While many small U.S. cities offer unique opportunities to business startups, they also present a unique set of challenges, according to a recent study by WalletHub.
Despite the lure of lower overhead costs, stronger relationships with customers and the potential to become a big fish in a little pond, entrepreneurs wanting to build large professional networks aren’t likely to make as many connections in a town with fewer residents, the data showed, with other restrictions including limited industry options, a less diverse customer base and difficulty attracting and keeping top talent.
In 2025, 61% of startups say they fear the rising cost of goods and services most, as 62% of small business owners list inflation as their top concern and 30% cite labor shortages.
Meanwhile, the commercial insurance market sits at roughly $845 billion in 2025, according to The Business Research Company, with the market projected to reach $1235.92 billion by 2029 at a compound annual growth rate of 10%.
Major trends during the forecast period include digitization and insurtech integration, parametric insurance, sustainability and climate risk management, data analytics for risk modeling, product customization and flexibility, regulatory compliance and changes.
“Small business owners are demonstrating remarkable resilience amid economic headwinds,” said Chris Rhodes, president and chief insurance officer at NEXT Insurance. “This data underscores the importance of providing accessible, tailored insurance solutions to help these businesses navigate their specific needs and protect their operations during times of market volatility and overall uncertainty.”
The slideshow above illustrates the worst small U.S. cities for business startups as selected by WalletHub.
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