Where do entrepreneurs have the best odds of success? This tool analyzes state-level economic indicators to identify environments most favorable for starting and growing businesses. Using BLS wage and employment data, it scores states on factors that correlate with entrepreneurial opportunity.
Key Takeaways
- High wages signal economic opportunity. States with above-average wages typically have stronger economies and more spending power for new businesses to capture.
- Occupational diversity indicates market variety. Diverse economies offer more niches for specialized businesses and multiple customer segments.
- Wage premiums show competitive positioning. States where workers earn more than national averages may support premium pricing for goods and services.
- Top states cluster on coasts and in business hubs. Major metros and high-income regions consistently score highest.
- Balance opportunity with costs. High-scoring states often have higher operating costs—evaluate net margins, not just gross opportunity.
Key Takeaways
- Top entrepreneurship states combine high wages with diverse economies
- Occupational diversity indicates multiple market opportunities
- Wage premiums correlate with customer purchasing power
- Consider operating costs alongside opportunity scores
- Use state rankings to inform business location decisions
Table of Contents
Entrepreneurship Environment Index
Identify states with favorable conditions for entrepreneurship based on wage levels, employment diversity, and economic indicators derived from BLS OEWS data.
Top States for Entrepreneurship
State Comparison Chart
Full State Rankings
| Rank | State | Avg Wage | Employment | Diversity | Wage Premium | Overall Score |
|---|
Methodology: The Entrepreneurship Environment Index combines wage levels (economic opportunity), occupational diversity (market variety), and wage premiums (competitive positioning) to identify states with favorable conditions for starting and growing businesses. Data from BLS OEWS.
Overview
Entrepreneurship success depends heavily on location. The right state provides:
- Customer base with money to spend
- Diverse markets offering multiple business opportunities
- Favorable economics that support healthy margins
This tool analyzes BLS Occupational Employment and Wage Statistics to score states on these dimensions. While it doesn’t directly measure self-employment rates (which require different data sources), it identifies the economic conditions that historically correlate with entrepreneurial activity.
What the factors measure
Wage Level (35% of score)
What it measures: Average wages across all occupations in the state
Why it matters for entrepreneurs:
- Higher wages = more disposable income for potential customers
- Strong economies attract more business investment
- Premium pricing becomes viable when customers have purchasing power
Top performers: District of Columbia, Massachusetts, Washington, New York, California
Occupational Diversity (35% of score)
What it measures: How many different occupations have significant employment in the state
Why it matters for entrepreneurs:
- Diverse economies offer more niche opportunities
- Multiple industries provide different customer segments
- Economic stability through diversification protects against industry downturns
Top performers: Large states with varied industries score highest; specialized economies (mining, tourism) score lower
Wage Premium (30% of score)
What it measures: Average premium that workers in the state earn compared to national averages
Why it matters for entrepreneurs:
- Premium wages indicate competitive markets
- Higher-earning workers become higher-spending customers
- Signals strong local demand for goods and services
Top performers: States with high-paying industry concentrations (tech, finance, healthcare)
How to use these results
For aspiring entrepreneurs
- Consider high-scoring states if you’re flexible on location
- Balance opportunity with competition — Top states attract more entrepreneurs too
- Factor in operating costs — High-wage states often have high rents and labor costs
- Look at specific industries — Your business type may favor different states than the overall rankings
For existing business owners
- Evaluate expansion markets using state rankings
- Compare your state to top performers — Are you capitalizing on local strengths?
