Best & Worst States to Start a Business

WASHINGTON D.C. - Starting a business is never easy. According to U.S. Bureau of Labor Statistics data, about a fifth of all startups typically don’t survive past year one of operation, and nearly half never make it to their fifth anniversary. That’s without considering the economic damage done by the COVID-19 pandemic, which resulted in 200,000 more permanent business closures than usual within a year of the pandemic’s start.

Outside of the pandemic, there are plenty of other reasons that startups fail, with a “bad location” 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 a recent study, WalletHub compared the 50 U.S. states across 28 key indicators of startup success to determine the most fertile grounds in which to launch and grow an enterprise. According to the study, Idaho was ranked as the 5th best state to start a business, behind just Texas, Georgia, California and Florida. 

Idaho also had the highest average growth of any state in the number of Small Businesses. Idaho also ranked 4th for business environment, 8th in business costs and 41st in access to resources. 

Idaho Small Business Growth


In order to determine the best and worst states to start a business, WalletHub compared the 50 states across three key dimensions:

  1. Business Environment
  2. Access to Resources
  3. Business Costs

These dimensions were evaluated using 28 relevant metrics, which are listed below with their corresponding weights. Each metric was graded on a 100-point scale, with a score of 100 representing the most favorable conditions for new-business creation.

Finally, each state's weighted average across all metrics was determined to calculate its overall score. The resulting scores were then used to rank-order the sample.