Vermont Business Magazine Small businesses are on the rise in the US, and according to MIT, they thrive or die based on location. Where you choose to start a business can be one of the most important decisions you make as an entrepreneur; location determines quality of life, cost/tax burdens, and the size of the consumer market. Vermont was among the five worst in this study, while Texas was rated best; West Virginia was worst.
Given the importance of location, FitSmallBusiness.com, an online business publication, sought to determine the best and worst states to start a business in 2019 based on key financial, social, and demographic factors. The patterns they discovered were not surprising: the states at the top of the list enjoyed ample funding (through loans and grants), a large and educated labor pool, and low tax burdens. The worst states suffered from lower average incomes — indicating less “spending money” for businesses’ target consumers — poor quality of life, and limited startup resources.
It’s worth noting, however, that there was no solid geographic pattern uncovered in our study. States in both our best and worst lists stretched from north to south and coast to coast. So while location itself is a key consideration for new businesses, it’s clear that key factors are less tied to any geographical pattern and more to the nuanced business, financial, and social makeup of each state.
FitSmallBusiness.com considered the following data points in their study:
- General business environment (30%) – We looked at statistics on how businesses fare in each state by considering data on economic growth, the percentage of new businesses, and business survivability rates. States with sustained growth and innovation were preferred in our consideration.
- Tax climate (20%) – Tax rates vary greatly from state to state and directly affect profit margins. This, in turn, can determine whether or not a business is able to succeed. For this reason, our ranking favored states with lower taxes.
- Startup costs & availability of funding (20%) – The cost to start a business and the availability of funding — such as business loans and grants — varies by state and can greatly impact the feasibility of starting a business. We looked for states that have lower costs and significant funding opportunities.
- Labor market (10%) – Businesses are only as good as the people running them, so we sought states that have low unemployment rates, indicating a healthy labor market. We also look at the percentage of the total population with some level of higher education, indicating a skilled workforce.
- Quality of life (10%) – Work-life balance impacts a business owner’s quality of life and the likelihood they can avoid burnout, so we looked at quality of life scores by state. These scores consider the favorability of both natural and social environments.
- Cost of living (10%) – New business owners need to live somewhere that is affordable, leaving them with more money for their business. Therefore, lower cost of living was favored in our ranking.
The commentary provided for Vermont was rather scathing:
"Vermont is a great destination to watch the leaves turn colors, but it’s not a great place to start a business and turn a profit. It’s the country’s second worst state to start a business, largely due to it’s expensive environment. It has both high tax rates, high business startup costs, and a high cost of living. Where it isn’t lacking, it’s simply average; the state’s business survivability rate and economic growth rate are middle of the road.
"Vermont has a tradition for keeping it local — especially when it comes to food. While there are a few examples, such as Ben & Jerry’s, that prove nationwide brands can be born in Vermont, it’s rare. Short of looking to build a local food business, entrepreneurs looking to put down roots in New England should opt for its neighboring state, New Hampshire, which clocks in at No. 8 on our list of the best and worst states to start a business."
Source: NEW YORK, July 31, 2019 /PRNewswire/ -- FitSmallBusiness.com