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April 22, 2024 | Tom Ballard

WalletHub ranks best small cities in which to start a business

Tennessee places 20 communities on the list with 10 in Middle Tennessee, six in the eastern third of the state, and four in West Tennessee.

If you want to successfully start a business in a small town in the Volunteer State, your best choice is probably a city in Middle Tennessee.

That’s our takeaway from a recent WalletHub analysis of 1,334 communities with fewer than 100,000 residents across 18 key metrics. The data set ranges from small business growth rates and the accessibility of financing to investor access and labor costs. A total of 20 cities in the Volunteer State were ranked, and 10 of those were in Middle Tennessee. Six cities from the eastern third of the state were ranked, and four from West Tennessee made the list.

Leading the Volunteer State was Spring Hill, the highest-ranked small community at #143. Only one other Tennessee city – La Vergne at #281 – cracked the top 300. The other rankings were as follows:

  • Jackson (#339);
  • Smyrna (#371);
  • Lebanon (#383);
  • Columbia (#424);
  • Franklin (#446);
  • Maryville (#459);
  • Brentwood (#505);
  • Johnson City (#526);
  • Morristown (#555);
  • Cleveland (#556);
  • Hendersonville (#571);
  • Cookeville (#600);
  • Oak Ridge (#631);
  • Mount Juliet (#715);
  • Kingsport (#906);
  • Germantown (#929);
  • Bartlett (#1077); and
  • Collierville (#1124).

What was WalletHub’s methodology? The personal finance website compared the cities across three key dimensions: (1) Business Environment; (2) Access to Resources; and (3) Business Costs. For its sample, WalletHub chose cities with a population of between 25,000 and 100,000 residents. “City” refers to city proper and excludes the surrounding metro area. Each city was then evaluated across the three key dimensions using 18 relevant metrics with weighting applied. Here is more information about the process:

Business Environment – Total Points: 50

  • Average Length of Work Week (in Hours): Full Weight (~5.56 Points);
  • Average Commute Time: Full Weight (~5.56 Points);
  • Average Growth in Number of Small Businesses: Double Weight (~11.11 Points);
  • Startups per Capita: Double Weight (~11.11 Points);
  • Average Revenue per Business: Full Weight (~5.56 Points);
  • Average Growth of Business Revenues: Full Weight (~5.56 Points); and
  • Industry Variety: Full Weight (~5.56 Points).

Access to Resources – Total Points: 25

  • Financing Accessibility: Double Weight (~5.56 Points) calculated as follows: Total Annual Value of Small-Business Loans / Total Number of Small Businesses;
  • Investor Access: Double Weight (~5.56 Points);
  • Human-Resource Availability: Full Weight (~2.78 Points) calculated by subtracting the “unemployment rate” from the “number of job openings per number of people in labor force”;
  • Higher-Education Assets: Full Weight (~2.78 Points) which was based on WalletHub’s “College & University Rankings”;
  • Workforce Educational Attainment: Full Weight (~2.78 Points) which is a measure of the percentage of the population aged 25 and older with at least a bachelor’s degree;
  • Working-Age Population Growth: Full Weight (~2.78 Points) based on those aged 16 to 64; and
  • Job Growth (2022 vs. 2018): Full Weight (~2.78 Points).

Business Costs – Total Points: 25

  • Office-Space Affordability: Full Weight (~6.25 Points) which is based on the  per-square-foot cost of commercial office space;
  • Labor Costs: Full Weight (~6.25 Points) which is based on the median annual income;
  • Corporate Taxes: Full Weight (~6.25 Points); and
  • Cost of Living: Full Weight (~6.25 Points)

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