Starting a business is not cheap. And unless you have a rich uncle that left you an inheritance, you will want to keep all costs down to the minimum when starting a new business. One of the easiest ways for a startup to fail is to finish its initial fund during the launch phase. So, it is important you find every way possible to cut startup costs. One of them is looking for the cheapest place to start a business.
In this post, we have highlighted the 7 cheapest places you can consider for your startup in the U.S. This includes Chattanooga, Columbia, Wichita, Knoxville, Orlando, Lexington, and Little Rock. These are places where the cost of living, average salary, and other expenses are relatively low.
We also gave a hint into some of the most expensive places to start a business too. So even if you have such a question in your heart too, you are definitely going to be getting an answer in this post.
How We Determine the Cheapest Place to Start a Business
To identify the cheapest cities in the U.S where starting a new business is cheapest, we rely on the new study conducted by SmartAsset. The study estimated the cost of starting and running a business in 81 of the largest cities in the country. The calculation was based on certain criteria such as:
- Office space
- Filing bills for incorporating or forming an LLC
- Utilities
- Legal and accounting costs for the first business year
- Payroll for having five employees earning that city’s median annual salary
Nevertheless, it is understandable that every business will face its unique set of circumstances and expenses. So, some assumptions were made in the study that may not apply to all startups. The idea is to use the costs calculated as a point of comparison, considering how a typical business would fare in each of the 81 cities in the study.
The Cheapest Place to Start a Business
#1: Chattanooga, Tennessee
One of the factors contributing to the low-cost impact of this city on startups is its ultra-fast internet. And that has become a major draw for businesses of all types.
Apart from the amazingly fast internet speed, Chattanooga also has some of the most affordable office space in the country. To lease a 1,000square foot office here for a year, you would actually need less than $15,000 on average.
#2: Columbia, South Carolina
This is where the University of South Carolina’s main campus is located. Because of that, the city boasts of a fairly well-educated workforce, which is a key draw for businesses in today’s economy. Starting a business in Columbia is indeed cheap. Based on the study, legal and accounting costs for a startup in the first year would be 25% lower than the national average.
#3: Wichita, Kansas
Talking about office space, Wichita offers the most affordable office space of any major city in the U.S. According to Reis, Inc. – a company that analyzes the commercial real estate market, the average price per square foot of office space in Wichita is just $14.55 per year. That means a new business can get an office space for about $14,550 a year, compared to New York’s $66,110.
#4: Knoxville, Tennessee
If you are looking for the cheapest place to start a business, you will appreciate Knoxville’s low costs of business. Many popular businesses are located here, including the Regal Entertainment Group, which operates one of the largest chains of movie theaters in the country.
With just about $230,000, you can start a business with 5 full-time employees and a 1,000 square foot office space in Knoxville.
#5: Orlando, Florida
In Orlando, there are multiple resources there for entrepreneurs looking to start a business. There is an annual Startup Weekend that is usually organized for current and future founders to discuss ideas and offer support for each other.
There is also Orlando Tech, an initiative that helps startups in the world of technology to connect and grow. Creative Village Orlando also provides a home and other things on its 68-acre area for high-tech and digital media companies.
Starting a business here is indeed low compared to other U.S major cities. Startups that file as an LLC in Orlando won’t have to pay any taxes on their profits because the state of Florida does not have a personal income tax. Remember that LLC taxes are treated as income to the shareholders.
#6: Lexington, Kentucky
Lexington is one of the largest cities in Kentucky, and also among the most well-educated. In fact, more than 40% of its population has a bachelor’s degree. That means as a startup, getting to employ educated employees to bring good ideas to grow the business won’t be a problem.
#7: Little Rock, Arkansas
There are a lot of ways startups in Little Rock can save costs. The state of Arkansas offers the lowest business filing fees of any state in the U.S. With only $45, you can submit the necessary paperwork you need to become an LLC.
At the same time, the cost of utilities is quite low in Little Rock. For a business with a 1,000 square foot office space and cost of gas and electricity for a year would be around $1,546. That is very much lower than what is obtainable in most of the other cities in the U.S.
Most Expensive Places to Start a Business
The study did not only identify places startups enjoy the lowest cost of business but also find some parts young entrepreneurs might need to stay away from because starting and running a business there is expensive.
Some of these cities are:
- San Jose, CA
- San Francisco, CA
- Washington, DC
- New York, NY
- Boston, MA
- Bridgeport, CT
- Oakland, CA
However, that the cost of running a business is high in these places doesn’t mean doing business there is a bad idea. Just that you will need a lot of money to get your foot in those places.
These places are good for business and many companies are always striving to get their business there. Hence the reason it’s expensive starting a business there. There is no cheap office space. So before thinking of starting a business in these cities, ensure you have ample funds and enough time to build the business to be successful.
Final Note
Whether in the U.S or any other place in the world, starting a business demands a lot. And many factors come together to determine the success of any business. Talk about having enough capital, competent employees, a solid business plan, and many more.
However, one major factor that also goes a long way to tell if a business is going to be successful is the location of the business. So, you need to put all your diligence into making sure you choose the most affordable place to start your business.
In this post, we have been able to identify some places in the U.S where starting a business can be really affordable. At the same time, we mentioned some places you may want to stay away from because of the cost of starting a business in such places. While choosing these places, we carefully study the cost of living in the area, average salary, and other expenses.
We hope this piece helps you find the right location for your startup business.
