Best & Worst States to Start a Business (2024)

, WalletHub Financial WriterJan 16, 2024

Starting a business is never easy. About one-fifth of all startups typically don’t survive past year one of operation, according to the U.S. Bureau of Labor Statistics, and nearly half never make it to their fifth anniversary. Staying afloat is difficult even under normal conditions, and even more so when dealing with high inflation and labor shortages.

Outside of the currently difficult economic conditions, there are plenty of other reasons that startups fail, with a “bad location” being among the most common. Choosing the right state for a business is therefore crucial to its success. A state that provides the ideal conditions for business creation — access to cash, skilled workers and affordable office space, for instance — can help new ventures not only take off but also thrive.

In this study, WalletHub compared the 50 states across 25 key indicators of startup success to determine the most fertile grounds in which to launch and grow an enterprise.

Best States to Start a Business

Overall Rank 

State

Total Score 

Business Environment Rank 

Access to Resources Rank 

Business Costs Rank 
1 Utah 61.08 8 1 29
2 Georgia 60.22 1 25 14
3 Florida 60.17 2 15 28
4 Idaho 58.69 6 16 11
5 Nevada 56.68 11 11 21
6 Arizona 56.51 3 18 30
7 Colorado 56.44 5 9 31
8 Texas 56.19 4 12 34
9 North Carolina 54.86 10 20 18
10 Tennessee 53.32 7 30 26
11 Oklahoma 52.78 22 31 2
12 South Carolina 51.99 12 42 10
13 California 51.88 9 2 48
14 Arkansas 51.69 13 44 6
15 Mississippi 51.52 24 45 1
16 Kentucky 51.40 19 35 4
17 Montana 51.14 16 40 7
18 Alabama 50.53 17 47 5
19 Delaware 50.44 14 5 43
20 Indiana 50.27 26 29 8
21 Washington 49.48 20 4 41
22 Illinois 49.03 37 3 36
23 Wyoming 48.32 25 27 23
24 South Dakota 48.21 42 36 3
25 Michigan 48.09 29 23 19
26 Ohio 46.80 31 32 16
27 Maine 46.00 21 46 25
28 Wisconsin 45.94 43 19 27
29 Minnesota 45.92 34 13 33
30 Louisiana 45.81 30 41 17
31 New Mexico 45.57 35 49 9
32 Iowa 45.39 46 28 15
33 Kansas 45.36 41 38 12
34 Virginia 45.01 23 17 37
35 Nebraska 44.69 39 34 24
36 Massachusetts 44.10 33 8 44
37 Oregon 43.97 18 26 39
38 New York 43.76 28 6 49
39 Vermont 43.36 45 14 32
40 North Dakota 43.06 32 48 22
41 Missouri 43.06 47 39 20
42 Hawaii 41.88 15 43 42
43 Pennsylvania 40.55 44 22 38
44 New Jersey 40.54 38 7 50
45 New Hampshire 40.46 40 37 35
46 West Virginia 38.25 48 50 13
47 Maryland 38.03 27 24 47
48 Alaska 36.52 36 33 45
49 Connecticut 35.61 49 10 46
50 Rhode Island 35.55 50 21 40

Note: With the exception of “Total Score,” all of the columns in the table above depict the relative rank of that state, where a rank of 1 represents the best conditions for that metric category.
 

Avg. Growth in Number of Small Businesses
Highest
  • 1. Idaho
  • 2. Utah
  • 3. Nevada
  • 4. Florida
  • 5. Delaware
Avg. Growth in Number of Small Businesses
Lowest
  • 46. Connecticut
  • 47. New York
  • 48. Vermont
  • 49. Missouri
  • 50. West Virginia
Accessible Financing
Most
  • T-1. South Dakota
  • T-1. Utah
  • 3. North Dakota
  • 4. Iowa
  • 5. Illinois
Accessible Financing
Least
  • 45. Florida
  • 46. Rhode Island
  • 47. Oregon
  • 48. Nevada
  • 49. Arizona

 

Tips for Starting a Business

  • Thoroughly Research Your Market: Before diving in, conduct thorough market research to understand your industry, target audience, and competitors. Identify gaps in the market and ensure there's a demand for your product or service. A strong understanding of your market will guide your business decisions and set you up for success.
  • Create a Solid Business Plan: Outline your business goals, target market, competition, and financial projections in a comprehensive business plan. This document serves as a roadmap for your business and is essential for securing funding from investors or lenders. Regularly revisit and update your business plan as your company evolves.
  • Focus on a Unique Value Proposition: Differentiate your business from others by offering things that stand out. Clearly communicate what sets your product or service apart from the competition and why customers should choose you. A compelling value proposition helps attract customers and build a strong brand identity.
  • Choose a City that Fits Your Needs Well: You should establish your business in a state that has a strong market in your particular niche, with easy access to relevant suppliers. For example, Jeff Bezos started Amazon in Washington in part because of the tech hub around Seattle and the fact that the state’s small population would minimize how much state sales tax they had to collect. Other business-friendly things to look for in a state include low business taxes, a large working-age population and a strong overall economy.
  • Manage Finances Wisely: Keep a close eye on your finances from the start. Develop a realistic budget, monitor expenses, and set aside funds for unexpected costs. Hire an accountant or use accounting software to ensure accurate financial records. Effective financial management is key to the long-term sustainability of your business. Don’t cut corners when it comes to things like licenses and insurance, and don’t put all of your personal income into a business venture.

Ask the Experts

National and state economic policies can greatly affect business creation and the direction they take after launching. For insight into the ways in which different measures impact business, we asked a panel of experts to address the following key questions:

  1. Do you believe that the economic policies being enacted thus far by the Biden administration will promote new-business development?
  2. To what extent do state policies, such as corporate tax rates, influence decisions about whether and where to start a new business?
  3. Are tax breaks and other incentives to encourage new businesses on the net a good or bad investment for states?
  4. Which, in your opinion, are the best industries for starting a business in 2024, and what states are most likely to see an increase in start-ups activity?
  5. What measures can state authorities undertake in order to encourage entrepreneurs to start new businesses in their state?

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