Study: Memphis Among Cheapest Cities for Startup Costs

By Andy Meek

A newly published national study focused on the cost of launching a startup in the U.S. has given props to the startup ecosystem in Memphis, ranking it one of the lowest-cost cities in which to launch a startup.


Tennessee is home to three of the top 10 cities with the lowest startup costs, according to the second-annual study on the topic from the personal finance technology company SmartAsset (

Memphis came in at No. 7 on the list this year, moving up two places from the 2015 list, when the city was the listed as the ninth-cheapest city for launching a startup. Chattanooga claimed the top spot for the second year in a row; Knoxville came in at No. 5, moving down one spot from last year’s list.

To prepare its ranking, SmartAsset studied 80 of the largest cities in the country. In its analysis, the firm added up costs that a new business would incur in its first year of operation – things like payroll, the cost of utilities and legal and accounting fees, among others.

For purposes of the ranking, SmartAsset considered a new startup in Memphis with its own 1,000-square-foot commercial office space and five employees on the payroll. That business, during its first year in operation, could expect to spend almost $19,000 on its office space; almost $1,900 in utility costs; and almost $210,000 on payroll, according to the study.

None of the results about Memphis should come as a surprise, according to a summary of the study’s findings. Thanks to an affiliation of startup accelerators here, new ventures keep relocating to the city from around the country – and the world. And “Memphis has historically served as a place where business leaders have thrived. Six Fortune 1000 companies,, including FedEx, have headquarters in the city,” according to SmartAsset.

Affordability is indeed important, agrees Leslie Lynn Smith, president of Memphis’ EPIcenter organization, which is focused on entrepreneurship efforts. But it’s not the only thing that’s important – nor is it the only thing drawing entrepreneurs here.

“I think it certainly helps that the dollar goes farther in Memphis,” Smith said. “But I also think that as a standalone asset it is not enough to build a strong entrepreneurial community.

“I think what goes along with that is access to quality programming and to customers. I think the culture and community around entrepreneurship is definitely strong and strengthening. I also think there’s a particular accessibility here to those sort of private-sector partners that doesn’t exist in other places.”

Other draws Smith cites that inspire entrepreneurs to hang out their own shingle here are things like the sense of place inherent in Memphis, encompassing everything from the river to the music and cultural scenes and the diversity on offer here.

Start Co. founder and CEO Eric Mathews agrees with Smith that Memphis is highly competitive for startups from an affordability perspective but adds that a multitude of other factors is propelling the ecosystem here as well.

“For local startups it is an advantage that they already realize,” said Mathews, whose organization is a nonprofit that offers a collection of industry-specific startup accelerators. “For recruiting startups to come to Memphis, it is not part of the value proposition that we sell. First and foremost, recruits are looking at the strength of the program, the network of partners, and the capital availability that drive the conversation.”

Overall, he adds, leaning on “low-cost” isn’t the best strategy; emphasizing “high program value,” instead, is the way to go, he says.