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Across the U.S., entrepreneurship continues to boom with an average of 430,000 new business applications per month in 2024 – a 50% increase compared to 2019. While the ingredients to a successful business often include passion, creativity and innovation, there are various economic and environmental factors that impact long-term business prosperity.
From the strongest business economies to locations that help foster work-life balance, read on as we break down which states offer the best opportunities for long-term business success in 2025.
We’ll explore data revealing the top locations for economic environment, business viability, operational costs and business support, all while sharing expert insights on startup success from Swoop Funding’s CEO, Andrea Reynolds.
In this guide:
- Best States for Economic Environment
- Best States for Business Viability
- Best States for Operational Costs
- Best States for Business Support
Best States for Economic Environment
One of the key factors that contribute to a successful business is a positive economic environment. From the cost of living and consumer spending to ideal tax conditions, there are various benefits to gaining a foothold in a healthy economy.
We studied the top states for economic growth based on insights such as population, unemployment rate, cost of living, sales tax rates and income tax free allowance.
To see the best states overall for starting a business, discover our guide to the top startup capitals of America.
1. North Dakota
Leading the charge, North Dakota promises favorable economic growth with the highest income tax free allowance at $53,325 and a competitive cost of living with an index score of 94.6. Meanwhile, the state also offers a low unemployment rate of 2.4% for the population of 783,926.
According to our data, North Dakota is one of the top locations for businesses looking to lay a foundation in a thriving economic landscape, earning an overall score of 28.23.
2. Montana
Following North Dakota is Montana, offering an attractive business climate with an overall score of 24.55. Our study found that Montana offers the next-best economic conditions with zero sales tax and a reasonable income tax free allowance of $14,600.
At 3.3%, unemployment rates are higher in Montana than in other top-ranking states in this category, although the state offers a competitive cost of living with an index score of 102.9. While higher unemployment rates may put a strain on consumer spending, it can also offer a wider pool of potential candidates for growing businesses.
3. New Hampshire
Ranking third for ideal economic conditions, New Hampshire follows closely behind with a total score of 23.14.
New Hampshire has the highest cost of living score at 114. However, with zero sales tax and a low unemployment rate of 2.5% for its population of 1,402,054, the Granite State still offers a steady landscape for budding businesses to grow.
Swoop’s CEO & Co-Founder
A word from Andrea
With so many factors to consider at the start of a business venture, it’s easy to become overwhelmed by your options. From getting you up and running to raising funds and investments, discover how Swoop Funding could help you launch your business journey as a startup.
Best States for Business Viability
For a startup to be successful, your business has to be viable for long-term survival by remaining profitable as time goes on. When it comes to potential business growth, various environmental factors can help encourage new businesses to thrive in a competitive environment.
Discover our top states for business viability below as we consider factors such as venture capital (VC) investments, business survival rate, and entrepreneurial activity.
1. California
Famous for technological innovation and its keen entrepreneurial spirit, California leads for business viability in 2025.
The Golden State offers many competitive advantages for startups and new businesses, boasting an impressive $81.57 billion in venture capital (VC) investments. A certified economic powerhouse, its biggest and fastest-growing sectors include technology, agriculture and healthcare. And despite attracting the second-highest number of entrepreneurs at 45,025, California promises the strongest business survival rate at 54.6%.
All combined, these factors earn California an overall score of 24.65 – indicating a positive entrepreneurial culture in which startups can benefit from strong investor confidence and potential business growth.
2. Texas
Texas is a promising base for business viability, claiming second place with an overall score of 14.67.
Attracting $6.66 billion in VC investments, Texas offers entrepreneurs strong long-term business growth. Only narrowly behind California, Texas also boasts an encouraging business survival rate of 53%, with over half of businesses surviving the five-year milestone.
And with more than 40,900 entrepreneurs in various sectors across the market, the Lone Star State shows a healthy entrepreneurial culture for startups to engage in.
3. Florida
Though lacking in VC investments at $2.96 billion, Florida invites new businesses to step into a prosperous business landscape with a total score of 14.38. Florida offers the largest entrepreneurial community in the U.S. with more than 50,300 entrepreneurs and a competitive business survival rate of 50%.
Whether you’re just launching your business venture or expanding your offering, learn more about how Swoop Funding can support startups and sole traders with small business loans and working capital loans.
Swoop’s CEO & Co-Founder
A word from Andrea
With so many factors to consider at the start of a business venture, it’s easy to become overwhelmed by your options. From getting you up and running to raising funds and investments, discover how Swoop Funding could help you launch your business journey as a startup.
Best States for Operational Costs
From the cost of office rent to equipment financing and employee benefits, the operational costs of running a business can all add to the challenges and responsibilities of a successful business venture.
We analyzed key factors that can impact operational costs and business profitability to uncover the most affordable states in 2025, including hourly wages, annual employer health insurance contributions and average office rent.
1. Mississippi
Mississippi wins the title of the most affordable state for running a business in 2025. According to our data, the state earns an overall score of 26.59, thanks to competitive hourly wages (£27.03) and affordable annual health insurance contributions per employee ($5,610).
Meanwhile, Mississippi offers lower office rent than the majority of the U.S. – with the second most affordable average at 17.68 square feet per annum.
All factors considered, this makes Mississippi a compelling location for businesses to optimize operational costs and boost profitability.
2. Tennessee
In second place, Tennessee offers low monthly office rent and agreeable wages, earning a score of 23.97.
