Some people like working for a big corporation or national organization. Others prefer the experience of working for a small business, where their efforts are often more visible and roles can be more flexible.
As it turns out, the vast, vast majority of businesses in the U.S. are small businesses—99.9%, in fact—and these small firms employ nearly half of the American workforce. Small businesses are also a pillar of our communities, and the character and creativity that are their hallmarks help give our cities, towns, and Main Streets their unique flavor.
And the truth is, if you prefer small business life, some parts of the country are better than others. Some states have a larger percentage of their workforce working for small businesses; some cities are more likely to have small businesses offering higher salaries than others. And some areas simply are more affordable to live in, which can offset the sometimes lower salaries that small businesses offer compared to larger firms.
Using a combination of factors, JustBusiness has put together a ranking of the best cities in which you can work for a small business.
Cities both big and small: On this list you’ll find some of the biggest cities in the country, such as Los Angeles and Chicago, and many “smaller” cities such as Raleigh and Birmingham. Healthy small business communities can be found everywhere.
The midwest takes center stage: Five Midwestern cities, plus a handful of others on the fringes—such as Pittsburgh and Buffalo—can be found in the top 15.
Housing costs were an excellent predictor of rank: Nine of the cities in our overall top 15 were also top 15 in terms of housing costs as a percentage of income. Other factors, such as average payroll at small firms or small establishment growth rate, didn’t follow the same pattern.
The Top 15 Cities to Work for a Small Business
1. New Orleans, Louisiana
New Orleans takes the top spot in these rankings due to the high percentage of its workforce that works for a small business (52.5%, third-best of all cities measured), a positive small business growth rate, and a top-10 ranking in terms of how well small businesses pay compared to large local businesses.
2. Cleveland, Ohio
The Cleveland area comes in second in our rankings thanks to a very low cost of living (third-to-last in all the cities reviewed) and a top-10 finish in terms of percent of employees who work at small businesses.
3. Buffalo, New York
This former economic powerhouse could be in an excellent position for a resurgence powered by small business. Buffalo has the lowest housing costs relative to income of all cities measured here, and a robust existing small business community with a positive small business growth rate and 51.2% of workers already working for a small firm.
4. Oklahoma City, Oklahoma
OKC comes in at number four on our list, mainly due to the fact that it has the largest percentage of small business establishments of any city on our list (99.84%) and a positive growth rate. Small business is clearly on the rise in Oklahoma City.
5. Los Angeles, California
And now for something completely different: Los Angeles, the country’s second-largest city, rounds out the top five here. L.A. pays its small business employees relatively well, with an average small business payroll of $48,919 (good for seventh overall) and a top-10 small business rate.
6. Baltimore, Maryland
Charm City is next up on our list. Baltimore performs fairly well on each metric we reviewed—in the top 20—for every city we measured, save for housing costs as a percentage of income.
7 (tie). Washington, D.C. and Raleigh, North Carolina
The cities of Washington, D.C. and Raleigh are tied for seventh. Raleigh was particularly strong in regards to existing small businesses as well as small business growth rate, while the nation’s capital has one of the best average payrolls at small businesses at $55,721.
9. Birmingham, Alabama
The Birmingham area makes our top 10 thanks to some very low costs of living (housing costs as a percentage of income for full-time workers is just 22.4%) while hanging around the midpoint of the rankings for our other factors.
10. Milwaukee, Wisconsin
The beautiful (in summer, mostly) city of Milwaukee caps our top 10 despite a lower-than-average total rate of small businesses. That’s likely because with a higher-than-average growth rate and a low cost of living, Milwaukee is an excellent candidate for a small business community resurgence going forward.
11. Kansas City, Missouri
There may be debate over which Missouri city is the better barbecue destination, but on this list, Kansas City edges St. Louis despite being dead last in small business growth rate in our rankings. That may be because payrolls between large and small firms in Kansas City are near equal.
12. Miami, Florida
The Miami area comes in 12th here, powered by having the highest small business rate on our list (in a tie with Oklahoma City) and thus a high percentage of workers employed by small businesses.
13. Pittsburgh, Pennsylvania
The jewel of western Pennsylvania, Pittsburgh does decently well across our factors but is near the top of the list in terms of cost of living.
14. Chicago, Illinois
Another major city makes the top 15 in Chicago, with a strong small business growth rate and very strong average payroll numbers, as well as excellent hot dogs (not a ranked factor here, but an important one to consider).
15. St. Louis, Missouri
Rounding out our list is St. Louis, which is buoyed by its low cost of living and top-15 small business rate (99.77%).
To come up with these rankings, JustBusiness collected data on a number of related factors, weighed each factor’s importance appropriately, and created an index score. The data for these factors are the latest available as of October 2020.
Small Establishment Rate (18% of index score): This is the percent of establishments with less than 500 employees. Source: 2017 Census Bureau’s county business patterns.
Small Establishment Growth Rate (10% of index score): This is the change in the number of small establishments in the area from 2016 to 2017. Source: 2017 Census Bureau’s county business patterns.
Employees at Small Business (18% of index score): This the percent of workers who work at establishments with less than 500 employees. Source: 2017 Census Bureau’s county business patterns.
Average Payroll at a Small Firm (18% of index score): This is average payroll at firms with less than 500 employees. Source: 2016 Census Bureau Survey of Entrepreneurs.
Payroll at Large Firms Divided by Small Firms (18% of index score): This is average payroll at firms with greater than 500 employees divided by average payroll at firms with less than 500 employees. Source: 2016 Census Bureau Survey of Entrepreneurs.
Housing Costs as a Percent of Income for Full-Time Workers (18% of index score): This is housing costs divided by annual earnings for full-time workers, which we used as a standard to measure the cost of living. Source: Census Bureau 2018.
The Bottom Line
The importance of America’s small business community became even more obvious in 2020, when a once-in-a-lifetime pandemic and corresponding recession brought the nation’s small businesses, en masse, to a grinding halt. The above cities are areas we expect to lead the revival of the country’s small business ecosystem—provided each city’s entrepreneurs have the means to do so.
- U.S. Small Business Administration. “2018 Small Business Profile.”