CT Ranked 14th Among Smaller States for Small Business Activity; MA Is 2nd Among Large States

Small business activity is on the rise in 49 of the 50 U.S. states, according to a new report from the Kauffman Foundation. The report provides a broad index measure of small local business activity, analyzing the states in peer groups of the 25 largest states by population and the 25 smallest states by population.  Connecticut ranked 14^th among the smaller 25 states, for the second consecutive year, and was the lowest-ranked New England state. The density of established small businesses per 100,000 residents increased slightly from the previous year, from 1,147.3 to 1,167.4 in 2015.  Established small businesses are defined in the study as businesses over the age of five employing at least one, but less than fifty, employees.  The rate of small business ownership also grew slightly in Connecticut, from 6.14 percent to 6.34 percent.

Demographic trends for Connecticut noted in the report indicate an increase in native-born small business ownership, and upticks in the percentage of small businesses led by Latinos, 55 to 64 year-olds, 35-44 year-olds, high school graduates and college graduates.  More small businesses are run by men than women.

Overall, what the report describes as “Main Street entrepreneurial activity – an indicator of the number of established small businesses and the number of business owners in a location – experienced a large increase in 2015, reversing a six-year downward and stagnant trend in the U.S.”

"Following a post-recession downward and stagnant trend in small business activity, we're now seeing Main Street Entrepreneurship begin to rise," said E.J. Reedy, director in Research and Policy at the Kauffman Foundation. "This obviously is good news given that these small businesses make up 63 percent of all employer firms nationally."

The Kauffman Index: Main Street Entrepreneurship State Trends report includes these findings:

Among the 25 largest states, the five states with the highest activity were Minnesota, Colorado, Massachusetts, New York and New Jersey. Among the 25 smallest states, the states with the highest activity were Vermont, Montana, North Dakota, South Dakota, Wyoming, Maine, Nebraska, New Hampshire, Rhode Island, Iowa, Oregon, Idaho, and Kansas.

Insights on business owner demographics for the 25 smallest states, including Connecticut:

• States with the highest rates of female business owners were Vermont, Montana, Wyoming, Oregon, and South Dakota.
• States with the highest rates of older adult business owners (ages 55-64) were South Dakota, Vermont, North Dakota, Montana and Nebraska.
• States with the highest rates of young adult business owners (ages 20-34) were South Dakota, North Dakota, Montana, Wyoming and Vermont.

Tennessee is the only state that did not show an increase in established small business activity in 2015 compared with 2014.

The new Main Street Entrepreneurship Index is an indicator of small business activity, presenting trends over the past two decades, focusing on established small businesses (firms older than five years with less than 50 employees) and trends in ownership rates. The Index measures business activity along two distinct and complementary dimensions: the rate of business owners in the economy – the percentage of adults owning a business in a given month, and established small business density – the ratio of established small employer businesses compared to population.

The Kauffman Index of Entrepreneurship is the first and largest index tracking entrepreneurship across city, state and national levels for the United States, and also presents demographic characteristics of the business owners.

In a companion study and report, focusing on the nation’s largest metropolitan areas, Small business activity is on the rise 38 of the top 40 largest metropolitan areas, the top five metropolitan areas for small business activity as measured by the Index were New York, Boston, Providence, San Francisco and Portland.  The report on metropolitan areas noted that “the one to experience the biggest increase in rankings was Providence, which moved up three spots to tie with Boston for second place in the 2015 Index.”