North Carolina Home to Top 3 Places to Start a Small Business
Chloe Della Costa is a freelance copy editor and writer with a degree from Bard College. She specializes in copy editing and fact-checking content related to personal finance, insurance, and business.
Launching a small business can be challenging. In addition to having a sound business concept, owners must secure startup funds, register their business and complete many other behind-the-scenes tasks. Of those tasks, choosing a site is one of the most crucial. A business’s location will impact how successful and profitable it is — even if it’s online.
Notably, some states and metros are more small-business-friendly than others. The latest LendingTree study identifies where small businesses are likely to thrive — and where they’re not — among the 100 largest U.S. metros. Our research shows the top places to launch a small business are in North Carolina, while many of the bottom-ranking metros are in California.
Key findings
- The three best metros to start a small business are in North Carolina. Raleigh tops the list again after finishing No. 1 in 2021. Charlotte (No. 3 in 2021) and Durham (No. 4 in 2021) follow in second and third. Raleigh has the sixth-highest rate of residents 25 and older with at least a bachelor’s degree (50.8%) and the seventh-highest percentage of the population that falls within the prime working age range of 25 to 54 (42.9%).
- 10 of the top 11 (due to a tiebreaker at No. 10) metros to start a small business are in the South and West. Texas and Florida metros join the three North Carolina ones in representing the South, while the best places to start a small business in the West are in Utah, Idaho and Colorado. Iowa is home to the lone Midwest representative.
- Allentown, Pa., Stockton, Calif., and Bakersfield, Calif., are the worst metros to start a small business. Pennsylvania ties for the lowest entrepreneurship rate across the U.S., with the lowest percentage of residents who start a business (0.17%). Allentown also finishes in the bottom fifth of four other metrics, contributing to its spot at the bottom. Bakersfield and Stockton finished last and second to last, respectively, in 2021.
- California dominates the worst places to start a business. Outside Stockton and Bakersfield, Fresno and Riverside join the bottom 10. Ohio has two metros in the bottom 10 — Toledo and Dayton.
How we determined the best — and worst — metros to start a business
LendingTree analyzed the 100 largest U.S. metros and scored them in three categories — business climate, entrepreneurship and local economy. Each grouping had three individual metrics, for a total of nine.
Note that metrics were scored at various full and half weights, while some were measured by state rather than metro. See the methodology for more details on our scoring.
Top 3 places to start a small business are in North Carolina
North Carolina’s capital, Raleigh, ranks as the top spot to launch a small business, maintaining its first-place position from our 2021 study.
The metro holds solid scores in our three categories — business climate, entrepreneurship and local economy — and places 25th or better in six of the nine individual metrics.
Raleigh’s strong business climate score is partly due to its high rate of residents 25 and older with a bachelor’s degree or higher — 50.8%, the sixth-highest in our study. The metro also scored strong marks among our entrepreneurship metrics. Raleigh has the seventh-highest proportion of residents in their prime working years of 25 to 54 (42.9%) and an above-average (28th place) proportion of self-employed residents — 4.2%.
Additional Raleigh highlights:
- Raleigh’s percentage of residents 25 and older with a bachelor’s degree or higher improved to sixth from seventh in our 2021 study.
- Raleigh’s proportion of residents in their prime working years jumped to seventh from ninth in 2021.
- North Carolina ranks 11th in our business survival rate metric — 82.7% of the state’s startups make it past the one-year mark, 1 percentage point above the national average of 81.7%.
2nd- and 3rd-best metros to start a small business
With top-20 scores in four of our nine individual metrics, Charlotte lands the No. 2 spot in our study. The metro — the largest in North Carolina — boasts a decent rate of self-employed residents (4.6%), residents 25 and older with a bachelor’s degree or higher (40.7%) and residents in their prime working years (41.6%). North Carolina’s business-friendly tax climate and healthy startup survival rate contribute to Charlotte’s No. 2 finish.
Notably, Charlotte came in third in our 2021 study, so it displaced Austin, Texas, from second to seventh.
Additionally, Durham has respectable scores in our local economy metrics. The metro — which includes Chapel Hill — has the 36th-lowest housing costs in proportion to income — and its 3.2% unemployment rate in August was below the national average at that time of 3.8%. However, Durham has mediocre rankings in our entrepreneurship metrics. It placed 39th for the proportion of residents in their prime working years and 44th for the percentage of self-employed residents — significantly lower than nearby Raleigh, ranked 28th.
