A new study has come out revealing which states are the “most friendly” and “least friendly” for entrepreneurs seeking to start a new business.

Local services startup, Thumbtack and the Kauffman foundation published this study after collecting data from more than 12,000 completed surveys.

People who responded were asked to grade their states on a letter scale of A-F. Letter grades were assigned to factors like tax codes, ease of hiring, and other important elements of business.

Businessweek’s Patrick Clark writes that the survey shed some important light on the primary concerns of business owners too. They worry about the costs and the difficulty of obtaining a business license as well as concerns about taxes when they expand.

Now here’s where this got interesting. The data revealed some surprising results on the best and worst states to start a business. We’ve listed them below and explained why they matter.

Note: each entry in the survey focuses on data from 2012, 2013, and 2014. You can go to the website and see a gradual evolution of these grades.

THE BEST

Idaho

Idaho received strong marks across the board. The state got an A+ in all of the important categories including overall friendliness, ease of starting a business, regulations, training and networking programs, and health & safety. Ease of hiring was given a B+ while zoning got an A.

Overall, small business owners in Idaho were the most optimistic about the economic outlook. The state had the highest share of startups in the country according to the survey. 19% of respondents said that they had been in business for less than a year. Also, the state had the highest share of entrepreneurs who made most of their money from their own business.

The best city to start a business was the capital, Boise. It ranked as the #1 easiest city for fledgling business owners. Plus, it had an unusually high amount of sole proprietorships.

Its improvement has been impressive. In 2012, Idaho had a D for hiring costs, but that quickly climbed to a B+ just two years later.

Utah

Utah tied its neighboring state, Idaho for the most A+ grades. The only mediocre marks came from training programs. Improvement was seen in the rate of hiring regulations.

Essentially, Utah had a very welcoming environment for small businesses. There are plenty of well-educated owners in Salt Lake City also. The survey mentioned that the city had the second highest numbers of owners with PhDs.

Texas

One of the largest states in the country performed fairly well. High marks were given to the friendliness of the state’s zoning laws and the health and safety regulations. Texas improved considerably across every category except the ease of hiring.

The abundance of cities played a big role in Texas’s spot on the list. Austin has become a cultural hotspot for young entrepreneurs. The annual SXSW festival brings in luminaries from the music and film industry as well as tech superstars. There’s a thriving arts scene forming in the city too.

Houston and Dallas’ proximity to shipping ports makes it easy to form new businesses too. Every city in the state has formed its own identity.

Virginia

The friendliness of health, safety, labor, and licensing regulations earned A+ marks for Virginia. Richmond and Virginia Beach received an A- for being friendly cities. Virginia’s rankings have never dropped below an A in previous surveys.

The government has posted several resources making it easier for owners to get licenses and find any help they need. One interesting thing to note is that African-American owners felt significantly more support for the state government as compared to the other entries on the list.

One potential industry to look into in the state of Virginia is education. The University of Richmond, University of Virginia, and Virginia Tech are some of the most prestigious universities in the county. There should be plenty of opportunities to create businesses that cater to college students.

Three military bases are housed within Virginia Beach for anyone interested in defense. It still remains a popular tourist spot, so a travel-oriented business could be a viable option also.

Louisiana

Aspiring business owners should consider moving down to the Bayou. Louisiana fared pretty well in this survey. The highlights include the ease of hiring new workers, and the environmental regulations.

One odd statistic that the survey mentions is that male business owners were more likely to give positive remarks about the state government than female owners.

Potential business ideas to consider are those related to construction or fishing. You’ll have close proximity to the Gulf so an import/export business may be a good idea. Other environmental jobs such as oil rig worker are also an option. Recovering cities could use help with some rebuilding so there are plenty of opportunities.

The Rest

Rhode Island

This micro state performed terribly, scoring D’s and F’s all across the board. Owners feel that they pay an unfairly high amount of taxes. The capital city, Providence was rated as one of the toughest places to start a business, and other owners would not recommend building a business there.

Illinois

Illinois business owners are some of the most pessimistic in the country according to these results. The state received an F for its friendliness to small businesses and barely reached a C- in some of the other categories. One source of complaints were high taxes.

California

At first thought, California may seem like a great place to build a business. The entertainment and tech capitals of the world are based on the opposite ends of the state. Despite that however, the sunshine state is not friendly for small business.

It received an F for small business friendliness and health, safety and other important regulations. Several major cities in the state including Los Angeles and San Diego received low marks as well.

Extremely high taxes, severe weather conditions, and lack of valid public transportation options in major metropolitan hubs mean that your dreams of finding gold in the west may need to be rethought.

Connecticut

All of Connecticut’s regulatory policies received F’s. Friendliness towards small business received a ‘D’, while ease of hiring, and training and network programs got B’s.

The proximity to New York City provides access to one of the world’s largest consumer markets which has perhaps contributed to a ‘brain drain’, with some of the most talented entrepreneurs choosing to set up shop in NYC instead of their home state.

New Jersey

The Garden state’s business community ranked in the lower part of the list when it came to being optimistic about the state economy. Obtaining health insurance within the state isn’t an easy feat either.


At the end of the day, there have been wildly successful small businesses established in each and very state of the union, so you shouldn’t be put off if you’re considering opening a business in a ‘non small business-friendly state’ – it’ll just be that much more impressive when you nail it.  Good luck and let us know what you think of your state in the comments below.

About the Author

Paul Nugent is a small business advocate, and Head of Marketing at ShopKeep point of sale’s UK headquarters. Paul uses his background in the startup space, along with his POS system expertise, to allow small business owners to make informed decisions within their specific budgets.