Economic conditions in recent years have allowed for small businesses to thrive in the U.S. Overall GDP growth, a boom in small-business lending, advances in technology and more have all attributed to this. However, small businesses are growing at different paces in different states. We decided to dig into various data to determine the health of small-business economies throughout the U.S.
The Best States for Small Business Owners
We formulated our score off of employees working in small businesses, small business survival rates, small business birth rates, and exports owned by small businesses. The strongest states also rank highly in owning a significant portion of the state's total exports of goods and services.
- Employees Working in Small Businesses: 1
- Small Business Survival Rate: 9
- Small Business Birth Rate: 24
- Exports Owned by Small Businesses: 1
- Employees Working in Small Businesses: 10
- Small Business Survival Rate: 1
- Small Business Birth Rate: 29
- Exports Owned by Small Businesses: 3
- Employees Working in Small Businesses: 49
- Small Business Survival Rate: 43
- Small Business Birth Rate: 11
- Exports Owned by Small Businesses: 2
- Employees Working in Small Businesses: 6
- Small Business Survival Rate: 22
- Small Business Birth Rate: 7
- Exports Owned by Small Businesses: 8
- Employees Working in Small Businesses: 25
- Small Business Survival Rate: 21
- Small Business Birth Rate: 5
- Exports Owned by Small Businesses: 7
The Worst States for Small Business Owners
The following 4 states had the lowest overall scores for small businesses. It is worth noting that the following states, except for Washington, also display low productivity growth when compared to the national GDP growth.
- Employees Working in Small Businesses: 42
- Small Business Survival Rate: 27
- Small Business Birth Rate: 38
- Exports Owned by Small Businesses: 45
- Employees Working in Small Businesses: 43
- Small Business Survival Rate: 49
- Small Business Birth Rate: 20
- Exports Owned by Small Businesses: 49
- Employees Working in Small Businesses: 31
- Small Business Survival Rate: 35
- Small Business Birth Rate: 31
- Exports Owned by Small Businesses: 46
- Employees Working in Small Businesses: 16
- Small Business Survival Rate: 36
- Small Business Birth Rate: 47
- Exports Owned by Small Businesses: 33
- Employees Working in Small Businesses: 34
- Small Business Survival Rate: 20
- Small Business Birth Rate: 49
- Exports Owned by Small Businesses: 24
The Rest of the States
Nationally, the average stats for employees working in small business, small business survival rate, small business rate, and exports owned by small business are 50%, 68%, 109%, and 31% respectively. Here's a full list:
|Rank||State||Employees Working in Small Businesses||Small Business Survival Rate||Small Business Birth Rate||Exports Owned by Small Businesses|
The Top (and Bottom) States In Major Categories
Here we explain our factors a bit more in detail and give a more in depth view as to what state ranks both strongly and weakly for each scoring parameter.
Employees Working in Small Businesses
Although small businesses make up more than 99% of all businesses in the U.S., the portion of employees who actually work at small businesses is very different from state to state. For example, 41.3% of all employees in Nevada work in a small business while the rest work in larger corporations. This metric helps show the balance between small businesses and larger businesses in a given state, and how the workforce is divided in each.
Small Business Survival Rate
The small business survival rate is how many businesses opened and stayed open for a span of at least two years. This metric serves as a strong indication of how well suited a state's market is to small businesses. For example, 74.2% of small businesses opened in North Dakota stayed open for at least two years.
Small Business Birth Rate
The small business birth rate tracks the rate at which small business are opened vs. closed. For example, CO has a birth rate of 129%. This means 29% more small businesses were being opened versus how many were closed. One of the things this factor helps show is how low barriers of entry are in a given state.
Exports Owned by Small Businesses
Exports of goods and services by a given state are great indications as to what a state's total revenue stream looks like. We were able to analyze what percentage of those total exports by state are attributable to small businesses. For example, small businesses were responsible for 70.8% of Montana's total exports in a given year.
In order to determine the best states for small businesses in the U.S. we looked at multiple data points from various sources. We prioritized data that would most accurately indicate whether small businesses would succeed or not. Although we didn't highlight them above, we also took into account state unemployment and productivity growth. Below, we breakdown each data point to its origin.