25 Best U.S. Metros to Start a Small Business in High-Growth Sectors

It’s easier than ever to start a small business not tied to any location in today’s post-pandemic world. With remote work so entrenched in the labor force, a small business owner can run their entire operation from a laptop without the need for office space. An entrepreneur can also hire freelancers and full-timers from around the world and be just as agile as a large corporation.

But starting a small business versus maintaining a successful one over the long haul are two different things. Everyone has heard the stats before about small biz failures, but they bear repeating. From 1994 to 2019, about 68% of small businesses survived after two years, according to the U.S. Small Business Administration. But after a decade, only slightly more than 33% of small businesses remained open.

The more resources a small business owner has, the better chances they have to succeed. This is why the geographic location of where small businesses launch matters more than ever. Some U.S. cities and states are much more small-business-friendly than others.

In our analysis, we uncover the very best U.S. metro areas for launching a small business, along with the worst ones. We examined several factors that make a metro area superior (or inferior) for small businesses, such as corporate tax climates, population growth, and GDP per capita. What we discovered should be useful for entrepreneurs in every industry and could give you a leg up on the competition.

3-5 Big Takeaways:

• Austin, Texas, is No. 1. The Austin, Texas, metropolitan area is the top MSA to start a small business in America, followed by #2 Provo, Utah, and #3 Raleigh, North Carolina. Salt Lake City and Boise City, Idaho, round out the top 5.
• It’s feast or famine in Texas for small business owners. The Lone Star State has three MSAs ranked in the Top 25 (Austin, Dallas, and Houston). But two metro areas (McAllen and El Paso) were at the very bottom of the ranking.
• Utah is a small business paradise. Two Utah metropolitan areas, Provo and Salt Lake City, ranked in the top 5 across America.
• Small business owners may want to avoid the Northeast. Harrisburg, PA, was the only Northeastern metro area to rank in the top 25. New York City is known as a place where dreams come true, but they ranked 71st overall, partly because the area has the worst business tax climate in the nation.

Best Metro Areas for Small Businesses in 2023

Having access to ample resources is vital when launching a small business, which is why choosing the right location is so important. We analyzed all 382 MSAs and then ranked the top 100, examining unemployment rates, population growth, GDP per capita, new business creation, and business tax climate.

Each of these factors is critical for entrepreneurs. For example, a robust population growth shows that the area has a deep pool of employee talent. For business tax climate, metro areas with less onerous tax rules simplify things for entrepreneurs and reduce their tax burdens. The biggest takeaways are:

Bigger isn’t always better: Some of the best MSAs for small businesses in the nation are also smaller and mid-level. The only metro area with a population of more than 3 million in the top 10 was Dallas. Several big-ticket cities like New York, Chicago, and Washington, D.C. fared poorly. This is partly because many of these big cities are facing declines in population growth and have high tax burdens.

(Nearly) tax-free in Florida: A stunning 9 of the top 10 most business tax-friendly MSAs in America are in the Sunshine State. Florida’s super-tax-friendly status and minimal small business regulations make it one of the best states to launch a small company, whether you’re in Orlando, Miami, or Fort Myers. The only businesses that pay state income taxes in Florida are traditional corporations, which very few small businesses start off as.

Room to grow: A robust growth in population doesn’t always correlate to a better environment for small business, but it certainly helps. Many of the MSAs that ranked high, such as Boise City, Idaho, and Provo, Utah, also saw big increases in new residents between 2020 and 2021. Most of these areas were also smaller and mid-level, indicating that there’s room to grow and they are desirable places to live.

Higher interest rates and a tougher economic environment may make it harder to launch a company in 2023. But there’s still plenty of opportunities, especially if you’re in a metro area that has the resources available. Let’s take a closer look at the top 5 metro areas for small businesses and the reasoning behind their success.

#1 Austin-Round Rock-Georgetown, TX

MSA Population: 2,352,426

MSA GDP per capita: $71,601

New Business Creation Score: 9.8

Business Tax Climate Score: 7.1

2020-2021 Population Change Rank: 6

There are so many reasons why Austin is the best place to start a small business that it would require another article to explain them all. But let’s put it this way: Austin is a fast-growing city with a diverse economy and a population within peak working years (18 to 44 years old) that’s 7% higher than the national average. Austin is a cultural mecca filled with live music and nightlife that attracts talented young professionals and sparks creative ideas.

