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Lead Your Team Strategy

The Best and Worst States for Small Business

The Best and Worst States for Small Business
Credit: dizain/Shutterstock

Not all states are created equal when it comes to supporting small businesses, new research shows

State governments that help promote business training and that make it easy to comply with various regulatory issues are perceived as being the "friendliest" to small businesses, according to a study by Thumbtack, a technology-based marketplace that connects Americans with experienced local professionals.

The research revealed that New Hampshire, Utah and Texas were rated as the friendliest states for small businesses. These three states were the only ones to receive an "A+" grade from small business owners, who judged states and cities on 12 factors that affect running a business.

Those factors included how easy it is to get up and running, how easy it is to hire new employees, how difficult it is to comply with licensing and certification requirements, how easy it is to file taxes, the type of zoning or land use regulations that must be followed, and the availability of helpful training or networking programs.

The states to receive an "A" or "A-" grade were Louisiana, Colorado, Idaho, Tennessee, Virginia, Georgia, Kansas and Oklahoma.

"Given that there is a crisis of entrepreneurship in the United States, seen in the broad collapse of self-employment across industries and states, creating the right environment for business startups is more important than ever," Jon Lieber, Thumbtack's chief economist, said in a statement.

The study discovered that offering training on how to build and run a business and better understand economic and environmental policies are the biggest factors influencing perceptions of friendliness. Specifically, small business owners who had positive training experiences were 1.5 times more likely to rate their states as being very supportive. [How to Start a Business: A Step-by-Step Guide ]

The research also shows that having regulations that are easy to comply with matters much more to the small businesses surveyed than does tax equity, which is the rate at which business owners pay taxes. For examples, labor rules that are easy to comply with were 88 percent more important than tax rates when judging a state's friendliness.

For the second year in a row, California, Rhode Island and Illinois ranked among the worst states for small business, each receiving an "F." Massachusetts, Maryland and New York were also poorly rated, receiving either a "D" or" D+" grade.

When broken down by city, small businesses in Manchester, New Hampshire; Dallas, Texas; Richmond, Virginia; Austin, Texas; Knoxville, Tennessee; Nashville, Tennessee; Houston, Texas; Fort Collins, Colorado; Boulder, Colorado; and San Antonio, Texas, gave their cities the highest scores. Conversely, Hartford, Connecticut; Albuquerque, New Mexico; Buffalo, New York; New Haven Connecticut; and Providence, Rhode Island, were judged as the worst.

Training opportunities, licensing regulations and having websites thatare easy-to-use and provide useful informationwere the most critical factors in determining the cities small business owners considered most friendly.

The study was based on surveys of 17,633 small businesses across the United States. Respondents to the survey were largely very small service businesses with five or fewer employees. Every state in the country was represented, although only states with more than 50 responses and cities with more than 30 responses were given a grade.

Chad  Brooks
Chad Brooks

Chad Brooks is a Chicago-based freelance writer who has nearly 15 years experience in the media business. A graduate of Indiana University, he spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including, local and state government, crime, the legal system and education. Following his years at the newspaper Chad worked in public relations, helping promote small businesses throughout the U.S. Follow him on Twitter.