly educated workforce); a longer work week (to get more work from business employees); lower annual incomes (to minimize how much a business must pay employees); a low cost of living (so the city is more livable for a new business owner); a higher percentage of self-employed people in a city (for the sake of a larger community of entrepreneurial individuals); a high number of business applications (to show that people are actively trying to start businesses in the city); a high business survival rate over the past three years (so you can know that businesses are succeeding in an area); and great tax friendliness (so you can take home as much of your company’s income as possible).
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