The 5 Best (and Worst) States for Small Businesses

by Kyle Woodley | May 8, 2012 8:18 am, in partnership with the Ewing Marion Kauffman Foundation, recently released new data on governmental “friendliness” toward small businesses.

The Small Business Survey[1] draws data from an extensive, nationwide universe of job creators and entrepreneurs themselves to investigate the best places in the country to do business.

“Six thousand small-business owners have told an unusually nuanced story about what they value in their state or city government,” said Sander Daniels, co-founder of “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. Easy-to-understand licensing regulations and well-publicized training programs are often overlooked as critical tools necessary to support small business.”

The top five friendliest states were scattered through the Midwest, Mountain West and South, and the five least friendly states could be found along the coasts:

5 friendliest 5 Least Friendly
1. Idaho 1. Rhode Island
2. Texas 2. Vermont
3. Oklahoma 3. Hawaii
4. Utah 4. California
5. Louisiana 5. New York

Idaho, Texas, Oklahoma and Utah all earned “A+” grades for their friendliness towards small businesses. In contrast, small-business owners gave California, Hawaii, Vermont and Rhode Island an “F,” while New York narrowly avoided this lowest category with a “D” grade. Top performing cities included Oklahoma City, Dallas-Fort Worth and San Antonio.  

Other key findings of the survey:

“We were truly surprised about the importance that small businesses place on licensing regulations when rating the business-friendliness of their state or city,” Daniels told InvestorPlace. “The national conversation often revolves around whether tax rates are too high or too low — but it turns out that tax rates are an afterthought for very small businesses that are doing everything they can just to get off the ground. We did not expect to find that well-publicized training programs and easy-to-understand licensing regulations are the best predictors of small-business-friendliness.”

The full results can be seen here and include full sets of rankings, dozens of easily searchable quotes from small businesses nationwide, regional comparisons within states, and Census data comparing states’ and cities’ key demographics against those of other states and cities.

Kyle Woodley[2] is the assistant editor of[3].

  1. Small Business Survey:
  2. Kyle Woodley:

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