Michigan Named #9 State for Entrepreneurs as 55% of Startups Thrive

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Article courtesy of Tekpon.

• A new study has revealed the best US states to start a new business based on business survival rates five years after founding. 

• Michigan has the ninth-highest new business survival rate in the US at 55.05%. 
• The data also revealed Missouri as the worst state for starting a new business, with just 44.55% of new businesses surviving after five years. 

A new study has revealed the states with the highest new business survival rates.

The study, conducted by software company Tekpon, analyzed the latest data from the US Bureau of Labor Statistics on the number of new businesses launched in each state in 2018 and those still operating by 2023. This data was then used to calculate the five-year survival rate for new businesses in each state, highlighting the top states for starting a new business.

Montana has emerged as the best state in the US to start a new business, with an impressive 57.63% of new businesses launched in 2018 still operational after five years.

The study revealed that in 2018, 3,049 businesses were formed in Montana, and 1,757 survived until 2023. Employment in these businesses increased from 8,808 to 9,125, reflecting a 3.60% rise over five years. Montana’s impressive business survival rate and employment growth showcase it as the top location to start a new business and ensure success.

Minnesota ranks second in the US for new business survival, with a five-year survival rate of 57.61%. The state saw 9,337 new businesses in 2018, with 5,379 still in operation by 2023. Employment in these businesses grew from 40,067 to 43,440, marking a substantial 8.42% increase, the seventh-highest increase across America.

In third place is Alaska, where 57.32% of new businesses remain active after five years. Out of 1,202 businesses formed in 2018, 689 survived until 2023. However, employment decreased from 5,468 to 4,986, reflecting an 8.81% decline. This shows that Alaska is a great location for entrepreneurs but may not provide as much job security for workers.

West Virginia ranks fourth with a five-year survival rate of 57.08%, a respectable 5.43% above the national average. The state had 2,619 businesses founded in 2018, with 1,495 of these still in operation when the study reviewed in 2023. Unfortunately for the West Virginia workforce, employment in these businesses fell from 14,456 to 13,084 during this time.

Massachusetts holds the fifth spot with a five-year survival rate of 56.68%, which puts the state at around 5% above the national average. Out of the over 18,000 businesses launched in 2018, a respectable 10,546 survived through to 2023.

Ranking sixth on the list, Virginia has a five-year survival rate of 56.52%. The state saw 16,758 new businesses in 2018, with 9,472 still active when reviewed in 2023. In addition, employment in these businesses increased from 77,169 to 79,405, making Virginia a promising state for both new employers and workers.

South Dakota ranked seventh with a five-year survival rate of 56.08%, which is 4.42% higher than the national average. The state had 2,008 businesses begin their lives in 2018, with 1,126 still operating in 2023. What’s more, employment in these businesses grew by 1.57% in that time, indicating a strong job market in the state.

Illinois is eighth on the list, with a five-year survival rate of 55.07%. In 2018, a massive 22,145 businesses were formed, and of these, 12,195 were still active in 2023. However, employment in these businesses saw a slight decline from 93,704 to 92,659, indicating that some businesses may have had to cut employees to survive.

With a five-year survival rate of 55.05%, Michigan ranks ninth. Entrepreneurs in the state founded 15,449 businesses in 2018, with 8,504 still in operation by 2023. Furthermore, employment in these businesses increased from 65,077 to 68,692, a 5.55% rise.

Alabama rounds out the top ten with a five-year survival rate of 54.36%. In 2018, 7,998 businesses were launched, and 4,348 survived by 2023. This is a respectable 2.71% above the national average of 51.65%. Employment in these businesses grew from 43,398 to 46,144, reflecting a 6.33% increase over the five-year period.

 States with the highest new business five-year survival rate: 

In contrast, Missouri has the lowest five-year survival rate at 44.55%, making it the most challenging state for new businesses to thrive. Out of 17,993 businesses formed in 2018, only 8,016 survived by 2023.

However, even with the closures, employment in these businesses increased from 60,473 to 62,300 over the five years. This 3.02% rise could indicate quality over quantity for Missouri businesses.

New Hampshire’s five-year survival rate is 45.99%, placing it second to last. The state saw 3,792 businesses start in 2018, with 1,744 still in operation by 2023. Employment in these businesses decreased from 11,457 to 10,938, which does not look promising for New Hampshire employers or employees.

Ranking third lowest for small business success is Kansas, with a five-year survival rate of just 46.45%. The state had 5,457 businesses start in 2018, with 2,535 still active by 2023, placing them 5.2% below the national average.

What’s more, employment in these businesses fell from 22,204 to 21,213, a daunting 4.46% decrease over the five years.

Nevada’s five-year survival rate is just 47.15%, placing it among the states least welcoming to new businesses. Out of the 7,672 businesses formed in 2018, merely 3,617 were still operational in 2023.

That said, employment in these businesses increased from 34,669 to 38,189, marking a huge 10.15% rise, making Nevada another great state for small business employees.

Idaho’s five-year survival rate of 47.81% ranks it fifth lowest. The state saw 5,323 businesses start in 2018, with 2,545 still running upon review in 2023.  Surprisingly, employment in these businesses increased from 17,936 to 20,855, an impressive 16.27% rise.

With a five-year survival rate of 48.05%, Wyoming is sixth from the bottom at 3.6% below the national average. In 2018, 1,613 businesses were formed, but only 775 survived until 2023. Furthermore, employment in these businesses dropped from 5,339 to 4,187, a significant 21.58% decline.

With a five-year survival rate of 48.11%, Delaware ranks as the seventh worst place to start a new business, which is 3.54% lower than the national average. The state saw 2,910 businesses start in 2018, with only 1,400 still active by 2023. Unsurprisingly, employment in these businesses decreased from 11,957 to 10,228, a staggering 14.46% drop.

New Mexico’s five-year survival rate is 48.14%, placing it eighth from the bottom. Out of a whopping 4,169 businesses formed in 2018, only 2,007 survived until 2023. In addition, employment within these businesses fell from 17,275 to 15,046, a concerning 12.90% decline.

Ranking as the ninth worst state to start a new business, Georgia has a five-year survival rate of 48.96%. The state saw an impressive 22,365 new businesses start in 2018, but unfortunately, just 10,950 were still in operation by 2023. Thankfully, employment in these businesses decreased from 118,670 to 109,210, an understandable 7.97% decline given the number of failed businesses.

Washington rounds out the bottom ten with a five-year survival rate of 48.99%. In 2018, 16,702 businesses were launched, and 8,182 survived by 2023. Employment in these businesses increased from 61,533 to 63,982, a 3.98% rise.

States with the lowest new business five-year survival rate:

Commenting on the findings, a spokesperson from Tekpon says: “It is estimated that approximately 45% of new businesses fail within the first five years, making a success of a business a major win for not just the business, but the community and customers that it serves.

“With the introduction of AI into our day to day lives, it’s more vital than ever for business owners to adopt the fast-paced and changing technology that we’re seeing develop. Something as major as AI puts pressure on business owners to educate themselves on what it can do for their business to increase their chances of a five-year survival and far further beyond.”

Sources: 

US Bureau of Labor Statistics

Methodology:

Data on the number of new businesses that started in each state in 2018 and the number of those businesses still surviving in 2023 were collected from the US Bureau of Labor Statistics.

These two numbers were used to calculate the average five-year survival rate for new businesses in each state, which is what the final ranking is based upon.

States with the highest new small business survival rate – Full Ranking: