10 cities where it's the cheapest to get a startup off the ground
- Startups are prominent in cities like San Francisco, New York City, or Washington DC — but those are also among the most expensive places to start a new business.
- Depending on your industry, it can be advantageous to start a business in one of the US cities with the lowest costs.
- SmartAsset ranked the cities with the lowest startup costs based on cost of filing fees, office space rentals, utilities, lawyers, accountants, and payroll for five employees.
- Tennessee is the state with the most cities in the top ten ranking — Chattanooga takes the top spot while Knoxville and Memphis take eighth and ninth respectively.
Famously, Apple started out of a garage with little up-front cash. But your typical startup requires more than just a some empty space and a brilliant idea. To create a successful company, you need some money to pay for office space, employees and everyday bills from utilities to legal fees. This can dampen entrepreneurs' ability to bring their business ideas to life especially if they don't have much capital in their savings account. Imagine trying to start a new company in San Francisco with its exorbitant cost of living. Below we look at a slew of factors to rank the cities with the lowest and highest startup costs in the country.
To rank the cities with the lowest startup costs we looked at data on a variety of metrics that affect businesses. We looked at the cost of filing fees, office space rentals, utilities, lawyers, accountants, and payroll for five employees. For a more detailed breakdown of our methodology and sources see our data and methodology section below.
This is our fourth annual look at startup costs. Read the 2017 version here.
Key findings
- Startup capitals are expensive — When you think of startups, you think of the Bay Area or maybe New York. But according to our data, those cities, along with Washington, DC, are the most expensive places to start a new business. Of course, depending on your industry, like finance in New York or tech in San Francisco, being in a particular place is worth the additional costs. In such a case, you may have no choice but to set up shop in in the most expensive areas if you want your startup to succeed.
- Tennessee is plenty affordable — In total, the Volunteer State has three representatives in the top 10. Chattanooga takes the top spot while Knoxville and Memphis take eighth and ninth respectively.
1. Chattanooga, Tennessee
ShutterstockChattanooga, Tennessee is the most affordable place to start a company, according to our data. Office space here is affordable and hiring workers for your business won't bankrupt you, at least right away. We estimate payroll for five employees will cost just over $214,300 per year. Combine payroll with renting an office and paying your lawyer and accountant and we estimate the annual cost of running a new business in Chattanooga to be about $236,600 per year.
2. Greensboro, North Carolina
Wikimedia Commons/Beyonce245Another city in the South offers companies competitive rates for starting businesses. Last year we estimated payroll for five employees would cost $213,400 per year. Now that figure has jumped up to $216,500, good news for employees but less good news for business owners. Regardless, Greensboro occupies the second spot. If you are attracted by the affordability of starting a business here, it may make sense to start one that targets the textile industry. Occupations like upholsterers and textile bleaching and dying machine operators are more than 20 times more common in Greensboro than they are in the rest of the county.
3. Wichita, Kansas
Sean Pavone/ShutterstockKansas' largest city comes in third. Filing fees here are some of the lowest in the top 10 at only $140. The cost of renting an office is also very reasonable. According to our research 1,000 square feet of office space should cost about $14,720 per year. Even the cost of lawyers and accountants is lower than in the two cities ranked above. Wichita falls to third because of payroll costs. Five full-time employees will cost over $219,300 on average, the Bureau of Labor Statistics estimates.
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