In fact, Tennessee offers the highest wages at an average of $30 per hour, as well as the highest average employer health insurance contributions per employee at $5,833. Businesses in Tennessee compensate for these costs with the lowest average office rent in the country at 16.53 square feet per annum.
It’s true that higher wages and health insurance premiums can increase labor costs and potentially impact profit margins. However, greater investment in employee salary and health insurance benefits may help to improve employee retention and satisfaction, which can positively influence productivity.
3. Arkansas
Close behind Tennessee with an overall score of 23.31, Arkansas rounds out the top three most affordable states for running a business in 2025.
Compared to Mississippi and Tennessee, Arkansas is the most expensive state for the average cost of office rent at 22.63 square feet per annum.
However, with competitive hourly wages ($28.84) and generous employer health insurance contributions ($5,825), Arkansas promises a reasonably cost-effective climate for businesses that prioritize profitability and employee benefits.
Swoop’s CEO & Co-Founder
A word from Andrea
With so many factors to consider at the start of a business venture, it’s easy to become overwhelmed by your options. From getting you up and running to raising funds and investments, discover how Swoop Funding could help you launch your business journey as a startup.
Best States for Business Support
According to the 2024 State of Hybrid Work Report by Owl Labs, 27% of workers are currently working in a hybrid model, while 11% are completely remote.
Nine in 10 (90%) of hybrid workers report that they are more, or just as productive, when allowed to work in a hybrid format. Meanwhile, the Stanford Report claims that hybrid work can benefit both companies and employees, positively impacting employee satisfaction and turnover.
As businesses continue to embrace flexible work models for employees, it’s clear that the demand for hybrid working is here to stay. Read on to discover the leading states that foster business support and co-working spaces below.
1. Texas
Sitting at the top spot for its positive hybrid working culture, Texas earns a high score of 9.09. Texas offers a healthy 280 co-working spaces to its 30 million residents, embracing the added work-life balance while nurturing co-worker interaction and collaboration.
2. Florida
Following closely behind Texas, Florida earns second place with an overall score of 9.06. With 279 co-working spaces, the Sunshine State could be an attractive destination for businesses that recognize the advantages of remote and hybrid work models.
3. California
It’s no surprise that tech-driven California embraces the modern flexibility of hybrid and remote working models, earning the state a total score of 8.75. Always on the cutting edge, California ranks third for the most co-working spaces in the U.S., offering 270 spaces for its 38.9 million residents.
Swoop’s CEO & Co-Founder
A word from Andrea
With so many factors to consider at the start of a business venture, it’s easy to become overwhelmed by your options. From getting you up and running to raising funds and investments, discover how Swoop Funding could help you launch your business journey as a startup.
Methodology
This dataset ranks all 50 US states, based on how good they are for start-up businesses. To do this, 11 different factors were used. Once the data for the factors was collected, the factors were then normalized, to provide each factor with a score between 0 and 1. If data was not available, a score of 0 was given. The normalized values were then summed & multiplied by 9.09, to give each state a total score out of 100. The states were then ranked from highest to lowest, based on their total scores.
The factors used are as follows:
- Unemployment rate – The percentage rate of unemployment in each state as of Oct 24, according to the BLS.
- Cost of living index – An index score ranking the cost of living in each state in comparison to the US average.
- Sales tax – The combined rate of state & local sales tax rates, using the average local tax rate, according to taxfoundation.org.
- Income tax-free allowance – The total amount of income tax-free allowance in each state. To calculate this, we assumed the person being single & having no dependents. To allow for better comparisons between states, we converted states which offer a credit deduction to a regular deduction by dividing the credit amount by the lowest marginal tax rate (credit is a discount post-tax, regular is a discount pre-tax), and for states like Delaware, where the first tax bracket starts at $2000 rather than $0, we included this in the tax-free allowance calculation.
- VC investments – The value of venture capital investments in each state, in 2023, in billions.
- Business survival rate – The 5-year survival rate of businesses in each state, calculated by comparing the number of businesses started in March 2019, to those still trading in March 2024.
- Number of entrepreneurs – The number of business registrations submitted in each state in October 2024.
- Average hourly wage – The average hourly earnings in each state, as of October 2024.
- Health insurance – The average annual contribution per employee, for employer-based health insurance, in 2023.
- Average office rent – The average office rent cost in each state, in square feet per annum. To calculate this, we gathered the prices of all listings on the first page of loopnet. In the case of there being less than 10 on the first page their data was further gathered to get a minimum of 10.
- Coworking spaces – The number of results on Google Maps for the prompt “coworking spaces in X”, where X is the state. Results were filtered to include “coworking” in the business category.
The factors were indexed as follows:
- Unemployment rate – Low values get a high score. High values get a low score.
- Cost of living index – Low values get a high score. High values get a low score.
- Sales tax – Low values get a high score. High values get a low score.
- Income tax-free allowance – High values get a high score. Low values get a low score.
- VC investments – High values get a high score. Low values get a low score.
- Business survival rate – High values get a high score. Low values get a low score.
- Number of entrepreneurs – High values get a high score. Low values get a low score.
- Average hourly wage – Low values get a high score. High values get a low score.
- Health insurance – Low values get a high score. High values get a low score.
- Average office rent – Low values get a high score. High values get a low score.
- Coworking spaces – High values get a high score. Low values get a low score.
All data is correct as of 05/12/24. The ranking dataset shown is a compilation of multiple data sources and may not be representative of real life. All data is accurate with regard to the sources provided.
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