#2 Provo-Orem, UT

MSA Population: 697,141

MSA GDP per capita: $45,719

New Business Creation Score: 9.61

Business Tax Climate Score: 9.0

2020-2021 Population Change Rank: 3

Utah’s second-largest metro area regularly ranks as a top place for entrepreneurs for a good reason. Provo is an attractive place to live, with a tight-knit community, beautiful outdoor scenery, and the host of the Sundance Film Festival. Nearby Brigham Young University supplies a steady pipeline of small business talent, particularly for tech startups.

#3 Raleigh-Cary, NC

MSA Population: 1,448,411

MSA GDP per capita: $65,813

New Business Creation Score: 8.9

Business Tax Climate Score: 8.3

2020-2021 Population Change Rank: 8

Combined with Durham and Chapel Hill, Raleigh forms the “Research Triangle,” which is why it’s one of the prime U.S. destinations for small businesses. The Research Triangle gets its name from a cluster of three elite research universities located just minutes apart - North Carolina State, Duke, and the University of North Carolina at Chapel Hill. Along with a growing population and low corporate tax rate, it’s a fertile ground for innovation.

#4 Salt Lake City, UT

MSA Population: 1,263,061

MSA GDP per capita: $82,271

New Business Creation Score: 8.7

Business Tax Climate Score: 9.0

2020-2021 Population Change Rank: 51

Once known as the crossroads of the west, Salt Lake City is becoming a destination in its own right to a growing number of entrepreneurs. Like #2-ranked Provo, Salt Lake City is home to a thriving tech startup ecosystem and numerous venture capitalists. But it’s not just tech startups that thrive in Salt Lake City - minimal business regulations and a young, talented labor force make it a great area to start any type of business.

#5 Boise City, ID

MSA Population: 795,268

MSA GDP per capita: $47,693

New Business Creation Score: 9.9

Business Tax Climate Score: 6.7

2020-2021 Population Change Rank: 1

Inexpensive land, an abundance of labor talent, and a low cost of living are all reasons Boise City is a surprisingly great place to do business. The metro area is one of the fastest growing in the nation, with a strong tech market and an education hub featuring a public college, a private college, and two community colleges.

Worst Metro Areas for Small Businesses in 2023

While some U.S. metro areas are incubators for small businesses, others are struggling. We looked at the same criteria listed earlier, such as population growth and GDP per capita, to reveal which metro areas were the worst for small businesses.

What we found is not entirely surprising, but bears a closer look. Metro areas struggling with higher rates of unemployment, lower GDP per capita, and generally sluggish economies are obviously not dynamic cities to launch a business.

The big takeaways are:

Not enough capital: Many of the metro areas at the bottom of the ranking also have the highest poverty rates in the nation. Southern border towns like McAllen and El Paso, Texas, have notoriously high rates of income inequality - not an ideal environment for launching a small business and supporting consumer spending.

Brain drain: Lack of educational attainment correlates closely with lower GDP per capita and higher poverty rates, and this was especially the case for metro areas ranked at the bottom. A smaller percentage of residents without college or high school degrees makes it infinitely more challenging to access the capital necessary to launch a business.

Stagnant growth: Not all metro areas at the bottom of our rankings have seen population declines, but most were either neutral or negative. For example, the population in Akron, Ohio, slightly dipped 0.2% between 2020 and 2021. Combined with a stubbornly high unemployment rate and more small businesses failing than being created, it was enough to push Akron to the lower tier.

Rebuilding city economies is a complex, multi-pronged process that takes years, and many of the cities listed below unfortunately have their work cut out for them.

#1 McAllen-Edinburg-Mission, TX

MSA Population: 880,356

MSA GDP per capita: $26,022

New Business Creation Score: 2.7

Business Tax Climate Score: 7.1

2020-2021 Population Change Rank: 25

Deep in South Texas on the Mexican border, the McAllen metro area has one of the nation’s highest poverty rates at 29.3%. While there are some opportunities in health services, logistics, and retail, a population that’s poorer and less educated than the Texas average has severely limited the area’s ability to attract investment.

#2 Springfield, MA

MSA Population: 695,305

MSA GDP per capita: $49,349

New Business Creation Score: 2.5

Business Tax Climate Score: 2.9

2020-2021 Population Change Rank: 84

Springfield is the third-largest city in Massachusetts and is in the midst of rebuilding after a protracted economic decline that started in the second half of the 20th century. Stagnant population growth, a low GDP per capita, and a relatively onerous tax environment have made Springfield a tough place to launch a business.

