Businesses that use virtual offices appreciate the concept of keeping business costs low. Beyond the costs of physical offices, of course, there are labor costs and taxes to consider when choosing where to expand your company.

Virtual offices can cut the overhead, but if you expand into a city where other fixed costs are through the roof you can erode your competitive advantage if you eventually plan to establish a larger presence.

KPMG is offering some insights on the cost of doing business in U.S. cities in a new study called “2010 Competitive Alternatives.” Armed with this information, companies looking to expand in new cities factor in costs beyond the nominal fee they’ll pay for virtual office space.

"Our study offers a comprehensive guide for comparing business costs in the United States and contains valuable information for any company seeking a cost advantage in locating a business operation, especially in the current economic climate," said Hartley Powell, national leader for KPMG's Global Location and Expansion Services practice. "Selecting the best site for a business operation requires balanced consideration of many factors, including business costs, business environment, personnel costs and quality-of-life issues."

Tampa Wins Cost Battle
Tampa the least-costly place to do business among 22 U.S. cities and locations with populations exceeding 2 million, according to KPMG. Tampa had a cost index of 96.0, representing business costs 4.0 percent below the U.S. national baseline of 100.

Atlanta was the second most cost-competitive location in the large-cities category, followed by Miami and Baltimore, ranking third and fourth, respectively.  Atlanta’s cost index is 96.3, Miami sits at 97.0 and Baltimore at 97.1.

The KPMG study reveals Atlanta's ranking was driven primarily by competitive business-operating costs in such areas as office leasing, transportation, labor, and employee benefits, along with a favorable effective corporate-tax rate. Miami benefited from low labor and transportation costs, while Baltimore was helped by low property tax and sales tax costs.

Dallas-Fort Worth, St. Louis, Houston and Phoenix also rated high in the study. Dallas-Fort Worth has a cost index of 97.7, ranking fifth among the large U.S. cities.  St. Louis ranked sixth with a cost index of 97.8, benefiting from very competitive salary and wage costs and very low industry lease costs. In fact, St. Louis tied with Chicago for the lowest industrial-lease cost among the 22 large cities in the study. Houston and Phoenix ranked seventh and eighth, with cost indexes of 97.9 and 98.1, respectively.

Los Angeles Most Expensive
By contrast, the most expensive places to do business in the large-cities category were Los Angeles, New York and San Francisco. San Francisco and Los Angeles, with cost indexes of 104.1 and 101.4, respectively, also have very high sales tax costs, while New York's very high industrial-lease costs contributed to its high ranking with a cost index of 102.0.

And while San Francisco ranks as the most expensive place to do business among 22 large U.S. cities studied, it is not the most expensive U.S. city to do business, according to the study. That distinction goes to Honolulu, in the study's small-cities category, with a cost index of 107.3.

When it comes to site selection, these are all factors to consider. The beauty of a virtual office is that it lets you avoid most of the costs of doing business in a city. You pay one monthly fee, with prices beginning at $75, and get a prestigious business address in your city of choice, along with support services like call forwarding.

Check out this video and get to know Tampa...