The Importance of Choosing the Right Location for Your Business
When starting your own business or side hustle, selecting the right location is crucial to your success. Local and state laws can greatly impact your operations, including taxes, zoning regulations, and licensing requirements. According to the U.S. Small Business Administration, being strategic about where you set up shop can significantly influence your chances of survival in the competitive business landscape.
Why Location Matters
Research shows that 20% of new businesses fail within the first two years, with a staggering 45% failing within the initial five years. To beat these odds, it’s essential to assess the area where you plan to establish your business carefully.
Capital on Tap, a company specializing in providing credit card and spending management solutions for small businesses, analyzed data to determine the survival rates of startups in various states. This can help you make an informed decision when choosing the best location for your entrepreneurial venture.
Image Credit: John Coletti | Getty Images. Boston, Massachusetts.
Qualities of Business-Friendly States
Before diving into the data, it’s important to understand what factors make a state conducive to business growth and success. Here are some key qualities to look for:
Taxes
A business-friendly tax environment can significantly impact your bottom line. Consider states that offer tax incentives for small businesses and have favorable tax policies to help cut costs and maximize profits.
Workforce
A state with a skilled and educated workforce can provide you with the talent necessary to build and grow your business. Look for areas near universities or colleges to attract fresh graduates and experienced professionals.
Regulations
Business regulations play a vital role in your company’s compliance and operational efficiency. Choose states with supportive government programs and minimal red tape to streamline your business operations.
Growth Potential
Seek out locations with a thriving economy, access to funding, and a high quality of life. Proximity to financing sources, good schools, and robust infrastructure can fuel your business’s growth both in the short and long term.
Top States for Small Business Survival
| State | 1-year Avg (%) | 3-year Avg (%) | 5-year Avg (%) |
| Massachusetts | 81.91 | 64.96 | 54.38 |
| Wisconsin | 81.13 | 64.93 | 54.97 |
| South Dakota | 80.44 | 64.03 | 54.88 |
| Minnesota | 80.96 | 63.97 | 53.51 |
| Iowa | 80.85 | 63.71 | 53.65 |
| North Dakota | 79.55 | 63.63 | 53.98 |
| Pennsylvania | 80.69 | 63.51 | 53.18 |
| Montana | 79.60 | 62.79 | 53.03 |
| Hawaii | 79.37 | 62.22 | 52.21 |
| North Carolina | 79.85 | 61.91 | 51.25 |
Massachusetts: A Hub for Small Business Success
With its top-notch universities, vibrant tech ecosystem, solid economy, and educated workforce, Massachusetts is a powerhouse for small businesses. Boston, in particular, serves as a flourishing center for STEM jobs and offers ample opportunities for investment and recruitment.
Wisconsin: A Business-Friendly Oasis
Wisconsin boasts a low cost of living, a robust public university system, and a supportive government that provides tax credits and financial assistance to small enterprises. With initiatives like the Wisconsin Economic Development Corporation (WEDC), the state is investing in the future of startups.
South Dakota: Tax-Friendly Territory
South Dakota stands out for its lack of corporate income taxes, personal income taxes, and property taxes, making it an affordable option for small business owners. The state’s minimal regulatory requirements and low overall costs make it an attractive destination for entrepreneurs.
Minnesota: Thriving in the North
Minnesota offers a conducive environment for small businesses, with high survival rates and a supportive ecosystem. The state’s business development centers and affordability contribute to its appeal as a top destination for entrepreneurs.
Iowa: A Hidden Gem for Entrepreneurs
Known for its high quality of life and low living costs, Iowa provides a welcoming environment for startups. With abundant resources, property tax incentives, and low energy costs, the state offers a competitive advantage for small businesses.
States with the Lowest Small Business Survival Rates
| State | 1-year Avg (%) | 3-year Avg (%) | 5-year Avg (%) |
| Washington | 75.12 | 54.60 | 42.75 |
| District of Columbia | 76.04 | 54.73 | 43.73 |
| New Mexico | 76.64 | 56.58 | 45.58 |
| Florida | 77.00 | 56.82 | 44.95 |
| Nevada | 77.18 | 57.38 | 46.79 |
| New Hampshire | 76.65 | 57.52 | 46.63 |
| Arizona | 77.34 | 58.00 | 46.74 |
| Tennessee | 78.46 | 58.21 | 46.81 |
| Arkansas | 77.64 | 58.24 | 47.25 |
| Rhode Island | 76.76 | 58.30 | 47.75 |
Choose Wisely for Business Success
Selecting the right location for your business is a critical decision that can shape its future. By considering factors such as taxes, workforce availability, regulations, and growth potential, you can position your company for success in a competitive market. Researching state-specific incentives and support programs can further enhance your chances of long-term viability.
Remember, where you choose to establish your business can make all the difference in its survival and growth. Start your entrepreneurial journey on the right foot by picking a location that aligns with your business goals and values.