Starting a business? Expert guide on the best states for success

Business formation applications in the United States soared to a record 5.5 million, marking an 80% increase from the decade before the pandemic. Yet, with half of all U.S. businesses eventually failing and one in five closing within their first year, many small companies are actively seeking strategies to enhance their long-term success.1,2

With this in mind, back office admin experts Vera have identified which U.S. territories have the highest and lowest business survival rates, as well as sharing expert advice on how businesses can increase their chances of success.

Key findings:

• New Jersey, New York, and Pennsylvania have the highest first-year survival rate for new businesses at 78.60%

• The Mountain division (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, and Wyoming) saw the largest drop in survival rates from 1994-2022 at 5.90%

• The Pacific division experienced the smallest decrease in survival rates from 1994-2022 at just 0.30%

• New businesses in the Mountain division face the lowest first-year survival chances at 74.40%

The results: One-year survival rates for new businesses by U.S. territory

*The above table is ranked by “2022 Survival Rate (%)”.

**The full data set containing survival percentages for every year can be found here.

The Middle Atlantic region offers the best one-year business survival rates

The Middle Atlantic division, comprising New Jersey, New York, and Pennsylvania, has the highest new business survival rate among U.S. territories. In 2022, businesses in this region had a one year survival rate of 78.60%, a slight decrease from 79.50% in 2017. Despite this 0.90% decline, the region’s stability reflects a resilient business environment bolstered by a diversified economy, robust infrastructure, and substantial financial and human resources, all of which support new ventures through their critical first year.

The West South Central division, encompassing Arkansas, Louisiana, Oklahoma, and Texas, ranks second in new business survival rates, with a one year survival rate of 77.80% for businesses established in 2022. Despite a 1.70% decline since 2017, the region’s vibrant energy sector, significant agricultural output, and expanding technology industries contribute to a favorable environment for new businesses to thrive.

New England, consisting of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont, ranks third with a 77.60% one year survival rate for new businesses established in 2022. This is a decrease from 78.90% in 2017, reflecting a 1.30% decline. Despite this reduction, New England’s survival rate remains competitive due to the region’s rich history of innovation, strong educational institutions, and a well-developed healthcare sector, all of which provide a solid foundation for new business.

The Mountain division has the lowest first-year survival rate

At the bottom of the list is the Mountain division (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, and Wyoming), with the lowest new business one year survival rate in the nation. Of all new businesses established in this division in 2022, only 74.40% survived their first year in this region — down from 78.20% in 2017 — marking a significant 3.80% decrease. This is the highest decline among all regions when comparing 2017 to 2022. In contrast, the Middle Atlantic saw the smallest decrease, with a modest drop of only 0.90%. The Mountain division’s decline may be attributed to economic volatility, lower population density, and less access to capital and resources3, making it harder for new businesses to sustain their first year.

Tips on how to increase your business’s first-year survival chances

Regardless of the regional challenges different states may experience, back office admin experts, Vera, recommend the following strategies to enhance your business’ chances of first-year survival and success:

1. Develop a business plan: Create a comprehensive plan with clear objectives, market analysis, financial projections, and strategies to address challenges. Regular updates will help you stay adaptable and focused on both market trends and customer needs.

2. Secure funding and manage finances: Ensure you have enough capital for start-up costs and unexpected expenses. Explore funding options and maintain a financial cushion to navigate early challenges. Invest in tools to manage finances efficiently and stay proactive with regulatory compliance, including taxes, permits, and insurance.

3. Adapt to market changes: Stay flexible and ready to adjust your business model based on market or economic shifts. Adaptability can help you seize new opportunities and overcome challenges.

4. Build a strong network and seek expert advice: Network with industry experts and mentors for valuable insights and support. Use tools like Vera to connect with advisors, manage tasks, and access current information.

5. Innovate with AI for back-office support: AI services, like Vera, can speed up admin time wastage, and help small business owners to efficiently handle regulatory requirements, manage renewals, and ensure compliance. This helps avoid missed deadlines and reduces administrative burdens.