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Starting a Business in a Small Town
by Rieva Lesonsky
May 6, 2022
a happy farmer with sone picking apples

John Cougar Mellencamp famously sang about the joys of growing up in a small town, and for many would-be small business owners, starting a business in a small town has a lot of the same appeal. Are you tired of running the rat race in your corporate, big-city job?

If you fantasize about moving to a small, close-knit community and starting a business, you’ll want to check out the list of the best small cities to start a business that WalletHub recently compiled.

Starting a business in a small town has both pros and cons. For example, the study’s authors note:

Small-town entrepreneurs benefit from a lower cost of living and less competition, but they may suffer from a limited customer and employee base.

The study compared more than 1,200 cities with populations between 25,000 and 100,000 people, evaluating them based on three factors:

  1. Business environment (including average growth in the number of small businesses, average revenue per business, and number of startups per capita)
  2. Access to resources (including financing, investors, and employees)
  3. Business costs (including cost of living, corporate taxes, office space, and labor costs)

Overall, Holland, Michigan, topped the list, followed by Carbondale, Illinois; Springville, Utah; East Chicago, Indiana; and Jefferson City, Missouri, rounding out the top five.

Does that mean you should pack your bags and move to the Midwest? Not necessarily. Cities with a high overall score sometimes score low in one of the three areas. For example, while Holland, Michigan, has a favorable business environment, it did not rank as well in terms of access to resources.

When deciding where to launch your business, the most important factors to consider are those that matter most to you.

What does your startup need to succeed? For example, if you want to start a business that relies on people physically coming into your location, such as a restaurant, the cost of renting space and the availability of a sufficient customer base will be big factors in your decision. On the other hand, if you’re starting a technology business that will serve clients all over the country remotely, a bigger concern would be the availability of skilled employees you can hire as your business grows.

Here are some questions to ask yourself when considering a small-town location:

  • How much assistance does the town offer small business owners? Are there tax or other financial incentives to start businesses or locate in the area? What type of economic development, networking, and support organizations are available for business owners?
  • How close is the town to larger cities and/or transportation hubs? If your small town is within driving distance of a larger city, you might enjoy the best of both worlds: a peaceful, lower-cost lifestyle, with relatively easy access to customers, employees, and transportation for products or business travel.
  • What does the local labor pool look like? How well do their skills match your needs? For instance, starting a manufacturing business in a town where large manufacturers have closed can give you a pool of experienced employees to draw from.
  • Is there a college or university nearby that can provide educated, entry-level employees? If you’ll need employees with specialized skills, consider forming a partnership with local colleges and universities to develop a pipeline of workers.
  • How much money will your startup require? If access to financing is a big concern for you or you need to raise a substantial amount of capital, either obtain financing before you move, or investigate how easy it is to access capital in the small town.

One final caution: Don’t assume that just because you are launching your business in a small town, you can do the bare minimum and still succeed.

Your business will be more visible in a small town than in a larger community, so any mistakes you make will be magnified and can be harder to correct. What’s more, just because you currently own the only Mexican restaurant in town doesn’t mean that will last. Put as much effort, heart, and energy into your small-town startup as you would anywhere else, and the community will reward you with success.

Take a closer look at WalletHub’s top small towns for starting a business, including breakdowns by category. Need more assistance deciding on the perfect startup location? Your SCORE mentor can help you assess your options and create a plan for success.

About the author
Rieva Lesonsky
Rieva Lesonsky is president and CEO of GrowBiz Media, a custom content and media company focusing on small business and entrepreneurship, and the blog
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