The 10 Worst Places to Start a Business


Do you want to start a small business right now? Some cities may be better than others.

The first rule of starting a small business is to go where the customers are. Unfortunately, current economic conditions have made those places few and far between. Although some industries continue to flourish in certain regions, many cities that were once economic boomtowns are no longer small biz hot spots.

A February 2009 Bizjournals study analyzed the nation’s 100 largest metropolitan areas to identify the cities that are the most promising for the creation and development of small businesses. The study factored in the concentration of small businesses, total number of small businesses, population growth and private sector employment growth. (Employment figures are from the U.S. Bureau of Labor Statistics from 2003 to 2008).

According to the Bizjournals’ study, here are the 10 worst cities to start a small business:

1. Detroit
Detroit has seen housing prices plummet during this housing crisis and the foreclosure rate soar. The decline of the auto industry has triggered a surge in unemployment. Private sector employment went down 7.5% from 2003 to 2008.

2. Toledo, Ohio
Toledo has also seen its share of layoffs. Many of its jobs are also linked to the automotive industry. The city has lost 2.5% of private sector jobs in the last five years.

3. Modesto, Calif.

Despite a surge in population, Modesto has a very weak concentration of small businesses, only 17.6 for every 1,000 residents. That’s 28% below the national average.

4. Dayton, Ohio
A classic example of an economy that has lost many of its manufacturing jobs, Dayton has seen its private sector employment fall by 4.2% between 2003 and 2008. The unemployment rate in Dayton is one of the largest in Ohio, reaching 8.4% in January.

5. Rochester, N.Y.
Rochester is another city in the long line of rustbelt cities to suffer in the jobs department. Although the unemployment rate is not has high as other cities on this list, Rochester does have a low concentration of small businesses (22.3 for every 1,000 residents) and a negative population growth (-0.8%).

6. Riverside-San Bernardino, Calif.
Of all the cities in this study, Riverside-San Bernardino has the third lowest concentration of small businesses, with 16.2 for every 1,000 residents. Despite positive population growth, this area does not sustain small business ventures. Additionally, housing prices fell rapidly when the California housing bubble burst.

7. Springfield, Mass.
Springfield has also seen an economic slump from the decline in manufacturing, which had lasted for decades. This may have contributed to its low concentration of small businesses (22.2 for every 1,000 residents).

8. Worcester, Mass.
“Taxachussetts” has one of the highest corporate income tax rates in the nation at 9.5%. This may have something to do with why this second-largest city in the state has a low concentration of small businesses (23.1 for every 1,000 residents).

9. Memphis, Tenn.
Memphis has one of the lowest concentrations of small businesses in the country, with 20.4 for every 1,000 residents. That’s 17% below the national average. Housing prices are falling here, too.

10. Oxnard-Thousand Oaks, Calif.
With its mounting state deficit and high taxes, California is far from a beacon for small business ventures. On top of that, the housing market has suffered a serious blow. Oxnard-Thousand Oaks is no exception, and entrepreneurs have not found much success in this area.

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at

Show Comments

Back to Top