How Small Business Friendly is Your State?

For those of you in the United States, do you know how small-business friendly your state is? 

Uh-huh.  I thought so.  You don’t have a clue.

Then take a look at the Small Business Survival Index.  Every year the Small Business and Entrepreneurship Council puts out a ranking of the 50 U.S. states plus the District of Columbia.  This year’s most small-business friendly state is South Dakota, followed by Nevada.  At the bottom of the list are New Jersey and the District of Columbia.  Here are the rankings:

Small Business Survival Index 2007

Click for larger chart 

The Index measures 31 different government costs that affect small businesses and entrepreneurs.  The 31 costs include direct costs such as corporate tax rates and capital gains rates, as well as indirect costs including crime rates and number of government employees per capita.  

Important fact: between 2000 and 2006, the population in the top 25 states in the Index grew twice as fast as in the lower 26.  Yes, lower costs really do drive growth.

Get all the details by downloading the 2007 Small Business Survival Index report (PDF).


Anita Campbell Anita Campbell is the Founder, CEO and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses.

6 Reactions
  1. But who REALLY wants to live in South Dakota? No offense to you South Dakotans, but come on…really…The only place above Georgia that I would want to Live is South Carolina, and it’s like an hour and a half away from Georgia.

    Although, I would like to have a house on the side of a mountain in Colorado. One day…

  2. Hi Graham, well, every state has its own defining attraction. Even if it’s just the presence of family and friends.

    What I found interesting here is that California, home of Silicon Valley, is at the bottom of the list. It’s an expensive place to do business.


  3. I can’t believe New York beats New Jersey! I thought New York would be the last place.

  4. Anita, great idea for an article especially in an election year. In my estimation, it comes down to a “safety-net” mentality. Those states that shift the burden of responsibility to the individual are defacto – pro business. However, states that hold with the idea that government should be the sugar-tit of the masses, make it almost impossible to turn a buck. Wealth redistribution- or social re-engineering is the objective in these instances.

    I side with the notion that maco economic factors such as the market clearing rental cost of capital decide the best playing field (states).

  5. While I claim no political party affiliation, I did notice that the more small business friendly states tend to be those of more conservative roots while the unfriendlies are more liberal based. Neither good nor bad, but I think it speaks to the mindset of that breed of politician.