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The Best States for Small Businesses in 2019

image for mavo/Shutterstock
mavo/Shutterstock
  • Thumbtack's annual survey polled more than 5,000 local small business owners in 49 states and 44 cities.
  • Only seven states and three cities received an A+ ranking.
  • Approximately 76% of SMB owners polled said they felt there was "enough economic opportunity in their community" to be successful.

There are several key factors that immediately have an impact on your level of success when you're starting a small business. One of the most important decisions a fledgling SMB owner can make is where to set up shop. Location matters, and according to a newly released survey, it can determine how easy you'll be able to get your business off the ground.

Released earlier today, Thumbtack's 2019 Small Business Friendliness Survey polled more than 5,000 SMB owners throughout the country to determine how easy or difficult it was to start a business in their home states and cities. Respondents answered more than 40 questions on the matter, ranging from local tax code and licensing regulations to the ease of finding workers.

Kellyn Blossom, the head of public policy at Thumbtack, said the information was important for a number of reasons, including the upcoming 2020 elections.

"Small business owners are active, involved members of their communities and local economies," she said. "Our survey shows the economic impact of healthcare, housing and transportation are top of mind for them. With 96% of small business owners planning to vote in the 2020 elections, they could have a big impact on the outcome."

Americans are a diverse bunch. Thanks to the influx of numerous nationalities and races, people of all ages, colors, genders, and political ideologies have the opportunity to start a business and make their own way in life.

Even though there's no such thing as the "typical American small business owner," researchers found that most survey respondents were 35 to 44 years old (28%), male (56%) and white (69%), with at least an associate's or technical degree (30%). Approximately 47% of respondents have been in business for five or more years, 48% work alone, and 28% work in events-related industries.

Looking at the survey's respondents through a political lens revealed that 30% considered themselves Democrats, 30% were Republicans, 31% were independent, and 9% said they were "other." Furthermore, 10% were either veterans or actively serving in the military.

As the country continues to experience economic growth, it's no surprise that Thumbtack's survey found that 76% of small business owners said they felt their communities had enough economic opportunities available to them to survive and succeed. Of the remaining respondents who felt there wasn't enough local opportunity, 42% live in suburban communities, 31% live in rural areas, and 26% live in urban locations.

According to researchers, respondents said the three most important things state policymakers can do to foster a stronger small business community were "lowering or simplifying taxes, improving access to healthcare and insurance benefits, and making housing more affordable."

Image courtesy of Thumbtack

According to the survey, here are the top 10 friendliest states:

  1. Arkansas
  2. Virginia
  3. Mississippi
  4. Georgia
  5. Maine
  6. Delaware
  7. Utah
  8. Montana
  9. Maryland
  10. Florida

The top seven states on the list have an A+ ranking.

Here are the top 10 SMB-friendly cities:

  1. Austin, Texas
  2. Fort Worth, Texas
  3. Oklahoma City, Oklahoma
  4. Houston, Texas
  5. Atlanta, Georgia
  6. Denver, Colorado
  7. Washington, D.C.
  8. Manchester, New Hampshire
  9. Salt Lake City, Utah
  10. Memphis, Tennessee

At the city level, only the top three were given an A+.

The bottom 10 states (and their grades) in terms of SMB friendliness are as follows:

  1. New Jersey (D+)
  2. Rhode Island (D+)
  3. Michigan (D+)
  4. Wisconsin (D+)
  5. South Carolina (D)
  6. Hawaii (D)
  7. Kansas (D)
  8. New York (D)
  9. Connecticut (F)
  10. West Virginia (F)

These are the bottom 10 cities (and their grades) for small businesses:

  1. Providence, Rhode Island (C-)
  2. Louisville, Kentucky (C-)
  3. New Haven, Connecticut (C-)
  4. Bridgeport, Connecticut (C-)
  5. Milwaukee, Wisconsin (D+)
  6. St. Louis, Missouri (D+)
  7. San Diego, California (D)
  8. Philadelphia, Pennsylvania (D)
  9. Hartford, Connecticut (F)
  10. Honolulu, Hawaii (F)

One major determining factor of how friendly a location may be for small businesses is the proximity to workers and potential customers. Researchers found that without enough affordable housing and public transportation, many locales just don't lend themselves to a conducive small business environment.

According to the survey, many small business owners reported finding it difficult to find housing near their customer base. As a result, 32% of respondents said they commute between 31 and 60 minutes each day, while 7% said their travel time to work is more than an hour long. Within this group of commuters, 93% said they drive themselves to work, with just 3% saying they utilize public transportation.

In addition to the time spent on their daily commute, respondents sounded off on the difficulty of gaining certain benefits. Thanks to rising healthcare costs, only 79% of small business owners said they currently have health insurance, with 58% of that group reporting that their monthly costs have gone up in the last year. Even more shocking were the 30% of SMB owners who said their monthly premiums increased by more than $100. In terms of other health benefits, 64% said they had dental insurance, and 59% said they had vision coverage.

When it comes to planning for the future, researchers found that just 44% had access to a retirement savings account, such as an IRA or 401K.

As we get closer to the 2020 election, a major focus has been placed on national politics. While legislators in Washington have a major impact on the country's economic future, it's officials at the local, county and state level that often impact small businesses the most.

Through their research, officials found that 86% of the small business owners polled were registered to vote, with 96% planning to vote in the coming election. Even though President Trump's tax plan aimed to help small businesses and the middle class, just 33% of respondents said they approved of the president's economic policies.

Andrew Martins

Andrew Martins is an award-winning journalist with a Bachelor of Arts in journalism from Ramapo College of New Jersey. Before joining Business.com and Business News Daily, he wrote for a regional publication and served as the managing editor for six weekly papers that spanned four counties. Currently, he is responsible for reviewing tax software and online fax services. He is a New Jersey native and a first-generation Portuguese American, and he has a penchant for the nerdy.