The U.S. is reported to be home to over 5,000 colleges and universities. Depending on the size and diversity of the population, many of them grow to define the place in which they are situated. Influxes of students make up large proportions of the population, molding the culture and spirit of what’s known as the college town.
For some, these towns become home after graduation. These people seem to prefer to stick to what they know when they settle into employment or start a business – but is it the right choice? If you’re about to graduate and want to start your own enterprise, you need to establish a lot of things. Everything from finding an office in which to work to purchasing your first virtual number is ahead of you. But first – should you settle in your college town?
To find out, we undertook some research, pitting the best US college towns against each other to find out which are the most suitable for starting a business.
Methodology
According to small business research firm NFIB, the top 10 issues for small businesses include the economy, cash flow, taxes, and locating qualified employees. So, we devised six vital ranking factors for those looking to start their own business (see the bottom of the post for our data sources:
- Percentage of opportunity entrepreneurs
- Percentage of startups that survive the first year
- Average rental price of office space
- Business tax rate score
- Future job growth
- Cost of living
We then compared 50 of the best college towns in the states (according to bestcollegereviews.org with a population of less than 500,000), giving each a percentile score to find out which are best for starting up a new enterprise. Based on the criteria, here’s the top 10:
In first place comes Lafayette, Indiana. The town’s students, who reside at Purdue University, make up over half the town’s population of 68,000, making it a great place to study and then start your own business.
Following closely behind is Columbia, Montana, which excelled at the rate of startups that survive their first year (85.32%). Rounding off the top three is East Lansing, Minnesota, which was positioned in the top 10 for both startups survival rate and business tax rate.
Here’s how the top 10 faired for each factor:
1. Lafayette, IN
Top 3 Positions:
- Average rental price of office space: $16 (1st)
- Cost of Living: 83.5 (3rd)
- Business Tax Rate Score: 10 (7th)
Overall score: 431
Business-focused graduates in the college town of Lafayette, IN, are in the strongest position in the US to start their own business. The town performed particularly strongly for those hoping to keep their finances tight. Not only did they finish joint 1st for office rental prices ($16 per square foot per year), but the town also finished in the top 10 on the cost of living and business tax rate.
Lafayette was positioned in the bottom half for only one factor – opportunity entrepreneurs. Defined as the rate at which entrepreneurs who create a business do so by choice rather than a necessity, Lafayette finished 36th with a score of 83.41%.
2. Columbia, MO
Top 3 Positions:
- Percentage of startups that survive the first year: 85.32% (1st)
- Average rental price of office space: $20 (8th)
- Cost of Living: 93.9 (11th)
Overall score: 410
Coming in second is Columbia, Montana. For startups, the rate of survival is better in Columbia than any other of the top college towns (85.32% are still trading after the first year). This could be in part due to how well it scores in the cost-effective areas, positioning strongly for office rental prices and the cost of living.
Columbia is let down by a bad performance on future job growth; a score of 26.83 places the college town 40th out of 50.
3. East Lansing, MI
Top 3 Positions:
- Percentage of startups that survive the first year: 81.47% (8th)
- Business Tax Rate Score: 13 (10th)
- Percentage of opportunity entrepreneurs: 87.59% (14th)
Overall score: 403
In third is Michigan’s East Lansing. Home to Michigan State University, the town also has several schools ranging from medical and veterinary to law. For those wanting to start a business, East Lansing can draw on the town’s local concentration of graduates.
East Lansing finished in the top 20 in four of the six factors, its highest being 8th for startup survival. As their lowest rank was only 26th (future job growth score of 36.33), the town’s only shortfall is a lack of top-5 positions.
4. Ames, IA
Top 3 Positions:
- Percentage of opportunity entrepreneurs: 93.98% (2nd)
- Average rental price of office space: $17 (5th)
- Cost of Living: 93.4 (10th)
Overall score: 403
Iowa is the strongest performing state in our study, with three college towns making it into the top 20. The best performing of which is Ames, home of Iowa State University. It’s a credit to the city that 93.98% (2nd overall) of their entrepreneurs start businesses based on choice.
Ames is nudged into 4th by the smallest of margins, scoring just 0.1 less than East Lansing. It’s performance on business tax rate – a score of 45 placing it 40th – is likely responsible.
