There are nearly 28 million small businesses in the United States. But your odds of success vary greatly based on where you decide to start.

Each year, Thumbtack ranks all 50 states according to how they treat entrepreneurs, based on a survey of small business owners. This year was the most impressive and interesting study yet, with more than 7,500 participating small business owners--and there are some real surprises.

Here are all 50 states, ranked by how friendly they are to small businesses. Among the categories that made up the rankings: how easy it is to start a business and hire people, along with taxes, training, licensing, labor regulations, and government websites. (They also ranked the top 57 cities in the U.S.)

There's a lot of data here, and you should also check out the much more detailed and interactive listing on Thumbtack. Let us know in the comments whether you're surprised at where your state wound up on the list.

1.    South Dakota    A+

The first five states all received A+ grades, so they're ostensibly tied. South Dakota ranks first among equals however, earning A+ ratings in almost every category. The only exception: "ease of hiring," where it got a D. It's a rural state with a small population; that might explain it.

2.    Tennessee    A+

Tennessee scored an A- or higher in 8 of 9 categories. But "government websites" got a D. Nashville also ranked really high, the #6 city in the country for small business friendliness, with an A+ as well.

3.    Alaska    A+

Across the board, Alaska got A+ marks in six of eight categories. The exceptions might have to do with its remote location and small population. Ease of hiring got a C+, and training and networking programs got a D.

4.    Michigan    A+

For overall friendliness, Michigan got an A+, and factors having to do with hiring and starting a business scored well. But the tax code and government websites were in the C and C+ range.

5.    Utah    A+

Nice showing for Utah. A's and B's across the board, and as a city, Salt Lake City also scored an A-. The sore thumb exceptions: Training and networking got an F, and government websites scored a D. 

6.    Georgia     A

Overall, a good, solid showing justifying Georgia's spot near the top: A's and B's in six of eight categories, with training and networking and government websites dragging things down a bit with C and C- grades. Atlanta scored an A-, one of the highest scoring big cities.

7.    Texas     A

This state had the top two ranked cities in America for small business friendliness: Fort Worth and San Antonio, both of which received an A+. (Also, Austin scored a B+ and Houston got a B, while Dallas was only a C+.) Overall it scored well in every category except training and networking (D) and government websites (F). 

8.    South Carolina     A

Very nice showing for South Carolina, which had As and Bs across the board, and also had the #7 city: Charleston, which also got an A. "There is a rapidly growing population and work is abundant," one small business owner said.

9.    North Dakota    A-

It's cold up there, but the small business climate is warm. However, the tax code is complicated and as you might expect given its remote location, ease of hiring only got a D+. Ease of starting a business and overall friendliness were the top categories.

10.    Maine    A-

A bit of a surprise perhaps, but Maine performed really well. Maybe it's all the lobstermen and B&Bs? Ease of hiring got an A+; people didn't like the tax code, which got a C-.

11.    Arizona    A-

The weather is hot and dry, but the small business climate is friendly. Yet another state where training and networking and government websites pulled down the overall ranking however: D and C-, respectively. Also, Phoenix was ranked #17 (and got a B+). 

12.    Alabama    A-

The results here were interesting. Alabama scored A and A- grades in five of eight categories. But low marks in ease of starting a business (D+), training and networking (F), and government websites (F), hurt its overall ranking.

13.    North Carolina    A-

Two high-ranking cities helped out here: Raleigh, which got an A, and Charlotte, which got an A-. Ease of hiring only got a C- and government websites (yet again) got a C. But otherwise a very nice report card, with all As and Bs.

14.    Minnesota    A-

Ease of hiring and tax code both got C- grades. But other than that, small business owners in Minnesota really find their state to be very friendly. They even liked the government websites! (B+). Minneapolis was the #12 city in the country for friendliness toward small business, with an A-.

15.    Massachusetts    A-

Strange results here. (Wicked strange, to coin a phrase.) Across the board, the state got fairly low marks, one B+ for ease of starting a business, but otherwise straight Cs, Ds, and an F (government websites). However, it got an A- for overall friendliness, and also included the second highest-rated city in the Northeast, Boston (A-).

16.    Arkansas    A-

Nice showing. The state got an A+ for both ease of hiring, and employment, labor and hiring. Government websites, once again, was the low performer (D+).

17.    Idaho    A-

Pretty good grades across the board for Idaho---with the exception of ease of hiring (C-), and training and networking (F). Boise only got a C, so factor that in.

18.    Montana    A-

The state tax code got an A+. How often would you expect that? Ease of hiring was only a C+ however; something we might chalk up to it being a rural state with a small population.

19.    Indiana    A-

Everything scored well here (As and Bs)--even the tax code (B-), with two exceptions. Training and networking and government websites both got F grades. Indianapolis got a C-.

20.    Maryland    B+

Tax code and government websites both got Fs; overall friendliness was a B+. Also, Baltimore got a B. 

21.    Nebraska    B+

The state where Warren Buffett got his start got a B+ for overall friendliness, and a B+ overall grade. But the tax code gets an F, licensing gets a D, and really nothing else scored very high. Nice people, though. Also Omaha got a B.

22.    Ohio     B

Ohio was middling performer--lots of Bs, and a C+ for the tax code. But the capital city, Columbus, got an A+. Cincinnati scored a B, but Cleveland dragged things down with a D.

