Worst places to start a business? These California cities made the bottom 10
Starting a business in California? You might want to be careful where you move, according to WalletHub.
The personal finance website recently ranked the best and worst small cities to start a business in 2026, based on access to financing, commute times, office space affordability and other factors.
“Size matters when choosing a city in which to launch a startup,” WalletHub financial writer Adam McCann wrote in a Monday, April 13, article.
Aspects that can help companies find their footing range from how quickly the number of small businesses grow to investor access and labor costs, according to the WalletHub study.
“The benefits of starting a business in a small city include lower overhead costs, stronger relationships with customers and the potential to become a big fish in a little pond,” WalletHub analyst Chip Lupo said in the article.
Drawbacks can include “limited industry options, a less diverse customer base and difficulty attracting and keeping top talent,” Lupo added.
See where California cities ranked, and why:
What’s the best California city to start a business?
Twentynine Palms in San Bernardino County was the highest ranking California city on WalletHub’s list of the best spots for startups, landing at No. 160.
The Southern California city is home to the Marine Corps Air Ground Combat Center and close to Joshua Tree National Park.
Twentynine Palms ranked the highest in the business environment category, scoring lower for access to resources and business costs.
The average rent in Twentynine Palms is 26% lower than the national average, according to Apartments.com.
According to WalletHub, these are the five best small cities for people starting businesses in California:
- Twentynine Palms
- Santa Paula
- South Gate
- Cathedral City
- Redding
What is California’s worst small city for startups?
According to WalletHub, Pacifica in San Mateo County was the worst small city in the nation for a startup.
The Bay Area city ranked last out of 1,334 cities around the United States, with an overall score of 30.18 out of 100.
Pacifica ranked relatively low in all three categories — business environment, access to resources and business costs — but scored the lowest when it came to the price of doing business.
The cost of living in Pacifica is 69% higher than the national average, according to the Economic Research Institute.
Labor costs in Pacifica are higher than the national average as well, with residents earning an average annual salary of $87,554.
What are 10 worst small cities for business owners?
With soaring living costs, low office space availability and a high corporate tax rate, California is among the most challenging states for business owners.
According to WalletHub, all 10 of the worst small cities for startups are in Northern California, with the majority in San Mateo, Contra Costa and Santa Clara counties.
Those counties rank among the wealthiest in the Golden State, according to SmartAsset.
According to SmartAsset, these were the 10 worst small cities in the nation for starting a business:
- Pacifica
- Danville
- Castro Valley
- Saratoga
- Belmont
- Morgan Hill
- Martinez
- Brentwood
- Los Gatos
- San Carlos
How does WalletHub come up with its ranking?
To rank the nation’s best small cities to start a business, WalletHub focused on those with 25,000 to 100,000 residents.
The personal finance website looked at three categories:
- Business environment: Average commute time, work week length and startups per capita
- Access to resources: Workforce education, working age population growth and access to financing
- Business costs: Office space affordability, labor costs, corporate taxes and cost of living
WalletHub used data from sources including the U.S. Census Bureau, Bureau of Labor Statistics, Federal Deposit Insurance Corporation, Yelp, Indeed and theTax Foundation.
This story was originally published April 15, 2026 at 8:35 AM with the headline "Worst places to start a business? These California cities made the bottom 10."