5. Waterloo-Cedar Falls, IA
Top 3 Positions:
- Average rental price of office space: $16 (1st)
- Cost of Living: 80.1 (1st)
- Percentage of opportunity entrepreneurs: 93.98% (2nd)
Overall score: 390
More than any other college town, Waterloo-Cedar Falls suffers from extreme results. With two first positions (office rental prices and cost of living) and a second-place (percentage of opportunity entrepreneurs), you might expect to see the college town finish higher than fifth.
However, disastrous scores on future job growth (19.89 places them 48th) and business tax rate (45 results in joint 40th place) dragged the town down.
6. Bozeman, MT
Top 3 Positions:
- Future job growth: 50.3 (3rd)
- Business Tax Rate Score: 5 (3rd)
- Percentage of startups that survive the first year: 80.59% (10th)
Overall score: 390
Bozeman, Montana, is squeezed out of the top five by just 0.2 points. The town’s top three positions are all business-focused. Future job growth is strong, and together with a low business tax, over 80% of startups survive their first year.
Bozeman, which is home to Montana State University, is mainly let down by its higher cost of living. Scoring 129.9, it comes in 44th place.
7. Gainesville, FL
Top 3 Positions:
- Business Tax Rate Score: 4 (1st)
- Average rental price of office space: $21 (12th)
- Future job growth: 39.56 (14th)
Overall score: 387
Just three points back from Bozeman is Florida’s best-performing college town – Gainesville. Home to students from the University of Florida, Gainesville is one of the most vibrant college towns on the map.
Despite having the best business tax rate in the study (scoring just 4), Gainesville doesn’t rank for anything else in the top 10, meaning it couldn’t squeeze any higher than 7th.
8. Athens, GA
Top 3 Positions:
- Average rental price of office space: $16 (1st)
- Future job growth: 49.38 (5th)
- Cost of Living: 93 (9th)
Overall score: 380
Like 5th place Waterloo-Cedar Falls, Athens, Georgia, has a mixed bag of results. It joins two other college towns with the cheapest office rental space prices ($16 per square foot per year) and has two other top 10 scores (future job growth and cost of living).
However, Athens is the only top 10 college town that comes last for one of our factors. At 73.48%, the startup survival rate is the lowest of all the 50 college towns, making it a risk for any entrepreneur looking to launch their business.
9. Tacoma, WA
Top 3 Positions:
- Percentage of opportunity entrepreneurs: 92.01% (5th)
- Future job growth: 39.87 (13th)
- Percentage of startups that survive the first year: 80.28% (15th)
Overall score: 358
One of the biggest college towns in the study, Tacoma, WA, is home to over 200,000 people, five universities, and has earned comparisons to a smaller version of Seattle. Tacoma’s only top ten position comes from their percentage of opportunity entrepreneurs (92.01%).
Despite three other scores in the top 20 (future job growth, startup survival rate, and business tax rate), Tacoma is let down by its cost of living. At 120.6, it comes a lowly 39th, pushing the town down to 9th overall.
10. Fargo, ND
Top 3 Positions:
- Percentage of opportunity entrepreneurs: 88.26% (11th)
- Average rental price of office space: $21 (12th)
- Business Tax Rate Score: 17 (14th)
Overall score: 355
North Dakota is the location of the final college town to make our top 10. Fargo makes up 16% of the state’s population, making for a thriving college town that could home any ambitious new enterprise.
In four of the six ranking factors, Fargo came between 11th and 15th, making it a solid and consistent business offering. Its biggest failing comes from the survival rate of startups. At just 77.01% it finishes in 46th, meaning there’s some risk for those who wish to start a business in Fargo.
For many of us, our college town becomes our long-term home. As your familiarity of the town grows, it becomes the obvious choice for those wishing to start a new business. With this research, you can get a gauge of how startup-friendly your college town is, helping you decide whether it’s the right move or not.
Where we got the data
Percentage of opportunity entrepreneurs – Kauffman’s Indicators of Entrepreneurship (source)
Percentage of startups that survive the first year – Kauffman’s Indicators of Entrepreneurship (source)
Average rental price of office space – 42floors.com (source)
Business tax rate score – 2019 State Business Tax Climate Index (source)
Future job growth – Best Place (source)
Cost of living – Best Places (source)
