10 Best Cities to Start a Small Business in the U.S.

From clothing boutiques to local restaurants and home décor shops, you probably have at least one favorite small business that you love and support in your city or town—and hopefully more than one! With over 30 million small shops and organizations making up the U.S. economy, it’s no wonder that Americans are so passionate about their local businesses.  

Many cities across the country boast small business-friendly practices and work to provide support to local entrepreneurs, from local government resources to mentorship programs. And some metro areas are just naturally perfect places to start up a small business, whether they offer lower costs of living or residents enjoy no state income tax.  

If you’ve ever felt the urge to start your own business, you know what it’s like to feel passionate about an idea, whether it’s handmade products or offering a valuable service to people who need it. Maybe you just need a little push to get started. Or maybe you want to find the right location to open up shop.  

We decided to look at some of the best places to start a small business in the U.S. to determine which cities are most friendly to and supportive of local entrepreneurs, we considered a variety of factors, including the number of small businesses in a city, the local economy growth rate, and any programs or incentives the city government offers to small business owners to help them get on their feet and start growing.  

While small businesses can include just about any industry, the most common industries we found were professional, scientific, and technical services; retail trade; and other services. Employees at many of these organizations are easily able to work from home, reducing overhead costs for the companies and even increasing productivity.  

So, if you’re thinking about beginning an entrepreneurial journey of your own, consider starting up your small business in one of these locations! 

1. San Francisco, California 

From the gorgeous weather to its diverse and colorful culture, San Francisco is a perfect place for business owners to turn their passionate ideas into reality. In 2017, the mayor of the city earmarked funds for supporting the growth of small businesses, and the local government even has an online portal offering a variety of resources for entrepreneurs. With over 120,000 small businesses in the city limits, San Francisco has the passion and capital to support local business owners, making it the best city to start a business! 

Spoiler alert: The state of California will show up again later on our list and for good reason. California has the highest number of small businesses (4.2 million) of any state. Small business employees make up almost half of the state’s total employees, and the state has 40% more small businesses than the state with the second-highest amount: Texas at 3 million. 

2. Austin, Texas 

Speaking of the Lone Star State … this city in central Texas is famous for its thriving music scene, as well as its unique culture and artsy atmosphere. Austin is home to thousands of small businesses including everything from locally sourced food and drinks to quirky specialty shops. With a population of just under one million residents and a lower cost of living than many major cities, Austin has the ability to support a wide array of small businesses, no matter how unusual the idea! 

3. Minneapolis, Minnesota 

This northern city also ranked high on our list of the most generous cities in the U.S., and while Minneapolis is known for being home to big corporations like Target and Best Buy (not to mention the country’s largest shopping mall, the Mall of America), it’s also one of the best cities for small business as well. The city is full of local breweries and restaurants, and the countryside is home to tons of scenic hiking spots, making it the perfect place to support specialty stores like bike shops and outdoor equipment providers. With a low unemployment rate as well as a more affordable living cost, Minneapolis could be the perfect spot to get your business idea off the ground.  

[Image: San Jose skyline or shopping area] 

4. San Jose, California 

The second California city to rank as one of the best places to open a small business! Surrounded by Silicon Valley tech giants like Google and Facebook, San Jose still remains one of the best cities for small businesses. The tech industry has helped create a thriving economy in this California city, leaving room for everything from local coffee shops to bookstores. You name it, there’s likely a small business in San Jose that meets that need! While the cost of living in San Jose is certainly higher than other cities in the country, it’s still a fantastic place for entrepreneurs to grow. 

5. Columbus, Ohio 

This Midwestern city boasts a significantly lower cost of living than many parts of the country, making it the perfect place for your small business to take off. Columbus is home to college-educated young adults enjoying more disposable income because of the comparatively lower rent and home costs—the ideal audience for your new brand! The affordable housing prices combined with a steadily growing economy make Columbus the top city in the Midwest to start a thriving new business. 

6. Nashville, Tennessee 

The country music capital of the world is known as a home to aspiring songwriters, but it’s also an especially supportive city to small businesses. Nashville residents tend to be friendly and love their local restaurants and shops, so your startup could fit in perfectly! Plus, the state of Tennessee has no state income tax. On top of the gorgeous countryside landscapes, local music scene, and mouth-watering barbecue, why wouldn’t you want to open your small business in Nashville? 

7. Seattle, Washington 

If you’re looking for a vibrant city that eagerly embraces local businesses, look no further than Seattle! The Emerald City boasts a growing economy that’s home to over 100,000 small businesses, from beloved bookshops to delicious eateries. The low unemployment rate and strong economic growth make for the perfect home for any entrepreneur looking to start something new. And your startup may not stay small forever—after all, Starbucks got its start in Seattle as a local small business. Who knows how quickly your Seattle-based company will grow? 

8. Boston, Massachusetts 

This major New England city is home to a rich history and culture dating all the way back to the founding of the country, and it’s easily one of the best cities to start a business. If you’re looking for a home for your small business that combines the old with the new, Boston is the perfect place. The city is full of investors looking for the next big startup, as well as young professionals with money to spend. Boston is already home to over 120,000 local businesses and counting, and your startup could be the next growing business in the city! 

9. Portland, Oregon 

The city of Portland often gets lumped in regionally with Seattle, but it has its own unique culture and plenty of support for local businesses, plus lower housing costs than the Emerald City. Portland provides entrepreneurs with tons of support, including the use of a local small business development center that offers free classes, counseling, and even mentorship opportunities. Bonus: Portland doesn’t have a local sales tax, which can encourage residents to spend more at the local small businesses they love.  

10. Denver, Colorado 

The city of Denver is home to gorgeous views of the Rockies, stellar skiing spots, and over 80,000 small businesses—a number that continues to grow with each passing year. With an unemployment rate under 3%, it’s no surprise that entrepreneurs have flocked to Denver to start their businesses. Whether you’re an aspiring restaurateur or a fashion maven, there’s room in the city for you, and residents are happy to support local businesses and help their favorites grow.  

Why Small Businesses Matter 

What’s the big deal about small businesses?  

Sure, you can find almost anything you need at your local big box store, but small businesses offer a uniquely personal experience and a way to support the economic growth of your community.  

Small local businesses are the backbone of the United States economy, making up the vast majority of American business establishments (95%). Of the five million companies in the country, over 76% have fewer than 10 employees, according to the U.S. Census Bureau. Even with the challenges of the COVID-19 pandemic, the number of small businesses has continued to increase year over year and in 2021 reached 32.5 million. With new small businesses popping up all the time across the country, that growth isn’t slowing down anytime soon.  

In addition to helping the economy grow, small businesses also play a huge role in job creation. Even though most small enterprises have fewer than 100 employees, they’re still responsible for millions of new jobs in just the last decade. Small business employees make up almost half (46.8%) of the U.S. workforce, helping to keep the economy moving and providing local residents with more job opportunities than they might otherwise have access to.  

The strong economic growth and diverse populations of larger cities and metropolitan areas make them the perfect locations for nurturing small businesses. These larger populations give local entrepreneurs a wider audience of potential customers and help their businesses to grow and even thrive, regardless of industry or niche.  

If you’ve been bitten by the entrepreneurial bug, there are plenty of U.S cities where residents will embrace and support your small business. And whether you own your own company or are just a consumer, be sure to take time to support your small businesses by shopping locally. You may be surprised at the unique products and services you can find right in your own backyard!