Special Report

The Best (and Worst) States for Business

The United States has experienced 71 straight months of private sector job growth through January. This consistent improvement, stretching back to February 2009, has been a boon for existing businesses and new ones as well. The recovery has not been even, however, and some states have seen more substantial growth than others.

While the factors affecting the success of a region’s businesses are varied, and can seem almost random at times, there are socio-economic conditions, differences in geography, and regional regulations that can make running a successful business easier in one state than in another. To determine which states have the best and worst business climates, 24/7 Wall St. identified and reviewed nearly 50 measures of doing business. These were divided into eight major categories: economic conditions, business costs, state infrastructure, the availability and skill level of the workforce, quality of life, regulations, technology and innovation, and cost of living.

A healthy economy reflects the success of businesses, and is also important to future growth. Substantial GDP growth in a state is indicative of new businesses being started and existing businesses increasing revenues. The more a regional economy grows, the more liquid capital is available to consumers and investors, which is also important for growth.

Click here to see the best (and worst) states for business.

A good place for business must also be an appealing place to live. While many Americans move to be near their place of work, financial factors — such as income, homeownership costs, the relative cost of goods, and tax burdens — can influence the decision to relocate. Similarly, other characteristics that affect quality of life in a region — such as the crime rate, the availability of good schools, and access to art, entertainment, and recreational establishments — can in part influence who moves there. Ultimately, businesses in attractive locations are likely to have better access to talented and motivated workers.

In many cases, states with a high share of competitive, educated employees can reach economic success due to a greater ability to innovate. Many of the best states for business foster a healthy entrepreneurial atmosphere, with high volumes of venture capital deals and patents issued. Many of these states have a high share of jobs in the STEM fields — science, technology, engineering, and math — allowing them to better facilitate technologically advanced business activity.

It should be noted that while a well-educated workforce and an abundance of STEM workers is one model for a flourishing business environment, the success of a state economy is tied to a host of factors, and not all of these benefit businesses in the same way. What is good for one type of economy may not be ideal in another.

While it is more important in some industries than in others, a low cost of doing business is a major reason to choose to operate in a particular state. Low costs in some states are often driven by beneficial tax climates, lower utility and real estate expenses, and lower average employee compensation.

The business climate in some states was more favorable to companies primarily concerned with minimizing the costs and risks of operating a business. These states, which include South Dakota, Montana, and Iowa, tended to enjoy ample natural resources, low cost of living, and low regulation. While higher incomes and more STEM jobs are important for states like California and Massachusetts, states like South Dakota, Iowa, and Montana have seen economic growth, even with wages well below the national average.

Click here to read our methodology.

These are the best (and worst) states for business.

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