Everyone knows that it takes money to make money--but it turns out that exactly how much money it takes to start and maintain a successful business can depend largely on where your business operates.
Using data from the latest reports by the Small Business & Entrepreneurship Council, Moody's, Forbes, and CNBC, we've analyzed tax data, real estate prices, and labor and energy costs to identify the most expensive cities in America to start a business.
1. Honolulu, HI
As much as we'd all love to warm up to our work days with a morning catching the waves, starting your business from Waikiki Beach may be less than realistic. Both Forbes and CNBC recently ranked Honolulu as having the highest cost of doing business in the country!
What exactly makes Honolulu such a terrible home for budding business owners? For one, Hawaii has the second highest state income tax in the country, contributing to the state's ranking among the top five least tax-friendly states for small businesses.
Add to that the fact that Honolulu has one of the highest costs of living in the country--due in part to the cost of importing supplies and exporting products from the islands--and it's no wonder that most business owners are quickly lured back to the mainland for anything more than a long vacation.
2. New York, NY
It's little surprise that New York is known as the city that never sleeps. Who has time for sleep when trying to make a profit in the country's second most expensive city for small businesses?
One of the biggest line items on a New York entrepreneur's balance sheet is office space. At $153 per square foot per year, commercial rents in Manhattan rank just behind Hong Kong as the second most expensive in the world!
Meanwhile, business owners in New York are also coping with one of the country's worst state tax systems for small businesses, all while supporting employees' cost of living in the one of the most expensive cities in America.
While the vibrancy of New York's startup culture is worth the price for some entrepreneurs, there's no doubt that starting a business in the Big Apple will cost you big bucks.
3. San Francisco / San Jose / San Diego, CA
Data absolutely supports that California as a whole is a pretty difficult place to start a business.
Forbes lists San Francisco, San Jose, and San Diego as three of its top ten most expensive cities to do business. Rent prices in San Francisco and the surrounding Bay Area--already among the highest in the world--have risen by more than 8% in 2015 alone.
San Francisco and nearby Santa Cruz are among the most expensive places to live in America--and to make matters worse, California has the decidedly worst state tax system in the union for small businesses.
With so many factors stacked against the Golden State, it's no wonder that more and more tech startups are setting up shop outside of Silicon Valley.
4. Boston, MA
Labor costs are the main factor driving the high cost of doing business in Bean Town. Not only is cost of living in the Boston metro area 18.4% above the national average, the city is also home to the most highly educated population in the country.
In addition to personnel costs, commercial real estate in Boston is notoriously expensive. Rental prices for office space--averaging $75 per square foot per year--are among the highest in the world. And while Massachusetts ranked the best of any state on our list for tax friendliness--property tax rates in Suffolk County are among the highest in the country.
5. Fairfield / New Haven, CT
Chief among the cost considerations for New Haven and Fairfield business owners is personal and employee cost of living. After all, Fairfield County is home to two of the top fifteen most expensive places to live in America.
As a state, Connecticut ranks among the top five highest for both cost of living and cost of doing business. This is due in part to its status as one of the fifteen worst tax systems in the country for small businesses--with the highest gas tax, 7th highest capital gains tax, 8th highest corporate income tax, and 9th highest state property tax rates in the United States.
Of course, price shouldn't be the only factor for entrepreneurs deciding where to start a business. Networking connections, availability of top talent, and customer demographics are equally important considerations in choosing a business home. But before you choose one of these top five most expensive places to start a business, make sure your reasoning is worth the impact to your bottom line.