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Starting a Small Business? Here Are the States Where It's Most Likely to Survive — and the Least. Location can make or break your business's success.

By Amanda Breen

Key Takeaways

  • Approximately 20% of new businesses fail within the first two years of being open.
  • Your business location will impact your taxes, zoning laws and the regulations you'll have to follow.
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There are many important things to consider when you give entrepreneurship a try and launch your own business — and location is at the top of the list.

The location of your business will impact everything from taxes to zoning laws, so it pays to be strategic about your choice of state, city, and even neighborhood, according to the U.S. Small Business Administration.

Choosing the right place to start your business can also make or break its success.

Related: 5 Things Not to Do When You're Running a Small Business

Approximately 20% of new businesses fail within the first two years of being open, 45% within the first five years and 65% within the first 10 years, per U.S. Bureau of Labor Statistics (BLS) data.

Capital on Tap, a company that offers a credit card and spend-management platform for small business owners, analyzed BLS data to determine the percentage of startups that are still active after three years — and broke down the U.S. states with the highest and lowest chance of survival in a three-year and five-year time frame.

"There are over 30 million small businesses in the U.S., making up an enormous percentage of the economy, and as this number continues to grow, so will innovation and commercial drive. This research should serve as a positive sign to entrepreneurs in the top ten states who are thinking about starting a business," Damian Brychcy, Chief Legal, America and Product Officer at Capital on Tap, said.

Image Credit: John Coletti | Getty Images. Boston, Massachusetts.

U.S. states with the highest rate of small business survival per Capital on Tap 

State

1year average (%)

3year average (%)

5year average (%)

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

U.S. states with the lowest rate of small business survival. 

State

1year average (%)

3year average (%)

5year average (%)

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

Amanda Breen

Entrepreneur Staff

Senior Features Writer

Amanda Breen is a senior features writer at Entrepreneur.com. She is a graduate of Barnard College and received an MFA in writing at Columbia University, where she was a news fellow for the School of the Arts.

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