4 Reasons Small Cities Are Better for Business The short commutes in a community grateful that you started a business are just the beginning of the benefits.
By Zac Carman Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
A recent study by MoneyRates.com found that smaller cities have a lot to offer young entrepreneurs who launch their startups outside of major hubs like San Francisco, New York and Chicago. That's because big cities are more likely to take entrepreneurship for granted while smaller cities typically offer incentives that make life as an entrepreneur easier and more attractive.
Although Texas, Florida, North Carolina, Colorado and South Dakota rank the highest on MoneyRates' list, there are plenty of other states that welcome entrepreneurs. Take Overland Park in Kansas, where politicians are working to attract tech entrepreneurs. In 2015 they initiated LaunchKC, a global grants competition formed to bring the best and brightest to the city to build their new businesses.
Related: The 25 Best Cities For Entrepreneurs -- and How You Can Make the Most of Yours
In Tulsa, Okla., where ConsumerAffairs is headquartered, there are amazing resources like venture assistance programs, angel investing groups and pitch competitions. The presence of nearby universities, including Oklahoma State University-Tulsa, Tulsa Community College, Oral Roberts University and the University of Tulsa, doesn't hurt either. With nearly 50,000 students enrolled in colleges and universities in the Tulsa metro area, our city has an energetic and educated population, as well as plenty of skilled labor to recruit and hire.
Building a tech startup in a small but thriving city like Tulsa has provided some great advantages and has certainly had an impact on the company's early and continued success. Let's look at four core reasons why relocating to a smaller hub may be better for your business.
1. Bigger incentives and perks.
The broader economic environment of a town makes a big difference in the success of a startup and whether entrepreneurs even try to launch in the first place. As a result, a supportive environment is key. Because state taxes can create a barrier to profitability for businesses, entrepreneurs are better off in cities with relatively low state business tax burdens.
In most states, corporations are subject to a corporate income tax, while income from S Corporations, Limited Liability Companies (LLCs), partnerships and sole proprietorships are subject to a state's tax on personal income. Regardless of the amount of income, corporate rates generally range from 4-9 percent, and personal rates range from zero percent for small amounts of taxable income to 9 percent or more in some states.
In Oklahoma, I not only have the benefit of tax breaks but also promotional and recruiting assistance. In 2016, an entrepreneurial resource center called 36 Degrees North opened in Tulsa's growing Brady Arts District, with financial assistance from the George Kaiser Family Foundation. With its seven conference rooms, 48 desks for rent and 10 private offices, the 11,500-square-foot space serves as a central gathering place for aspiring entrepreneurs and is a testament to the growing entrepreneurial movement here in Tulsa.
Related: Industries Driving the Top 10 Small Cities for Business Owners
2. Fresh ground for development.
As an entrepreneur, you naturally become part of the fabric of development in smaller cities that are trying to expand on existing businesses, to attract new businesses and to develop a startup environment. Being located in a smaller city gives you the opportunity to be a pioneer in the area of development, which can help you forge closer partnerships with other local business owners and remain at the forefront of your community's development. For instance, we created an Entrepreneur Organization in Tulsa. EO is an international organization, but we only launched a Tulsa chapter this year.
Taking part in building the Tulsa business community has helped me network with other local business owners and have a say in the direction the city takes. I would be hard pressed to find a similar opportunity in a larger city.
3. Little to no commute.
Smaller cities are a win-win for both the employer and the employee. Most have a commute time that's almost non-existent, plentiful housing options and a much, much lower cost of living than their big city counterparts.
With a cost of living rating of 84.60, Tulsa is cheaper than the U.S. average of 100. For comparison, the cost of living rating in San Francisco is 242 compared to 168 for New York and 106.50 for Austin. In addition to the higher cost of living, workers face a lengthy commute on a daily basis in New York, Los Angeles and San Francisco, where traffic adds 10-15 hours of transit time a week to get to and from the office. The maximum commute time to our office is 30 minutes, which leads to happier employees because they have more free time to spend with their families or friends.
With our location in Tulsa, I can offer workers a better work-life balance, which makes for overall happier and more productive employees.
Related: Forget Silicon Valley: Build Your Business in the 'Burbs
4. Higher talent retention rates.
The advantage of a big city is its growing population, which creates consumer demand and economic opportunity for young people. Although there's an inordinate amount of young talent in big cities, there co-exists the risk that they will be poached by a bigger company like Google, Microsoft or Facebook. I don't have to worry about that as much because there aren't as many tech companies based in Tulsa who are in a position to hook my employees. As a result, vacancies are rare. ConsumerAffairs reports an annual employee retention rate of 98 percent. Staffers at ConsumerAffairs earn an equivalent salary to those based in the Bay Area who are in comparable positions but without the big city hassles of being based in San Francisco.
Our local talent pool might be smaller, but we're still selective. We employ high-performing individuals who don't have to be micromanaged. Like Netflix and other hot startups, ConsumerAffairs rewards its salaried employees with unlimited vacation and freedom to work flexible hours as long as they are performing at or above our expectations.
Going against the grain and launching your business outside of Silicon Valley, or any other major city, can have a number of benefits for a young startup. Entrepreneurs who go this route may find their company has more of a chance to thrive instead of getting lost in the highly competitive climate of bigger cities.