Durham is home to Research Triangle Park, a 7,000-acre business hub of more than 300 research, tech and agricultural-biology companies employing over 60,000 workers.
South, West top places to start a small business
The South and West are well-represented in the top 10 rankings, occupying 10 of the 11 spots (due to a tiebreaker for 10th). The South holds six top rankings, with Texas and two Florida metros joining the three in North Carolina. Two Utah metros, Idaho and Colorado represent the West, while Iowa has the only top Midwest metro. The Northeast fails to make an appearance until 26th with Boston.
| Rank | Metro |
|---|---|
| No. 1 | Raleigh, NC |
| No. 2 | Charlotte, NC |
| No. 3 | Durham, NC |
| No. 4 | Salt Lake City, UT |
| No. 5 | Ogden, UT |
| No. 6 | Boise, ID |
| No. 7 | Austin, TX |
| No. 8 | Des Moines, IA |
| No. 9 | Denver, CO |
| No. 10 (tie) | Orlando, FL |
| No. 10 (tie) | Jacksonville, FL |
Source: LendingTree analysis of U.S. Census Bureau, Kauffman Indicators of Entrepreneurship, Tax Foundation and U.S. Bureau of Labor Statistics data.
Six of the top 10 metros are holdovers from our 2021 research. One newcomer, Ogden, Utah, had a significant jump from 21st to fifth. Also joining the top rankings are Des Moines, Iowa, and Denver, which rose from 15th and 20th, respectively. Florida has two metros in the top 10 — Orlando and Jacksonville — which jumped from 22nd and 16th, respectively, to tie for No. 10.
Bottom 3 places to start a small business are in Pennsylvania, California
Allentown, Pa., holds the bottom spot in our study, ranking 80th or worse in five of the nine metrics. The eastern Pennsylvania metro, which extends to neighboring New Jersey, came in 90th place in our 2021 study — just outside the bottom 10. Its decline is partly due to a severe drop in the proportion of residents in their prime working years (ages 25 to 54). Allentown’s rate fell from 51.7% in 2021 to 37.1%.
Pennsylvania’s dismal entrepreneurship rate, 0.17% — the lowest in our research — contributes to the metro’s last-place finish. Interestingly, the state has a decent business survival rate, with 83.3% of startups making it past the one-year mark — the sixth-best in our study.
2nd- and 3rd-worst metros to start a small business
Stockton, Calif., places second-to-last, maintaining the position from 2021. The metro has near-bottom rankings in five of the nine metrics. It has the fourth-worst proportion of residents with at least a bachelor’s degree (22.9%) and unemployment rate (6.2%). Additionally, the metro holds the fifth-worst proportion of self-employed residents — 2.7%.
Another California metro, Bakersfield, is the third-worst metro to start a small business. The metro has the lowest score in two metrics — the proportion of residents 25 and older with at least a bachelor’s degree (19.0%) and the unemployment rate (8.1%). Notably, the metro’s unemployment rate was more than 4 percentage points above the national rate of 3.8% in August.
Despite the poor showings, Bakersfield’s overall ranking improved since the 2021 edition of this study, when it placed last. California’s entrepreneurship rate (15th-best), business survival rate (16th-best) and business formation rate (seventh-best) may have helped boost the metro’s rank.
California dominates bottom-10 list; 2 metros in Ohio
The Golden State has four of the 10 lowest-ranked metros, with Fresno and Riverside joining Stockton and Bakersfield. Notably, each region of the country appears in the bottom 10. Ohio represents the Midwest with two bottom-ranked metros — Toledo and Dayton. Syracuse, N.Y., joins Allentown, Pa., for a total of two Northeastern metros. The South — which didn’t have any bottom-10 metros in the 2021 rankings — now has two: Memphis, Tenn., and Virginia Beach, Va.
| Rank | Metro |
|---|---|
| No. 1 | Allentown, PA |
| No. 2 | Stockton, CA |
| No. 3 | Bakersfield, CA |
| No. 4 | Fresno, CA |
| No. 5 | Toledo, OH |
| No. 6 | Memphis, TN |
| No. 7 | Dayton, OH |
| No. 8 | Syracuse, NY |
| No. 9 | Virginia Beach, VA |
| No. 10 | Riverside, CA |
Source: LendingTree analysis of U.S. Census Bureau, Kauffman Indicators of Entrepreneurship, Tax Foundation and U.S. Bureau of Labor Statistics data.
