What’s the Best City for Your Business? 12 Things to Consider

Looking to relocate your existing company or searching for the perfect place to start a business? Here are some factors to consider.

Small-business friendliness: How supportive of small business and entrepreneurship is the state and/or city you’re considering? Small-business friendliness can encompass everything from zoning laws and tax rates to economic development programs and incentives for businesses. Choosing a location where local government supports and encourages small business, not just with words but also with actions, will make your life a lot easier.

Small-business friendliness can be hard to define, so it’s best to go to the horse’s mouth. The 2014 Thumbtack.com Small Business Friendliness Survey asked small-business owners for their perceptions of the business environment in their communities, assessing factors including hiring, regulations, zoning, licensing and health insurance requirements. Utah, Idaho, Texas, Virginia and Louisiana ranked highest for overall friendliness to small businesses.

Tax rates: Research both business and personal tax rates when choosing a location. Many business owners prefer states with no personal income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming) or very low personal income tax (Tennessee and New Hampshire). For business tax information, check out the Tax Foundation’s annual State Business Tax Climate Index. In 2014 California, New Jersey and New York earned the dubious honor of the states with the worst tax climate for small business, while Wyoming, South Dakota and Nevada boasted the best tax climate.

Quality of life: Issues such as the cost of living, weather, crime rate, housing inventory and natural/cultural amenities factor into a locale’s quality of life. As long as you’re moving, why not move someplace that offers plenty of what you value, whether that’s year-round surfing or live theater? Better quality of life can also help you persuade employees to move with you.

• The One D Scorecard produced by Data Driven Detroit, a Michigan Nonprofit Association affiliate, is a ranking of the nation’s 54 biggest metro areas based on economic prosperity, schools, quality of life, ease of transportation and other factors. (It includes an interactive map you can find at OneDScorecard.DataDrivenDetroit.org.) Maybe you’ll be surprised to learn that Grand Rapids/Muskegon/Holland, Mich. ranks tops for quality of life, while the economy is best in Seattle/Tacoma/Olympia, Wash.

• You’ll want to move to the heartland after perusing a survey of the 100 cities with the best quality of life that was conducted by the online financial guidebook Nerdwallet.com. Madison, Wis.; Lincoln, Neb.; and Minneapolis/St. Paul are rated the best places to live.

• NerdWallet’s online cost of living calculator can help you assess how far your and your employees’ money will go in different cities.

Wage and employment laws: Some states have higher minimum wage rates superseding the federal minimum wage of $7.25 per hour. States’ employment laws and regulations regarding workers’ compensation insurance also vary. You can learn more about wage and hour laws, unionization, workers’ compensation requirements, and more from the Small Business Administration at SBA.gov.

Cost and availability of labor: Be sure to research average wages for the types of workers you need to hire. Tools such as Salary.com or Glassdoor.com let you look up average wages based on job titles, industries and locations.

Also be sure the area you’re considering has a good supply of suitable workers, especially if you’ll need to hire people with specialized skills such as IT or medical coding training, or workers with college or advanced degrees. The Bureau of Labor Statistics (BLS.gov) has demographic data on labor force characteristics nationwide.

Support systems: Choosing a location with plenty of business support services, such as a Small Business Development Center, SBA District Office or SCORE (formerly called Service Corps of Retired Executives) chapter ensures you can get the help you need in growing your company. Also look for a location where you can find other business owners to network with—whether that’s high-tech startups, female business owners or minority entrepreneurs.

CIO.com, the IT industry news source, names the Best Cities for Tech Startups. San Francisco/Silicon Valley, New York City and San Jose, Calif., are at the top, but there are also some surprises, such as Pittsburgh.

• Personal finance social network WalletHub.com ranks the Best Cities for Hispanic Entrepreneurs. The site credits Florida with the highest rate of Hispanic entrepreneurship, and its cities of Pembroke Pines and Orlando boast the most business-friendly climates for Hispanic entrepreneurs. However, Boise, Idaho, comes in third and Salt Lake City is fourth.

• NerdWallet’s list of the Top 10 Cities for Female Entrepreneurs ranks D.C., San Francisco and Seattle tops.

• The personal finance news and trends site CreditDonkey.com surveyed for the Best Cities for Young Entrepreneurs, and names Houston; Austin, Texas; and Raleigh, N.C; the best startup spots, based on factors such as the percentage of population aged 18 to 44, educational attainment and businesses started versus closed.

Startup assistance: If you’re launching a startup, you may want to investigate extra help to get off the ground, such as accelerators or incubators. These programs typically provide guidance, space and business services to startups, often in a particular industry such as technology or retail.

• Find lists of incubators at the National Business Incubation Association website, NBIA.org.

