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16 May, 2022

Best State to Start a Business

What is the best state to start a business? The state of Utah is considered the sixth best destination, or state, for both starting a new business, and opening a small business, in two separate national reports, released recently, that used various quality-of-life and business environment metrics. Utah ranked especially well for consumer spending, and climate. The business environment also weighed very positively for Utah in the national rankings.

In fact, places in the West and Southeast make up a majority of the top 10 listed states rated for preferability for launching a business.  There are some states more conducive to entrepreneurship than others, with states like Utah offering supportive business environments or superior access to resources. 

Deciding where to launch your business is just as important as the type of business you plan to open. These two comprehensive reports offer guidance to business owners for which states are most advantageous when it comes to starting a business, large or small.

As a business owner, you may also choose to evaluate other indicators catering to your own unique preferences your specific industry.

Scoring Factors for “Best States to Start a Business”

The source for the report entitled, “Top 10 Best States to Start Your Small Business in 2021” is The Blueprint. 

There are six important factors small business owners should consider when launching a new business, according to The Blueprint. Each factor is scored on a scale of 1-10.  

Among these scoring factors for state ranking related to business openings are: 

Tax Climate 

The tax climate assists small business owners in understanding which states have preferable tax conditions. Some of the factors taken into account for tax climate are individual income tax, sales tax, property tax, unemployment insurance tax, and corporate tax. 

Rate of New Entrepreneurs 

This rating indicates the favorability of the environment for entrepreneurship. For example, how many entrepreneurs are successful in launching a business enterprise in a particular state? 

Consumer Spending in the State 

Consumer spending is an indication for the small business owners’ market potential. While this indicator does vary by industry, the macro view shows the overall market potential for each state. 

Business Survival Rate Over 5 Years 

This rate is an indicator of the general business climate in a particular state. On average,

half of all businesses fail within the first five years. However, there are certain states that have better long-term rates of business survival. This specific data point looks at businesses that have made it from 2015 to 2020. 

Labor Costs 

Labor costs are based on the median household income of each state. Small business owners could anticipate paying more for labor in certain states with higher median household incomes. 

Climate

This metric assesses the ways climate impacts a state. The number is based on the average number of FEMA-designated disasters per square mile for each state. As climate change persists in affecting and exacerbating natural disasters, this number is expected to continue increasing. 

Best States to Start a Small Business in 2021 – Utah #6 

According to The Blueprint, here is the top 10 list for the best place to start a small business as listed in the report, “Top 10 Best States to Start a Small Business”: 

1)     Montana 

2)     South Dakota 

3)     Florida 

4)     Texas 

5)     Idaho 

6)     Utah: 

  Total Score — 6.26

  Tax Climate — 5.16

  Consumer Spending — 10.00

  Rate of New Entrepreneurship — 3.89

  Business Survival Rate — 5.80

  Labor Costs — 3.55

  Climate — 9.49 

7)     Arizona 

8)     Oregon 

9)     Wyoming 

10)  Nevada 

Utah’s Favorability Points 

Utah experienced a 5.7 percent increase in consumer spending between the years 2018 and 2019.  The majority of dollars was spent on housing and utilities. Being situated in the Rocky Mountains, Utah is considered quite safe from natural disasters. 

Also, to Utah’s credit, the state provides connectionsto numerous new business resources for new entrepreneurships. However, the rate of new entrepreneurs in Utah is lower than the surrounding states, with a five-year survival rate of 49.8 percent. 

Utah falls approximately in the middle on tax climate, with a top corporate tax rate of

4.95 percent which is identical to the individual income tax rate. Combined state and local tax average is 7.18 percent. 

The 10 Best States to Start a Business – Utah #6 

With respect to another report entitled, “The 10 Best States to Start a Business,” published by WalletHub, places in the West and Southeast make up a majority of the top 10 – similar to the other report. Some states are more conducive to entrepreneurship than others, providing supportive business environments or superior access to resources. 

This report by WalletHub pulls data from the U.S. Census Bureau and the Bureau of Labor Statistics. They analyzed 28 metrics, including the number of startups per capita, the share of the college-educated population, and the cost of living.All of these factors determine the best states to start a business across three specific dimensions, which include access to resources, business environment, and business costs. 

Here are the 10 Best States to Start a Business, according to WalletHub: 

1)     Texas 

2)     Georgia 

3)     California 

4)     Florida 

5)     Idaho 

6)     Utah 

7)     Colorado 

8)     North Dakota 

9)     North Carolina 

10)  Massachusetts 

Some of these states that perform well, according to WalletHub’s list, also rank highly among the U.S. News & World ReportBest States for Business rankings, and they include Utah, Colorado, Idaho, California, Georgia, and Massachusetts. 

Here is how Utah rates for specific indicators in the “Best States for Business” rankings:

Utah

Business creation rate:  4.0%

Tax burden:  9.4%

Patent creation:  579.7 per million people

Utah ranked No. 1 for its economy in the Best States rankings. 

Drilldown Solution Can Help Your Small Business Optimize Profits 

At Drilldown Solution, we are all about helping small businesses to be profitable. Our fractional CFOs are highly skilled and able to assist you in establishing a robust financial system while providing you with keen insights, strategic guidance, and fiscal leadership to support your growth and ascendance in the marketplace. 

Drilldown Solution offers a full suite of financial services that includes bookkeeping, accounting, and tax preparation. We have the expert team to help any small business thrive, even under the current COVID-19 pandemic circumstances. We accomplish this endeavor with a three-part system comprised of patient-experience excellence, financial focused operations, and accountability. 

Our goal at Drilldown Solution is to put your small business in the best financial position possible, utilizing proactive processes and personal care!

 

Heather Porter

DrillDown Solution was founded in 2004 and has helped thousands of people save on taxes and achieve their best financial position possible.

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