Similar to the top metros, many of the bottom 10 make a repeat appearance from 2021. However, several newly low-ranked metros dropped significantly from their previous standings. Syracuse fell 21 spots from 71st to 92nd due to declines in the proportion of residents in their prime working years and those who are self-employed. Memphis and Virginia Beach dropped from 87th and 76th, respectively, in our 2021 rankings.
Full rankings
How to choose the right business location
“Location, location, location” is not a cliche when deciding where to start your small business — it’s the golden rule. Choosing an ideal area is more than finding a spot where your business gets foot traffic. The location will impact your business’s bottom line and chances of success. Even if you’re launching a home-based business or one that operates purely online, you’ll want to do a lot of research before settling on a location.
- Consider your business’s unique needs. “There are a million factors that can go into making a location right for your business, and those can vary based on the type of business that you’re in,” says Matt Schulz, LendingTree chief credit analyst. “A strictly online business may have different considerations than a brick-and-mortar retailer,” he adds. Once you’re clear on your specific needs, it’ll become easier to identify locations that meet them.
- Estimate your initial and ongoing costs. Small business startup costs can differ significantly between regions, states, cities and even local neighborhoods, so it’s best to do your homework. “You have to consider the costs associated with that location, everything from taxes to monthly rent to average salaries of workers in that area,” Schulz says. “If it’s a different location from where you currently live or where your business is based, the cost of relocation is important to consider, too,” he adds.
- Consider your target market. Choose a location based on where you can reach your ideal customer. “If you’re opening a high-end jewelry store, for example, you’ll likely want to put your store in a location accessible to high-income families,” Schulz says. Awareness of this will help you avoid places that won’t reach your customers, even if they check off some boxes on your list. For example, “If you target a fashionable, young consumer, you may not want to locate your business in an area dominated by retirees.”
- Be aware of existing competition. Consider the industries and companies in the area(s) you’re researching and whether your service or business competes with or complements them. “If you’re opening a sandwich shop or a boutique clothing store, are there already a lot of similar businesses in that town, or would your offerings fill a need?” Schulz says. Focusing on an area where you can fill an unmet or underserved need will help your business stand apart.
- Look for state and local incentives or restrictions. Before solidifying your location, familiarize yourself with government incentives and programs available to small businesses. For example, some state governments may offer tax breaks, small business grants or small business loans for companies that operate in targeted locations or meet other criteria. Similarly, you’ll want to be aware of local zoning ordinances or other restrictions for your type of business.
Methodology
LendingTree analysts compared nine metrics across the 100 largest U.S. metros by population to determine the best places to start a small business.
Analysts created three scores using this data:
- Business climate score
- Entrepreneurship score
- Local economy score
Analysts averaged the three indexes to create a final score to rank the metros. Here are the categories and the metrics within them, representing the latest available data at the time of research. Metrics are metro-based unless otherwise noted:
Business climate score
- Tax climate: The 2023 State Business Tax Climate Index score, measured at the state level. Corporate, individual income, sales, property and unemployment insurance taxes are factors in the score. Tax Foundation, October 2022. (Full weight)
- Proportion of residents 25 and older with at least a bachelor’s degree: U.S. Census Bureau 2022 American Community Survey with one-year estimates. (Full weight)
- Business survival rate: The percentage of new businesses still operating after a year, measured at the state level. Kauffman Indicators of Entrepreneurship, April 2022 report using 2021 data. (Half weight)
Entrepreneurship score
- Proportion of residents in their prime working years: The percentage of residents ages 25 to 54. U.S. Census Bureau 2022 American Community Survey with one-year estimates. (Full weight)
- Proportion of residents who are self-employed: U.S. Census Bureau 2022 American Community Survey with one-year estimates. (Full weight)
- Entrepreneurship rate: The percentage of residents who start a business, measured at the state level. Kauffman Indicators of Entrepreneurship, April 2022 report using 2021 data. (Half weight)
Local economy score
- Housing costs as a percentage of income: U.S. Census Bureau 2022 American Community Survey with one-year estimates. (Full weight)
- Proportion of residents who are self-employed: U.S. Bureau of Labor Statistics, August 2023. (Full weight)
- Entrepreneurship rate: The share of business applications that become businesses with employees within two years of filing, measured at the state level. Kauffman Indicators of Entrepreneurship, May 2022 report using 2021 data. (Half weight)