• A study of the top business accelerators ranked YCombinator in Mountain View, Calif.; Techstars in Boulder, Colo.; and AngelPad in San Francisco the highest, but Launchpad LA in Los Angeles is close behind.

Growth potential: Is the location you’re considering on the way up, holding steady or undergoing a decline? Stay away from cities that are on the downswing. On the other hand, cities that are starting to undergo a renaissance or “gentrifying” can be great places to find cheap rent and special business assistance—if you’re willing to deal with challenges such as higher crime rates, difficulty attracting customers and fewer skilled employees.

• Information about federal Empowerment Zones, Renewal Communities, Enterprise Communities and other economic development programs can be found at 
HUD.gov. Or contact a city’s economic development division.

• Look up demographic, city and neighborhood data at the Census Bureau’s American FactFinder website, FactFinder2.census.gov.

Cost of office, retail or warehouse space: Don’t get an unpleasant surprise when you move—scope out property options ahead of time. Searching sites such as Realtor.com or LoopNet.com can give you an idea of the average cost for the type of commercial space you’ll need.

Transportation: Depending on your industry, you may need proximity to shipping hubs and major interstates in order to deliver or receive products affordably; major highways so employees and customers can reach your location easily; or public transportation so your employees can get to work. Looking for foot traffic? Walkscore.com rates the walkability and public transportation in different cities and neighborhoods. Not surprisingly, New York City heads the list.

Financing: If you’re hoping to land venture capital, locating in a region with a wealth of these investors can help. The Martin Prosperity Institute reports that high-tech startup activity—and venture investment—have begun to shift from Silicon Valley to urban centers and mixed-use, walkable suburbs that are close to cities with diverse populations. Ranked top for venture capital financing: the Bay Area, the Boston-New York-Washington corridor, New York City and college towns such as Austin; the Raleigh-Cary metro area in North Carolina; Boulder; Ann Arbor, Mich.; and Lawrence, Kan.

Customer base: Look for a location with a big and growing supply of the types of customers you’re targeting.

What Matters Most?

There’s no “one size fits all” way to choose the best location for your business, nor is there one perfect region that combines all the positive features listed above and none of the negatives. Areas with lots of educated employees and business support are likely to have higher tax rates and costs of living, while inexpensive areas may have fewer qualified employees and business services.

Which location is right for your business will depend on what factors from the list above are most important to you. To assess your preferences, make a list of these factors in order of importance:

Essential: What can’t you do without? Perhaps your business absolutely must be near a major shipping port, or you need a reliable source of freshly minted IT graduates. Knowing your “must list” will narrow your choices considerably.

Desirable: List factors that are less essential and then figure out if there’s a way to work around their absence. For instance, maybe you’d like to launch somewhere with no personal income taxes, but you can’t handle Florida’s heat or Alaska’s cold. Talk to your accountant about whether modifying your business’s legal structure could lessen the tax bite.

Nice to have: Finally, list the little extras you could do without if you have to. But be honest with yourself: If Omaha has almost everything on your wish list but you know you’ll be miserable there because you live to surf, don’t try to force it.

Always do a reality check by actually visiting the region(s) you’re considering. A place that sounds great on paper may not pan out in person. The time to find that out is before you move, not after!

By following these steps and carefully weighing both your options and your gut feeling, you’ll find the perfect place for your small business to thrive.

Find the Perfect Location for Your Small Business

Congratulations: You’ve got an idea for a new business that will kill it in your town.

Now it’s time to think about the address where you will set up shop. It’s time to think about the building itself. Location, location, location.

So what do you need to keep in mind? Research factors that relate to your office, retail or restaurant space, including:

Traffic patterns: If your business relies on customers coming to your storefront, take some time to observe the traffic patterns near the location you’re considering. Is there a lot of traffic flow during times you’ll be open? Is it easy to get into and out of the parking lot? Is there plenty of adequate parking? Something as simple as the absence of a left-turn lane can deter customers from coming to your shop or restaurant.

• Neighbors: Pay careful attention to the types of businesses located nearby. Competitive neighbors can help or hurt your business. For instance, you wouldn’t want to open an independent bookstore next to a Barnes & Noble. On the other hand, if you open a restaurant in a shopping center that already has other restaurants, you’ll probably attract some of their customers as long as you serve a different cuisine.

• Total costs: You need to know what is—and isn’t—included in your rent. Whether you pay or the landlord pays for utilities, security services or maintenance of common areas makes a big difference. Also take into account any potential renovation costs.

To make sure you’re choosing wisely, use a commercial realtor experienced in the area and in your industry. He or she will know the right questions to ask the landlord about the property, which is especially important if you’re moving to an unfamiliar city or state. Also, you should have an attorney experienced in commercial leases look over the lease before you sign on the dotted line.

Starting a business? Make sure you know the 5 ingredients for startup success. 

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Rieva Lesonsky

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