CT Ranked 9th Among Small States in "Main Street Entrepreneurship," Showing Improvement

Improvements in Connecticut’s “Main Street Entrepreneurship” has pushed the state’s ranking to 9^th among the nation’s 25 smaller states, up from 12^th a year ago, in the latest analysis from the Kauffman Foundation. The nation as a whole and most states and metro areas are experiencing higher rates of small business activity, according to the 2016 Kauffman Index of Main Street Entrepreneurship.  Nationally, there was a sharp uptick in the survival rate of businesses in the last year. At the same time, Main Street entrepreneurship activity gained ground in 47 states and 38 of the 40 largest metropolitan regions.

Among the nation’s smaller states, the top ranked entrepreneurial states were South Dakota, Vermont, Montana, North Dakota, Maine, Iowa, Nebraska, New Hampshire.  After Connecticut, Oregon rounded out the top ten.  Connecticut was one of only two states to move up three positions in the ranking.

The state’s rate of business owners was 6.55 percent; the percentage of the adult population that owns a business as their main job, according to the survey data.

The number of established (older than four years) small (less than fifty employees) businesses per 1,000 firms was 649.9 in Connecticut.  In Massachusetts, which ranked third among the nation’s 25 larger states, it is 684.7.  The top ranked larger states were Minnesota, Wisconsin, Massachusetts, Colorado, Pennsylvania, Maryland, Ohio, Louisiana, California and Illinois. 

"The Main Street Entrepreneurship Index provides additional evidence that U.S. small business activity has rebounded from the downturn and continues to gather strength," said Arnobio Morelix, senior research analyst at the Kauffman Foundation. "More new businesses are making it through their first five years of operation. While this could indicate that a lack of dynamism is allowing less-productive firms to hang on longer, overall the entrepreneurial increases bode well for the established, small businesses that underpin much of our economy."

Among the larger states, the rate of businesses surviving through their first five years ranges from 44 percent in Arizona to 53.3 percent in Pennsylvania. Among the smaller states, the business survival rate ranges from 43.4 percent in Nevada to 58.1 percent in North Dakota.  In Connecticut, the rate is 51.35 percent, the 8^th highest among the 25 smaller states.

In start-up activity, Connecticut ranked 22^nd out of 25 smaller states, a drop of two positions since last year.  The Survival Rate of American businesses is the main driver of the recent improvements in Main Street Entrepreneurship in the United States, and has reached a three-decade high of 48.7 percent—meaning that almost half of new businesses make it to their fifth year of operation.

U.S. Census Bureau business statistics show that established small businesses represent almost 68 percent of all employer firms in the country.   The five metros with the highest Main Street entrepreneurship activity are Pittsburgh, Boston, Portland, San Francisco and Washington, D.C.

The Kauffman Index of Main Street Entrepreneurship captures business activity in all industries and is based on both a nationally representative sample size of roughly 900,000 responses each year and the universe of all employer businesses in the United States, in a dataset that covers approximately five million businesses.

CT Ranked #41 in Climate for Small Business and Entrepreneurship

Connecticut ranks #41 in its policy environment for small businesses and entrepreneurship, according to a study that ranked the 50 states in a Small Business Policy Index.  Most of the New England states landed towards the bottom of the list, with none ranking in the top 25. The report, Small Business Policy Index 2014: Ranking the States on Policy Measures and Costs Impacting Small Business and Entrepreneurship, tracks 42 measures with 33 of them pertaining to taxes and regulations. Issued by the Small Business & Entrepreneurship Council, the index ranks the 50 states according to 42 different policy measures, including a wide array of tax, regulatory and government spending measurements. The index, which has been published annually for 19 years, continues to point to South Dakota as the most entrepreneurial-friendly state in the U.S., benefiting most from the lack of individual income tax, capital gains tax, corporate income tax and inheritance tax.

The top 10 states are South Dakota, Nevada, Texas, Wyoming, Florida, Washington, Alabama, Indiana, Colorado and North Dakota.  Among the New England states, the highest ranked was New Hampshire at #27, followed by Massachusetts at #31, Rhode Island at #40, Connecticut at #41, Maine at #42 and Vermont at #45.

Commenting on Connecticut, the report indicates that “Connecticut’s entrepreneurs, businesses, investors and workers benefit from a low crime rate and low consumption-based taxes. However, the state’s negatives are numerous, including high personal income, individual capital gains, corporate income, corporate capital gains, property, gas and diesel taxes, along with high levels of government spending and debt.”

Connecticut’s ranking was unchanged from last year’s Index report.  In 2012 the state ranked #42 and in 2011 was ranked at #44.  In 2010, Connecticut ranked at #41, which was a drop from #40 in 2009.

“States like Arizona, Indiana, Kansas, New Mexico, North Carolina, North Dakota, and Ohio have really stepped up their game on the policy front. In each of these cases, tax reform and relief were undertaken, which reduces the costs of risk taking and doing business. Meanwhile, top-tier policy states like Texas, Nevada, South Dakota, Florida and Wyoming continue to leverage their long-standing policy advantage, and are doing things to get better,” said SBE Council President and CEO Karen Kerrigan.

Of the 42 measures included in the recently issued 2014 edition of the Index, 24 are taxes or tax related, 9 relate to regulations, five deal with government spending and debt issues, with the rest gauging the effectiveness of various important government undertakings, according to the report. The lowest ranked states were New York, New Jersey and California.

The report states that “most business owners understand the array of costs and burdens imposed by government. Taxes and regulations, for example, drain enterprises of vital resources, distort decision-making, and redirect resources and energies away from maintaining, improving and/or expanding a business.”

In the individual measures, among Connecticut’s highest rankings were #7 in crime rate, #10 “State and Local Sales, Gross Receipts and Excise Taxes as a Share of Personal Income,” #13 in the rankings of “Adjusted Unemployment Taxes,” and #17 in workers compensation costs.

The Small Business and Entrepreneurship Council (SBE Council) is a 501c(4) advocacy, research, education and networking organization dedicated to protecting small business and promoting entrepreneurship.  SBE Council works to educate elected officials, policymakers, business leaders and the public about key policies that enable business start-up and growth. The report, issued in December, was authored by Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council.