The 4 Worst Cities to Start a Local Small Business in the U.S.

While some multi-million dollar corporations seeking a large (unemployed) available labor pool might consider these cities to be a great opportunity, as a small business proprietor you always need to be looking for customers that don’t just need the services you offer, but also the income needed to buy it from you.

Following is a list of some of (but not all) the worst cities to start a local small business in the United States. Factors considered include high unemployment rates, poor income levels (versus cost of living), slow growth rates, and high rates of poverty.

4. Santa Rosa, CA

worst cities to start a local small business
Image Credit: Don McCullough/Flickr

Less than sixty miles from Silicon Valley lies the cozy, flowery city of Santa Rosa. You might think being close to the San Fran tech-hub would make this the perfect place to start a small retail or service business, but you’d be dead-broke-wrong if you did (well, most likely). This city isn’t the absolute worst on the list, but it doesn’t have much in the way of potential to offer either.

The unemployment rate is acceptable, but certainly not optimal at 4.5% and because of its proximity to other thriving areas of California, the cost of living is extremely high. The city’s growth rate is an abysmal 3.8% which isn’t great.

The median average hourly wage is higher than the average U.S. city, but at just $27.15 it’s barely enough to pay the rent in most places here. Not a lot of spare money changing hands here depending on what type of business you’re considering building.

3. Albuquerque, NM

Worst cities to start businesses
Image Credit: killbox/Flickr

Albuquerque’s current economic outlook isn’t good at all. Their unemployment rate recently topped out at a dismal 6.4% and they have yet to fully recover from the recession, in spite of most states and provinces around the world making a resurgence years ago.

This place used to thrive on oil and gas revenues to prosper, and with the price per barrel of oil so unpredictably low as of late, they just can’t seem to bounce back. Before then, they were a major railway hub, but the brunt of the rail cars have long since left the station here. The cost of living in Albuquerque is considered average, but the median hourly rate is actually quite low at just under $21/hr, meaning there isn’t a lot of money to go around in this once thriving city for most new businesses.

2. Providence, RI

Worst cities to start a small business: Providence, RI
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Judging whether to do business in here based totally on a skyview of the city might not be the best way to make a decision whether to start a business in this U.S. city. Coming in second on this list of worst cities to start a small business in America is the once bustling manufacturing hub of Providence.

Unemployment is high at 6% and the average hourly wage is only $24.78/hr. Worse, the city has only grown a hair over 1% in size since 2010 — not exactly a growing metropolis ripe with opportunities for entrepreneurs who need local customers to thrive, right? Nobody seems to want to live here, despite many young people getting educated at Brown University and the city’s other thriving educational facilities.

There’s lots of educational institutions here, if you can afford to lease available space near the university and have a business that’s heavily targeted toward them. But such a business is what pipe dreams are made of when considering every other business in this dying city is trying to capitalize on the same demo.

1. Modesto, CA

Image Credit: Wayne Hsieh/Flickr
Image Credit: Wayne Hsieh/Flickr

Arguably the worst city to start a local small business in the United States, Modesto has a frightening unemployment rate of 9.5 % and plenty more negatives to go along with it for entrepreneurs seeking to start a local business. Of course, a high unemployment rate can be a blessing for some businesses looking to move in, but usually not a small business that will rely on a select few employees and plenty of income from the city and surrounding area.

The poverty rate here is quite high, with 21% of residents living below the poverty threshold (compared to the 16% average across the state).

Quite frankly the city has a high cost of living, and an extremely poor average hourly wage of just under $23. With over 80% of residents having no college degrees either, mean household incomes aren’t likely to skyrocket in the immediate future. This city is best avoided by all but the bravest of entrepreneurs wanting to launch a thriving local SME.

Were you considering building a local SME in one of these cities?

If so, will you still after reading this?