Best & Worst States To Start A Business In 2024

With Silicon Valley’s world famous startup culture and reputation, you might think California is the best state in America to start a new business.

You’d be wrong.

According to a new study looking at data across a wide array of sources, WalletHub has ranked Utah as the state with the most favorable conditions to new businesses. California ranks No. 13 overall.

“Utah is the best state for starting a business because businesses have greater access to loans than in any other state, and Utah has the largest annual employment growth in the country, at nearly 2.5%,” says Cassandra Happe, WalletHub Analyst.

“During a time when money is tight, having ready access to capital and being in a state where business is booming can mean the difference between a startup thriving and dying during its first few years.”

FIVE BEST STATES TO START A BUSINESS

For the report, WalletHub collected data up through December, 2023, from more than a dozen public and private sources including the U.S. Census Bureau, Bureau of Labor Statistics, Center for Digital Government, Gallup, U.S. Bureau of Economic Analysis, and others.

All of the best states for starting new businesses happen to fall outside the traditional entrepreneurial hubs along the West and East coasts.

Georgia was ranked as the second best state for new businesses due to its high entrepreneurship rates, strong private-sector revenue growth, and strong business clusters – interconnected businesses that specialize in the same fields.

Florida’s booming local economy propelled it to the third-ranked state on the list. Florida has of the highest GDP growth rates in the country at more than 4%. And, despite its reputation as a retiree playground, Florida’s working age population (ages 16 to 64) is rising faster than many other states.

Idaho and Nevada round out the top five as seen in the chart below.

5 BEST AND WORST STATES TO START A BUSINESS

UTAH VS CALIFORNIA FOR NEW BUSINESSES

Odds are already stacked against new businesses, no matter where they are located. According to the U.S. Bureau of Labor Statistics, nearly one-fifth of all startups fail in the first year and half never make it to five years.

So how does Utah give new businesses the best shot at survival?

For starters, it offers the easiest access to business loan financing over all 50 states. It also has the largest year-over-year employment growth in the country, at nearly 2.5%, and one of the lowest average health insurance premiums, saving its business owners money on employee benefits.

Finally, Utah was recognized as one of the best states on the “Digital States Survey” from the Center for Digital Government, which measures how well states are using technology to improve the efficiency of their businesses.

California’s notoriously high costs, meanwhile, makes it harder for new businesses to make it in the long run. The state ranked 47th for office-space affordability, 46th for labor costs, and 49th for the cost of living. It ranked first in availability of human capital and sixth in industry variety.

METHODOLOGY

For its ranking, WalletHub evaluated states across 25 metrics in three categories: Business Environment, Access to Resources, and Business Costs. Each metric was graded on a 100-point scale and used a weighted average to calculate a state’s overall score.

Business Environment, worth a total of 50 points, included metrics such as the average length of the workweek, growth in number of small businesses, startups per capita, five-year business survival rate, job and GDP growth, and the amount of engaged workers according to Gallup’s “State of the American Workplace,” report.

Access to Resources, worth 25 points, included metrics such as accessibility of financing, venture investment, and share of college-educated workers.

Business Costs, worth 25 points, looks at metrics such as office affordability, labor costs, corporate taxes, employee insurance premiums, tax rates, and cost of living.

See the full ranking report to learn the best and worst states on each metric.

NEXT PAGE: How every state ranked for new business creation according to WalletHub