Launching a new business is hard — more than 20% of new businesses fail within a year of launching, while only about half last at least five years, according to data from the U.S. Bureau of Labor Statistics. So those who dream of being an entrepreneur want any advantage they can get.
Financial website WalletHub published a new study on Monday that ranks all 50 U.S. states based on which ones have the best conditions for starting a business. For its study, WalletHub compared all 50 U.S. states across three elements: the overall business environment, access to resources and business costs. Within those three categories, WalletHub rates each state based on 26 key metrics, like start-ups per capita, the percentage of the population that is of working age and college-educated, local cost of living, corporate tax rates and labor costs, among others. Each state received a total score on a 100-point scale based on how it performed across those metrics.
Texas landed the top spot on WalletHub's ranking of the best states to start a new business.
The Lone Star State — which is home to such Fortune 500 companies as Exxon Mobil, AT&T and American Airlines — also nabbed the study's top score for business environment. Texas, which was also CNBC's Top State for Business in 2018, has the country's second-largest economy at $1.8 trillion in 2018, behind only California, according to the U.S. Department of Commerce. It also saw the fourth-highest average growth in the number of small businesses among U.S. state in 2018, according to WalletHub.
The runner-up behind Texas on WalletHub's overall ranking is Utah, which is one of the top states for making financing accessible for business owners, according to WalletHub. That helped Utah also rank second in the study's "access to resources" category.
Georgia ranked third in WalletHub's study for the best U.S. states to start a business, with North Dakota and Oklahoma rounding out the top five, respectively.
Here are the top 10 U.S. states for starting a new business, according to WalletHub:
1. Texas
2. Utah
3. Georgia
4. North Dakota
5. Oklahoma
6. Florida
7. Arizona
8. California
9. Montana
10. Colorado
Ranking at the bottom of WalletHub's study is Rhode Island. The state ranks dead last in terms of business environment, according to WalletHub. New Jersey ranks 49th on WalletHub's list, coming in last in terms of business costs, with one of the highest corporate tax rates (9%) of any U.S. state.
Other details that WalletHub found in compiling its rankings include the fact that Mississippi is the state with the lowest labor costs for businesses, while Maryland has the highest costs. Massachusetts also has the most educated population (41% of the population has at least a bachelor's degree) while West Virginia has the least educated population (only about 20%). And, Minnesota has the cheapest office spaces, while three states tied for the most expensive office spaces: New York, California and Alaska.
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