The Top 5 Cities in America for Small Business

When you run a small business, one of the most important factors is location.

Whether it’s a high traffic retail shop or a supply chain-dependent ecommerce company, where your business sits can be a huge advantage or a major disadvantage.

To help entrepreneurs and founders understand how their city stacks up, or to help them plan for their next opening, we dive deep into the stats and arguments for and against the top five cities in America for small businesses.

Atlanta, GA

Home to giants like Delta, Coca Cola, The Home Depot, and other Fortune 1000 businesses, Atlanta has a lot to offer smaller companies, too.

According to Select Georgia, Atlanta has added 57,000 new jobs in the last 11 years and ranks #2 for professional opportunities by WalletHub. That means Atlanta is a magnet for talent and growth with a booming economy and a 1.5% annual growth rate; even Elton John calls Atlanta home for part of the year.

Pros:

Thanks to ATL having the largest airport in America, getting around is easy, whether you’re shipping e-commerce orders or flying out to meet clients. This transportation hub is ideal for any small business.

Atlanta has invested heavily in becoming a business-friendly city, supporting innovation, small business centers, and active chambers of commerce. No wonder ATL rappers talk up the city’s cool factor.

Plus, Atlanta is diverse with a heavily international populace and vibrant economic landscape. It’s easy to see how a small business would thrive in a dynamic market with diverse customers, employees, vendors, and opportunities within reach.

Cons:

As the #1 moving destination in the US, according to Penske, both commercial and residential real estate is expensive; in fact, Atlanta has one of the most valuable housing markets in America, meaning living costs could rise even further, putting the squeeze on small biz budgets.

Despite the market size and growth, Atlanta’s strong economy may mean small businesses face an uncommon amount of competition and market saturation. A smaller market could offer a small business more chances to stand out than Atlanta does.

Houston, TX

With its historical connection to space exploration, it’s no surprise the city of Houston is an innovative, intelligent city with lots to offer a small business owner; 26 Fortune 500 companies call Houston home, so it’s clear the business climate is welcoming.

Plus, 2 out of every 5 small businesses are run by BIPOC owners and 1 out of every 4 are owned by women, meaning diversity thrives in Houston. Startups are winning, too, with more than $2B in VC funding reaching Houston startups in 2021 alone.

Pros:

A major transportation hub like Atlanta, Houston not only boasts a major airport, but port access on the Gulf of Mexico. Those who need stellar supply chains will love Houston’s accessibility.

Houston is a favorable city for small business taxes, plus a host of small business support and incentives that provide everything from small business training to 6-figure grants.

Despite having 2 million residents, Houston offers some of the lowest living costs of all major metro areas. That means you get access to a huge market without paying the costs of a large city.

Cons:

Thanks to the booming economy, unemployment in Houston is low. While this indicates a strong economy and lots of employed customers to frequent a small business, it also suggests hiring could be a challenge.

Houston’s economy is heavily dependent upon the energy sector, which is undergoing major changes and experiences volatility. Running a business in a city that is so reliant on a single industry could be risky.

Tampa, FL

Beyond the 246 sunny days per year, there’s a lot to like in Tampa, especially for entrepreneurs and small business founders.

In fact, WalletHub ranked Tampa the second best city in America to start a business, referencing Tampa’s competitive tax rate and high availability of investors. This growing Sunshine State city is on virtually every list of business-friendly locales.

Pros:

Tampa is one of the fastest growing major cities in one of the fastest growing states, according to the latest census data, so small businesses should find plenty of customers, employees, and partners.

With no personal income tax in Florida, plus Tampa’s own low tax rates and lenient regulations, business owners are likely to keep more of their money overall.

Cons:

Due to its proximity to the Gulf of Mexico, Tampa is a likely candidate for hurricanes and severe weather, which can interrupt, or stop altogether, small business operations. Thanks to major weather events, insurance is becoming increasingly expensive and potentially unsustainable statewide.

Despite its diversification of industries, Florida and the Tampa Bay area are reliant on tourism with more than $8B hitting the local economy via tourism. A drop in tourism could spell trouble for Tampa.

San Francisco, CA

San Francisco’s reputation as a hub for startups is well-established, however, many people may be shocked to see it on the list; after all, San Francisco is one of the most expensive cities in the world while occasionally generating some surprising crime headlines.

However, San Fran still makes the list, partially because it has more than 2x the VC funding amount of New York, the second highest city in America for VC funding. Businesses in San Fran had access to nearly $29B in venture capital funding in 2023, meaning capital is available for growing businesses.

You can’t find anything quite like it elsewhere.

Pros:

Home to world-renowned universities, VC funds, and world-leading brands (including Apple and Meta), San Francisco attracts some of the brightest people. So, whether you’re looking for investors, partners, vendors, or employees, you’re likely to be picking from the very best.

San Francisco seems determined to turn around its reputation when it comes to crime and urban blight, introducing initiatives like Vacant to Vibrant, a program meant to help business owners thrive. Plus, San Francisco offers access to incubators, accelerators, and city-run programs that help small businesses.

Cons:

It’s well-documented that it’s very difficult to open and run a small business in San Francisco, specifically due to red tape, city planning codes, and convoluted application processes. Operating in one of the most diverse, economically powerful cities in the world has its costs.

San Francisco’s competitiveness can be a hindrance, too. Small businesses need to compete with well-funded companies in a pricey, saturated market, competing for employees that command premium salaries and benefit packages.

New York, NY

In the city so nice they named it twice, small business owners find an environment that is both ripe with opportunities and filled with challenges. Still, there are plenty of reasons to consider NYC, which is why NYC currently has more small businesses than ever.‍

Across the five boroughs, the local economy thrives, thanks to 8 million residents, millions of tourists, and plenty of small business-focused city services. With each neighborhood offering its own distinct amenities, virtually any business can find a place to thrive, from Brighton Beach to SoHo.

Pros:

There’s money in NYC. Lots of it. Owning a small business in NYC means you’re in one of the economies in the world, plus local to billions in VC funding and millions in low-interest financing from the city.

Hiring and retaining employees is less of a problem when you’ve got the largest workforce in America to count on. With 4,000,000 available employees and stellar universities like Columbia and NYU nearby, you can build a team with diverse skills and abilities.

Cons:

New York City is ranked the third most expensive city in the world. While that means small businesses may have less price-sensitive customers and loads of cash circulating in the local economy, it also means paying more for rent, labor, taxes, and transportation. Initial startup costs can be eye-wateringly high with tighter margins overall.

NYC is still feeling the effects of the pandemic across employment, real estate, policy, and more. In a city that’s always changing anyways, NYC could throw unexpected curve balls at business owners as there is still significant change happening.

Make Your City Your Small Business’s Advantage

Because each of these cities offers unique benefits and challenges that could mean opportunity or disaster for your company, you’ll notice the list is not ranked.

However, if you’re trying to determine where to expand to next or how to leverage your city’s small business opportunities, LedgerWay can help.‍

‍Book a consultation and learn how a LedgerWay Virtual CFO can help you capitalize on your city’s advantages, from tax incentives to funding and much more.