The 10 Best and Worst States for Small Business

The state best known for growing spuds may be fertile ground for small businesses too. Idaho ranks first, along with Texas, in a new survey that of entrepreneurs that sought to identify the states that are most – or least – friendly to small businesses.

The two-month survey of more than 6,000 small business owners nationwide was conducted by Thumbtack.com, an online service that helps users hire service professionals, in partnership with the Ewing Marion Kauffman Foundation. It found that Idaho, Texas, Oklahoma and Utah all earned A+ grades from business owners, while Louisiana, Georgia, Virginia and New Hampshire received A’s.

At the other end of the scale, California, Hawaii, Vermont, and Rhode Island all got F’s and New York scored a D.

The rankings were based on how respondents rated the ease of starting a business in their state, the level of support offered to small businesses and whether the entrepreneurs would encourage others to create a business there. Alaska, North Dakota, South Dakota, West Virginia and Wyoming were excluded from the results because each of those states received fewer than 10 responses in the survey.

Idaho scored well almost across the board, including for its regulatory and tax environment. But it got a D for the costs, beyond salary, of hiring new employees. Texas, similarly, scored well in most categories, though it got a B+ for hiring costs, a C+ for training programs, and a C for networking programs.“Although Texas and Idaho clearly come out on top as the nation's friendliest states towards small business, entrepreneurs value a lot more than just low tax rates,” the co-founder of Thumbtack.com said in a statement announcing the results. “Easy-to-understand licensing regulations and well-publicized training programs are critical tools necessary to support small business.” In fact, the survey found that, overall, licensing issues were almost twice as important as tax rates to small-business owners considering their state or local government's overall entrepreneurial appeal. 

The survey also looked at individual cities, and Texas is home to three of the top five: Dallas-Fort Worth, San Antonio and Austin, all of which received an A+. Oklahoma City got top marks, receiving A+ grades across the board with the exception of an A for taxes. Atlanta, Colorado Springs, Omaha and Salt Lake City all received A’s. The three cities ranked as least friendly to small business are all in California. Sacramento, Sand Diego, and Los Angeles all got F’s, as did Tucson.