- Consider remote customers — Sell to high-wage states even if you operate elsewhere
- Use wage data for pricing — Higher-wage states may support premium pricing
For economic developers
- Benchmark against top states to identify improvement areas
- Focus on diversity if your state has specialized economy risks
- Attract high-wage industries to improve overall economic environment
- Market strengths to entrepreneurs looking for business locations
Methodology
Data source: U.S. Bureau of Labor Statistics, Occupational Employment and Wage Statistics (OEWS)
Index calculation:
- Wage Score (35%): State average wage normalized to 0-100
- Diversity Score (35%): Percentage of tracked occupations with employment presence
- Premium Score (30%): Average wage premium vs. national, centered at 50
Limitations:
- Does not measure actual self-employment rates (requires CPS data)
- Does not account for state tax policies or regulatory environment
- Cost of living differences affect real purchasing power
- Industry-specific conditions may differ from overall rankings
Best used with: State business formation data, cost-of-living indexes, state tax comparisons, and industry-specific market research.
FAQs
What does the Entrepreneurship Environment Index measure?
It scores states on economic conditions that favor entrepreneurship: wage levels, occupational diversity, and wage premiums.
Higher scores indicate more favorable environments for starting and growing businesses.
Learn More...
The index analyzes BLS OEWS data to identify states with strong customer purchasing power, diverse market opportunities, and competitive economic positioning.
While it doesn't directly measure self-employment rates, the factors it tracks historically correlate with entrepreneurial activity.
Why isn't this showing actual self-employment rates?
Self-employment rates come from the Current Population Survey (CPS), which uses different data and methodology.
This tool uses OEWS wage and employment data to identify favorable economic conditions instead.
Learn More...
Actual self-employment statistics require household surveys that ask about work arrangements—different from employer-reported OEWS data.
The factors this tool measures (wages, diversity, premiums) are leading indicators that correlate with entrepreneurial success.
Which states rank highest for entrepreneurship?
States with high wages and diverse economies typically rank highest: District of Columbia, Massachusetts, Washington, New York, California.
Major business hubs and coastal metros consistently score well across all factors.
Learn More...
These states offer strong customer purchasing power, multiple market opportunities, and competitive economic environments.
However, they also have higher operating costs—entrepreneurs must evaluate net opportunity, not just gross potential.
Should I move my business to a high-scoring state?
Not necessarily. High scores indicate opportunity but also mean higher costs and more competition.
Consider whether your specific business benefits from the factors measured.
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Service businesses selling to local consumers benefit more from high-wage customer bases than businesses selling nationally.
Online businesses can serve high-wage states while operating from lower-cost locations.
Factor in labor costs, rent, taxes, and regulatory environment—not just the opportunity score.
How does occupational diversity affect entrepreneurs?
Diverse economies offer more niche opportunities and multiple customer segments.
Specialized economies may offer fewer paths to business success.
Learn More...
A state dominated by one industry (mining, tourism, etc.) provides fewer different types of customers and business opportunities.
Diverse economies also provide economic stability—when one industry struggles, others may thrive.
Entrepreneurs in diverse states can often pivot to different markets more easily.
What about states with lower scores—are they bad for business?
Lower scores mean different conditions, not necessarily worse ones.
Lower-scoring states often have lower operating costs that can offset reduced customer purchasing power.
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Some business models thrive in lower-cost states: manufacturing, distribution, remote services.
Lower competition can be an advantage when customer bases are adequate for your business size.
Consider your specific industry and customer base when interpreting state rankings.
How often is the data updated?
The tool uses BLS OEWS data, which is released annually with a May reference period.
Check the displayed survey year for the current data vintage.
Learn More...
Economic conditions change gradually, so annual data remains useful for location decisions.
For rapidly changing factors like housing costs or tax policy, supplement with current-year sources.
In summary
The Entrepreneurship Environment Index identifies states with favorable conditions for starting and growing businesses. By analyzing wage levels, occupational diversity, and wage premiums, you can find locations that offer strong customer bases and economic opportunity.
Remember that high-scoring states often come with higher operating costs. The best location for your specific business depends on your industry, target customers, and operational needs.
Ready to explore business opportunities by state?
- State Income Power Rankings — Compare proprietor income across states
- Wage Benchmarking Tool — Research wages for your industry
- Schedule a consultation — Get help with business location strategy