#3 Scranton-Wilkes-Barre, PA

MSA Population: 567,750

MSA GDP per capita: $48,264

New Business Creation Score: 2.42

Business Tax Climate Score: 3.0

2020-2021 Population Change Rank: 56

The hometown of President Biden is similar to the Springfield, MA, area in that it’s another former heavy industrial hub in the midst of revitalization. Scranton’s city government almost went bankrupt in 2012, though it has since stabilized. The area’s economy is slowly coming to life, but with more businesses failing than being created, it’s evident there’s still a lot of work to be done.

#4 El Paso, TX

MSA Population: 871,324

MSA GDP per capita: $39,156

New Business Creation Score: 5.9

Business Tax Climate Score: 7.7

2020-2021 Population Change Rank: 55

El Paso is another Texas border town at the bottom of the rankings, three spots ahead of #1 McAllen. There are many positive aspects to living and working in El Paso, but like McAllen, a less educated population and a concentration of low-paying industry sectors put a drag on the local economy. El Paso’s economy is also heavily reliant on immigration, international trade with Mexico and the shifting sands of U.S. trade policy, making investment in the area riskier.

#5 Akron, OH

MSA Population: 700,015

MSA GDP per capita: $52,941

New Business Creation Score: 1.7

Business Tax Climate Score: 2.7

2020-2021 Population Change Rank: 75

Akron is like many Rust Belt towns trying to reinvent itself in the new digital economy. LeBron James grew up here, so we know entrepreneurs can come from Akron, but that doesn’t necessarily mean it’s a great place to launch a small business. LeBron infamously fled for Miami at one point in his career, after all. Akron also had the third-worst new business creation score among the metro areas we studied.

Best Metro Areas for the Fastest-Growing Sectors in 2023

When starting a small business, it’s also wise to know which sectors are growing the fastest. We examined the five fastest-growing sectors in the U.S. in 2023 according to Bureau of Economic Analysis data and determined which metro areas are the best for each sector, including arts and entertainment and healthcare and social assistance.

Austin is the place to be: Along with ranking number 1 overall for small businesses, Austin ranked in the top 5 for all 5 fastest-growing sectors that we tracked. Austin ranked #1 for arts and entertainment and information technology, a testament to the vibrant economy in this progressive haven in the Lone Star State.

Health biz is booming in FLA: Seven of the top 25 metro areas best for healthcare and social assistance small businesses were located in Florida, including Sarasota, Miami, and Fort Myers. Florida has the second-largest percentage of residents over 65, behind only Maine, so this makes the Sunshine State a prime destination for healthcare entrepreneurs.

Off-Broadway: You may think of a place like New York City when it comes to arts and entertainment. But according to our rankings, NYC isn’t where you want to be if you’d like to launch an arts small business. New York City ranked #62 for arts and entertainment small businesses, behind metro areas like Baltimore, Oklahoma City, and Knoxville, Tennessee. It goes to show that you don’t have to go to Broadway to make a decent living as a creative/artistic entrepreneur.

If you’re looking to capitalize on the fastest-growing American sectors, the following metro areas are a good place to start. Austin, Texas, is a hot spot for the fastest-growing sectors, but there are plenty of other places where entrepreneurs can shine.

Arts, Entertainment, and Recreation - Austin-Round Rock-Georgetown, TX

MSA Population: 2,352,426

MSA GDP per capita: $71,601

New Business Creation Score: 9.79

Business Tax Climate Score: 7.7

2020-2021 Population Change Rank: 6

Given that Austin is the yearly host of the celebrated South by Southwest conference, it’s not very surprising they ranked as the top metro area to start an arts and entertainment small business. Austin ranked #1 overall for all small business purposes, but its thriving arts and culture scene is especially celebrated. Austin’s motto is to “stay weird,” and that quirky sense of pride draws the types of creative folks that arts entrepreneurs need.

Healthcare and Social Assistance - North Port-Sarasota-Bradenton, FL

MSA Population: 859,760

MSA GDP per capita: $45,927

New Business Creation Score: 8.37

Business Tax Climate Score: 9.4

2020-2021 Population Change Rank: 5

As we mentioned above, Florida is a top destination for healthcare entrepreneurs because of the fact the state has many retirees and an older-than-average population. The North Port-Sarasota-Bradenton metro area, in particular, is one place that a healthcare and social assistance business can thrive. Sarasota County is home to four hospitals, including one (Sarasota Memorial Hospital) that has been ranked one of the best in the nation.

