Editor’s Note: This story originally appeared on Simply Business.
Entrepreneurs face numerous challenges in the early years of starting a business, from solidifying business plans to navigating the complexities of hiring employees and acquiring licenses and insurance.
These hurdles often determine the fate of a startup, making the journey from an idea to a successful enterprise both difficult and uncertain.
Each year, millions of Americans file new business applications, but only a fraction of these ventures transition to hiring employees. Among those that do, surviving the critical first few years can still be an uphill battle.
However, business survival rates differ significantly by location, influenced by a variety of factors such as economic conditions, state policies, and industry-specific demand. The good news is that businesses that weather the initial hurdles see a much greater likelihood of long-term success.
The following analysis explores the states where new businesses are most likely to survive their earliest years based on the latest data from the U.S. Bureau of Labor Statistics (BLS). The findings reveal important insights into how location and time impact the chances of business success.
This analysis was conducted by Simply Business — an online insurance marketplace for small businesses — using 2024 data from the U.S. Bureau of Labor Statistics. Learn more about the methodology at the end.
20. Delaware
- Business survival index: 60.2
- Odds of surviving the 1st year: 76.5%
- Odds of surviving the 2nd year: 84.5%
- Odds of surviving the 3rd year: 89.7%
19. Massachusetts
- Business survival index: 62.9
- Odds of surviving the 1st year: 76.4%
- Odds of surviving the 2nd year: 86.2%
- Odds of surviving the 3rd year: 88.0%
18. South Carolina
- Business survival index: 66.7
- Odds of surviving the 1st year: 76.7%
- Odds of surviving the 2nd year: 85.4%
- Odds of surviving the 3rd year: 88.5%
17. New York
- Business survival index: 67.4
- Odds of surviving the 1st year: 77.8%
- Odds of surviving the 2nd year: 85.5%
- Odds of surviving the 3rd year: 87.2%
16. Texas
- Business survival index: 69.0
- Odds of surviving the 1st year: 77.8%
- Odds of surviving the 2nd year: 84.8%
- Odds of surviving the 3rd year: 88.4%
15. Illinois
- Business survival index: 69.4
- Odds of surviving the 1st year: 78.1%
- Odds of surviving the 2nd year: 84.5%
- Odds of surviving the 3rd year: 88.2%
14. Kentucky
- Business survival index: 69.7
- Odds of surviving the 1st year: 78.1%
- Odds of surviving the 2nd year: 84.9%
- Odds of surviving the 3rd year: 87.6%
13. Michigan
- Business survival index: 70.1
- Odds of surviving the 1st year: 76.8%
- Odds of surviving the 2nd year: 85.8%
- Odds of surviving the 3rd year: 88.6%
12. Alabama
- Business survival index: 70.1
- Odds of surviving the 1st year: 77.2%
- Odds of surviving the 2nd year: 86.7%
- Odds of surviving the 3rd year: 87.6%
11. New Jersey
- Business survival index: 70.1
- Odds of surviving the 1st year: 78.5%
- Odds of surviving the 2nd year: 84.8%
- Odds of surviving the 3rd year: 87.2%
10. Nebraska
- Business survival index: 72.1
- Odds of surviving the 1st year: 78.2%
- Odds of surviving the 2nd year: 84.4%
- Odds of surviving the 3rd year: 90.1%
9. Wisconsin
- Business survival index: 74.1
- Odds of surviving the 1st year: 78.3%
- Odds of surviving the 2nd year: 85.4%
- Odds of surviving the 3rd year: 87.5%
8. South Dakota
- Business survival index: 74.8
- Odds of surviving the 1st year: 78.5%
- Odds of surviving the 2nd year: 84.4%
- Odds of surviving the 3rd year: 90.0%
7. Indiana
- Business survival index: 75.2
- Odds of surviving the 1st year: 78.0%
- Odds of surviving the 2nd year: 85.0%
- Odds of surviving the 3rd year: 89.1%
6. Pennsylvania
- Business survival index: 82.0
- Odds of surviving the 1st year: 79.0%
- Odds of surviving the 2nd year: 85.1%
- Odds of surviving the 3rd year: 88.2%
5. Iowa
- Business survival index: 92.2
- Odds of surviving the 1st year: 80.2%
- Odds of surviving the 2nd year: 86.8%
- Odds of surviving the 3rd year: 89.3%
4. North Carolina
- Business survival index: 93.9
- Odds of surviving the 1st year: 79.5%
- Odds of surviving the 2nd year: 87.0%
- Odds of surviving the 3rd year: 90.5%
3. West Virginia
- Business survival index: 94.5
- Odds of surviving the 1st year: 79.1%
- Odds of surviving the 2nd year: 87.3%
- Odds of surviving the 3rd year: 91.9%
2. California
- Business survival index: 98.3
- Odds of surviving the 1st year: 86.0%
- Odds of surviving the 2nd year: 89.8%
- Odds of surviving the 3rd year: 91.4%
1. Washington
- Business survival index: 99.0
- Odds of surviving the 1st year: 86.4%
- Odds of surviving the 2nd year: 89.3%
- Odds of surviving the 3rd year: 91.8%
Methodology
The data in this report comes from the U.S. Bureau of Labor Statistics’ Business Employment Dynamics.
To determine the states where new businesses are most likely to succeed, researchers at Simply Business developed a business survival index.
This index is based on a weighted average of the most recent survival rates for private-sector establishments during their first, second, and third years of operation, as of March 2024. The survival rates were calculated using sequential benchmarks.
The first-year survival rate is the percentage of businesses still active one year after opening. The second-year rate is the percentage of those first-year survivors that remained operational for another year.
Similarly, the third-year rate is the percentage of second-year survivors that continued into the following year.
The data focuses exclusively on private-sector businesses with at least one employee.
