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The US states with the best talent pools for small businesses and their impact on the economy and workforce

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Last editedApr 20235 min read

The US is home to 330 million people, all with their own dreams and ambitions. But when people turn these dreams into reality, they often need to enlist the help of others to grow their success.

When businesses are ready to take the next step, bringing other people’s skills together can have a huge impact. 

Whether it’s the creative minds coming together to brainstorm ideas for a new project. Or data specialists, analyzing the most recent survey results. All the different abilities of individuals can contribute to a much bigger picture.

This is especially helpful for smaller businesses. Being able to afford the extra wages that another pair of eyes will bring can sometimes be a challenge. However, for many business owners, expanding their workforce is often a goal to strive towards. As well contributing to their industry’s overall growth, and improving cash flow and profit within a business.

However, it’s not always that simple.

Well, not every business can find exactly what they’re looking for in a new hire. Sometimes the talent pool isn’t as diverse as expected, or educational levels in their state might not be as high as neighbouring states. 

We wanted to take a deeper look into how these different variables can affect a state’s businesses and their economic growth, as well as the specific industries that have benefited the most. 

To do so, we analyzed twelve key publicly available data streams* in order to demonstrate the states with the greatest talent pool. Including the most recent small business profiles from each congressional district, published by the Small Business Administration.

We also looked at the states with the largest recent economic growth and the industries with the small businesses that have employed the most people.

Through this, we can reveal which state has the highest number of people employed by small businesses, as well as other variables that can impact their success. 

Talent pool and education

Of course, the US doesn’t see small businesses grow overnight! 

We know that there are millions of people behind their successes, all working together to create booming business, even when times are tough. Once a business is ready to expand however, they can prepare to provide new work opportunities for local people.

But whilst education doesn’t always equal success, it can help to improve an individual’s skill set, potentially increasing their chances of securing a role.

So, whilst small businesses are set up all around the country, which state has the greatest talent pool in comparison to its educational rankings? 

To find out, we delved into the data at the World Population Review, analyzing each individual state to find out the quality of their education. We then compared it to the percentage of people employed by a small business in each state. 

We found that Massachusetts has the highest education quality, with a ranking of 80.1. But, is Massachusetts leading the charge when it comes to small business employment?

Taking a closer look, we found surprising results.

Montana took the top spot, with 65% of all employed citizens working for a small business. That’s 245,758 people in the state, working for a smaller enterprise. However, we found that Montana’s education ranking was actually 53.4, putting it in the middle of the states for quality of schooling.

Wyoming came a close second in the ranking, with 64% of its employees working for a small business (128,883 people). Yet, similarly to Montana, Wyoming had a slightly below average educational ranking of 51.3. 

Vermont placed third in the percentage of employees being hired by a smaller business, with 61% (157,322 people) of the state’s workforce belonging to a small enterprise. However, unlike the other two states, its educational quality ranked much higher at 70.1, putting it in the top three for teaching level.

In fact, taking a closer look at this, we found that the top states for education actually placed much lower in the overall result for the percentage of people working in a small business. 

With a ranking of 80.1, Massachusetts has just under half (48%) of its workers in a small business, which is 143,216 people. Whilst Maryland’s ranking of 73.2 resulted in 52% of staff operating in a small enterprise (1,155,058).

Perhaps, educational quality doesn’t produce a larger talent pool for small business owners to choose from?

This can especially be seen in the states with a lower educational quality ranking. Mississippi was ranked 19.3, but 47% of its working citizens are employed by a small business (436,567). 

The same can be said for West Virginia, with exactly half of its working population (1,553,543) being hired by smaller businesses, whilst its education ranking sits at 21.

The state of Louisiana also places in the bottom three for educational quality, but this hasn’t stopped people from helping small businesses grow. In fact, the data shows that whilst Louisiana has an educational ranking of 22.6, it has a higher percentage of workers employed by a small business than both Massachusetts and Maryland (56%). That’s 901,956 people!

We’ve created a ranking table, highlighting the top and bottom states that have seen the most economic growth, the greatest talent pool, as well as factoring in the industry growth.

[en-US] US Talent Pool

Industries with the most growth

There a many different sectors that businesses specialize in across the US, all offering their own unique contributions to our communities 

We wanted to find out how much these small businesses have grown in specific industries. As well as the amount of opportunities they’re bringing to their home states. 

The data revealed the industries that are amongst the biggest employers in small businesses across the whole country. 

The Construction industry, Scientific & Technical, Retail Trade and ‘Other Services’ were all the top employers.

It was the Construction industry that took the top spot out of all of the states, offering the most job opportunities in small businesses across the most states. In fact, small construction businesses offered the most jobs in 16 states; including, New Mexico, Idaho and North Dakota.   

The data also showed us that the Scientific and Technical industry followed closely behind, with smaller enterprises in the sector handing the most jobs in states such as Delaware, Maryland and the District of Columbia!

Retail wasn’t too far behind these two powerhouses of industries. Small businesses in this sector actually offered the most amount of jobs for seven of the fifty states. Including New York, which is actually home to four million small business employees.

Economic growth

Of course, the one thing that all of these small businesses would love to see, is economic growth. 

Launching a new business is a costly endeavour, with so many costs to factor in, it can be a daunting task. Despite this, it is worth the risk, as turning over your first profit is a great feeling.

It’s not just a personal achievement that makes the investments of cash worthwhile either; Small businesses are integral to helping local economies grow.

But which state’s talent pool resulted in the largest economic growth over the last four years?

US Map 1

So, it’s clear that a larger talent pool and higher educational rankings doesn’t always equal a tidy profit for small businesses.

But, to narrow it down further, we’ve used our findings to create a round up of the best states for small businesses.

Overall, the best state to start a small business is Wyoming! The state has notably high disposable income, much more favourable taxes and an existing precedent for small business success. The top 10 states are:

US Map 2

Of course, building a strong and reliable team is also important. If that’s your main goal for launching a small business, Montana is the state to be. It has the largest percentage of employment by small businesses, as well as the largest number of small businesses per thousand residents. Montana is also home to a well-educated workforce.

However, if you’re looking for somewhere to really make a profit, Washington is your best bet. It has the highest GDP growth, compared to any other state. As well as the highest decreases in both unemployment rates and poverty rates!

You can find even more small business stats, figures and findings here.

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*Sources for data streams

Combined tax rate + Corporate tax rates State and Local Sales Tax Rates, 2020 - Tax Foundation

Number of working citizens employed by a small business  Percentage of all employed citizens employed by small businesses  Small businesses by state population  Small businesses percententage of statewide payroll 2020 Small Business Profiles For Congressional Districts - Small Business Administration

Average salary per employed citizen 

State Minimum Wages | 2020 Minimum Wage by State - National Conference of State Legislatures

Cost of Living  Corporate tax rate  Cost of Living Index 2020 - COLI

Average disposable income per resident  Per capita disposable personal income in the United States in 2019, by state - Statista

Education rankings  Most Educated States 2020 - World Population Review

GDP growth Gross Domestic Product by State, 2nd Quarter 2020 - Bureau of Economic Analysis


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