23.    New Hampshire     B

Second-ranked among the six New England states, it had the top-ranked city in the Northeast CK: Manchester, which got an A. Tax code got an A-; ease of hiring got a D+. 

24.    Mississippi     B

Generally good marks: An A- for the tax code and ease of hiring; training and networking got an F, however. 

25.    Virginia     B

Good grades across the board except for training and networking, which got an F and a D+ respectively. Ease of starting a business, ease of hiring, and employment, labor and hiring categories all scored As and A-s.

26.    Louisiana     B

Not a bad showing here. The tax code (C) and training and networking (D+) pulled things down. But New Orleans scored an overall A-.

27.    Delaware    B-

Ease of hiring (D+) and training and networking (F) pulled this state down; otherwise it would have scored higher. Ease of starting a business scored an A+.

28.    Iowa    C+

Once again, training and networking and government websites were poor performers (F and C). Otherwise things were good, except that overall friendliness scored only a C+.

29.    Florida    C+

Pretty flat grades: Everything came in between B and C-. Florida is one of the largest states geographically, and its small business climate was all over the map. Jacksonville got an A+, and Miami got a B-. Fort Lauderdale, Orlando, Tampa, and West Palm Beach all got between a C+ and a D+.

30.    Colorado    C+

Just a flat performance across the board, with a high of B+ for government websites, and a C- for ease of hiring. Also, Colorado Springs got an A+; Denver got a C+. 

31.    Washington    C+

Frankly I can't understand how Washington ended up with a C+, since its individual categories included five Ds and an F. Also, getting a C- in Seattle probably didn't help.

32.    Kansas     C

Ease of hiring got a D+; training and networking and government websites got Fs. 

33.    Oklahoma     C

Oklahoma had a lot of variety: an A+ for ease of hiring, an A for ease of starting a business--but also four Cs and an F (our old friend, government websites). Oklahoma City got a B-.

34    Oregon     C

Wow: Government websites got an A+, and training and networking got an A-. But there were also three Cs and two Ds. And, Portland got a C+.

35.    Wisconsin     C

Poor showing except for ease of starting a business (B+), everything else came in between a C and an F.

36.    Pennsylvania     C

It's fairly easy to hire people here: a B- for ease of hiring, and a B for the employment, labor and hiring category. Mostly Cs and Ds otherwise. Pittsburgh got a B; Philadelphia got a C-.

37.    Nevada     C

A surprisingly poor performer, especially since the state got an A in the ease of hiring category. Regulations, licensing, and government websites (C+, C-, and D) pulled things down. Also Las Vegas got a C-. 

38.    Connecticut    C-

Low marks across the board except, and this is truly an exception, for government websites, which got an A. The tax code got an F. Hartford was the only Connecticut city on the list, and it got a C. 

39.    Vermont    C-

Ease of hiring got an F. (Remember this is a state that pays some workers $10,000 to move there).  The tax code gets a C+, and yet again, government websites gets an A. 

40.    Missouri    C-

Ease of hiring got an A-, so that's good. But training and networking gets an F. Kansas City came in as the #35 city in the country, with a C+.

41.    West Virginia    C-

Employment, labor and hiring got an A+; training and networking got an F. 

42.    New York    D+

Very sad marks across the board for the home of Inc.: A C+ for ease of hiring was the top grade. Tax code and government websites get an F; everything else was a D. New York City got a C.

43.    New Jersey    D+

If you're looking for a bright spot here, I guess it's that the tax code wasn't as horribly ranked as other places, with a C. Otherwise, two Fs, and two Ds. Newark, home to Audible and a dark horse candidate for Amazon's HQ2, got a C+.

44.    California     D

Ease of hiring got a B- here; everything else was either a D or an F in the Golden State. Fun fact: San Francisco, where Thumbtack is headquartered, got an F. So did Anaheim, Riverside and San Diego. Los Angeles and Sacramento got D+'s; San Jose got a C, and Oakland got a B.

45.    Wyoming     D

Small businesses cannot live by low taxes and spare regulations alone. Those categories got As, but ease of hiring, training and networking and government websites all got Fs. It's likely a function of just being another rural, sparsely populated state.

46.    Kentucky     D

We're down in the back of the class now, and we're looking hard to find any good news to report out of Kentucky. What's shocking is that this state fell from an A- in last year's survey to a D this time around. Is that a statistical anomaly or have things changed that much?

47.    New Mexico     D

Low scores here: an F for tax code, D+ for ease of hiring, F for training and networking.  Albuquerque scored a D+. There's lots of work to be done.

48.    Rhode Island     D

Rhode Island got an A+ for training and networking, but D and F grades for everything else. The biggest city, Providence, got a D+. If there's good news, it's that Rhode Island's D grade is an improvement over its consistent F grades in 2012 through 2015.

49.    Hawaii     F

Bad grades across the board: a couple of C+s, and five Fs. Was it dragged down by Honolulu? It also got an F. But hey, the weather is amazing.

50.    Illinois     F

Ease of hiring scored pretty well, with a B, but otherwise Illinois was in rough shape: two D grades and five Fs. Chicago also ranked last among cities, with a D.

Published on: Aug 15, 2018
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