Launching a new business is always a risky venture, and as the COVID-19 pandemic rages on, entrepreneurs face even tougher challenges. According to the Census Bureau’s Business Formation Statistics for June, seasonally-adjusted business applications totaled 448,533, a drop of 9.8% from May.
However, monthly statistics are brief snapshots and likely impacted by short-term circumstances. Viewed over the longer term, new business formation remains robust despite the pandemic and resulting initial economic shock. The Peterson Institute for International Economics estimates the number of business startups rose from 3.5 million in 2019 to 4.4 million in 2020, a 24% increase during the height of the national shutdown. For where to live after starting your business, see the most (and least) expensive states to buy a home.
The ultimate success of a new company depends greatly on the conditions of where it’s located. Entrepreneurs target states with a large and educated labor pool as well as those that offer reasonable business costs and a strong business environment.
To identify the best and worst states to start a business, 24/7 Wall St. reviewed data from WalletHub, which ranked each state across three key dimensions — business environment, access to resources, and business costs. WalletHub used 28 metrics like average business revenue growth for business environment, human capital availability for access to resources, and office space affordability for business costs. 24/7 Wall St. added seasonally-adjusted estimates for June 2021 unemployment rates from the Bureau of Labor Statistics.
It’s not surprising, therefore, to find Georgia and Texas as the top two states on this list. They have a reputation for being welcoming to fledgling businesses. And despite its notoriety for being a high-cost state, California ranks third overall as it offers easy access to resources and a solid business environment. Oh, and there is the sunshine and beaches, too.
Where not to start a business? Northeast states New Jersey and Connecticut offer a less hospitable environment for new companies, but nevertheless rank high in access to resources like a sizable workforce. And entrepreneurs might want to consider states where the most people are vaccinated.