Best and Worst Small U.S. Cities to Start a Small Business Revealed

Looking to start a small business? Here are some locations you should strongly consider and some you might want to leave alone.

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No doubt, 2020 was a rough year for most small businesses. According to WalletHub, 66% of small business owners report 2020 was their worst year ever. Half say it will take over 1 year to fully recover from the effects of the pandemic.

Fortunately, most custom integration companies were spared the same downturn. But have you ever thought of picking up your custom installation business out of the big city and starting fresh in a new, smaller location? But where would you go, especially in this post-COVID-19 world?

A new study by WalletHub analyzed more than 1,300 small U.S. cities using 20 different criteria, including the extent of their COVID-19 problem, to determine the best and worst cities in the U.S. to start a new business right now. According to the study, St. George, Utah, is the best U.S. metropolitan area with a population under 100,000 in the nation to start a small business. The worst small city is deemed to be Westfield, N.J., a suburb of Newark, N.J.

St. George was one of several Utah cities near the top of the list. In fact, six of the top nine best cities for small businesses are in the Beehive State. Here is the top 10:

  1. St. George, Utah
  2. Cedar City, Utah
  3. Williston, N.D.
  4. Washington, Utah
  5. Logan, Utah
  6. Aberdeen, S.D.
  7. Midvale, Utah
  8. Fort Myers, Fla.
  9. Clearfield, Utah
  10. Bozeman, Mont.

On the flip side, New Jersey dominates the list as the worst state to start a business, with six of eight worst cities on the list. The 10 worst small cities in the U.S. to start a small business are:

  1. Westfield, N.J
  2. Ridgewood, N.J
  3. Hoboken, N.J.
  4. Trumbull, Conn.
  5. Atlantic City, N.J.
  6. Olney, Md.
  7. Clifton, N.J.
  8. West New York, N.J.
  9. Potomac, Md.
  10. Milton, Mass.

In determining its rankings, the study looked at the following in 1,337 small U.S. cities:

  • Average Daily COVID-19 Deaths in the Past Week per Capita
  • Average Daily COVID-19 Cases in the Past Week per Capita
  • Average Length of Work Week (in Hours)
  • Average Commute Time
  • Average Growth in Number of Small Businesses
  • Startups per Capita
  • Average Revenue per Business
  • Average Growth of Business Revenues
  • Industry Variety
  • Financing Accessibility (based on total annual value of small-business loans / total number of small businesses)
  • Investor Access
  • Human-Resource Availability (calculated by subtracting the “unemployment rate” from the “number of job openings per number of population in labor force”)
  • Higher-Education Assets
  • Workforce Educational Attainment (based on the percentage of the population aged 25 and older with at least a bachelor’s degree)
  • Working-Age Population Growth (ages 16 to 64)
  • Job Growth (2019 vs. 2015)
  • Office-Space Affordability (per-square-foot cost of commercial office space)
  • Labor Costs (median annual income)
  • Corporate Taxes
  • Cost of Living

Small Business Owners Are Fed Up

A separate WalletHub study reveals that small business owners are facing difficult times right now post pandemic. WalletHub reports that 50 million small business owners say it will take more than a year for their business to return to pre-COVID levels. Two thirds of small business owners say that 2020 was their most difficult year in business.
Meanwhile, business owners are growing wearing of the COVID-19 limitations. Last year, 85% of small business owners believed that minimizing pandemic deaths was more important than re-opening the economy. Today, only 56% of small business owners still believe that.

According to Rikki Abzug, professor and convener of management, Anisfield School of Business, Ramapo College, the change in attitude among small business owners is not unexpected and should not be viewed by others as dispassionate.

“There is COVID fatigue happening in all areas of our business lives. Mask mandates, zoom meetings, social distancing have all gotten on people’s nerves. With the uncertainty of when this all will be over, many people are taking things into their own hands,” she says.

Source: WalletHub

“Getting the vaccine or already having the effects of the virus tend to change the psychology of people, making them feel immune and looking for this to all be over. There is also a tendency of many business owners to see where things are re-opening, but they are being left behind or told to proceed with caution. What was once a priority (minimizing deaths) suddenly becomes secondary to a when can I get back to normal mentality?

“It is not surprising to see small business owners looking to re-establish their operations. It does not make them less compassionate; it just shows how this pandemic impacts people in different ways. They have a living to make, and it was taken away from them. Others are going about their days, but these owners are still having to sacrifice. There is a cost-benefit analysis going on in their minds and they are seeing the cost is too great for that continued sacrifice,” says Abzug.

“Again, this is their own livelihood at stake, where they see death as death, and the loss of their business is just as important as human life. We might not be able to accept that or even understand it, but many of these business owners have poured everything into that business and might stand to have nothing before this is all over. It is not that they do not want to minimize COVID-related deaths, but some might be thinking is my sacrifice really making a difference?”

About the Author

Jason Knott
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Jason Knott:

Jason Knott is Chief Content Officer for Emerald's Connected Brands. Jason has covered low-voltage electronics as an editor since 1990, serving as editor and publisher of Security Sales & Integration. He joined CE Pro in 2000 and serves as Editor-in-Chief of that brand. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He has been a member of the CEDIA Business Working Group since 2010. Jason graduated from the University of Southern California.

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