Information - Austin-Round Rock-Georgetown, TX

MSA Population: 2,352,426

MSA GDP per capita: $71,601

New Business Creation Score: 9.79

Business Tax Climate Score: 7.7

2020-2021 Population Change Rank: 6

You don’t necessarily need to go to Silicon Valley to start an information and tech small business. There are many emerging tech cities nationwide and, according to our rankings, Austin, Texas, leads the pack in this, too. Many have noted that Austin is becoming a city of tech unicorns and giants, and the numbers back it up. Venture capitalists invested more than $5.5 billion across 412 deals in Austin in 2021, more than double that of 2020.

Administration and Support and Waste Management and Remediation Services - Los Angeles-Long Beach-Anaheim, CA

MSA Population: 12,997,353

MSA GDP per capita: $77,480

New Business Creation Score: 9.53

Business Tax Climate Score: 2.1

2020-2021 Population Change Rank: 97

You may think of Hollywood and glitz and glamor when thinking of Los Angeles, but there’s plenty of opportunities for blue-collar professionals, too. The U.S. Census Bureau NAICS code for Administration and Support and Waste Management and Remediation Services includes occupations like janitors and landscapers. And according to our rankings, LA is surprisingly the best city to start a business in this industry sector.

Management of Companies and Enterprises - Dallas-Fort Worth-Arlington, TX

MSA Population: 7,759,615

MSA GDP per capita: $68,922

New Business Creation Score: 8.95

Business Tax Climate Score: 7.7

2020-2021 Population Change Rank: 15

The U.S. Census Bureau NAICS code for Management of Companies and Enterprises includes many professional managerial occupations, including in finance and accounting. This is the bread and butter of the Dallas metro area’s economy, with some of the area’s largest employers being major banks like JPMorgan Chase and Bank of America. Launching a management of companies and enterprises small business here would be wise considering all the networking opportunities that are available.

Conclusion

2023 is shaping up to be a challenging year for small businesses. Worries about inflation are still running high, and many small business owners still say job openings have been hard to fill. The biggest concern of all is a potential recession, which could limit cash flow, reduce sales, and make it harder to access credit.

Despite these concerns, there’s plenty of opportunities out there for entrepreneurs - especially if they’re located in the right geographic region. Small business owners in cities like Provo, Utah, Salt Lake City, and Austin, Texas, may find it easier to launch a successful enterprise thanks to friendlier tax environments, deeper talent pools, and minimal regulations.

If you’re looking to start a small business, the top cities we listed above may be your best bet. Whether it’s in the Research Triangle of Raleigh, North Carolina, or the unsuspecting Midwestern business haven of Boise City, Idaho, the right location for a small business can make all the difference.

Methodology

To find the best metro areas for small businesses in America we analyzed all 382 U.S. Metropolitan Statistical Areas and then narrowed down and compared the top 100 U.S. MSAs across 4 key categories and a total of 10 individual factors:

• Metropolitan Statistical Area population (2021 Estimates). Census
• MSA Unemployment Rate (December 2022). U.S. Bureau of Labor Statistics
• MSA GDP in thousands (2020). Bureau of Economic Analysis
• Actual MSA GDP (2020). Bureau of Economic Analysis
• MSA GDP per capita (2020). Bureau of Economic Analysis
• New Business Creation Score: a ratio of new business establishments to number of business establishment exits (2020). Census
• Number of Business Applications, per capita (2021). Census
• Job creation rate (2020). Census
• Total count of business bankruptcies (during 12-month period ending September 2022). U.S. Courts
• State business tax climate ranking (2023). Tax Foundation

We also ranked the best metro areas for the 5 fastest-growing industry sectors in America based on 2021-2031 output growth projects from the U.S. Bureau of Labor Statistics across 2 key categories: raw number of small businesses (less than 500 employees) in that sector, and density of the number of small businesses in that sector as a percentage of all businesses in that metro area.

We scored each factor with an equal-weighted score (where 10 is the highest score). We then averaged the factor scores within each of the categories listed above to find each individual category score. Then, we normalized the category score so that the highest-scoring MSA within each category received a high score of 10 (the highest score).

The final score was calculated by averaging the score of the 4 categories, then normalized to produce the final score and ranking.