Businesses in Arizona have a better outlook for startup success than those in most other states, according to a new report that measures which places around the nation are most amenable for entrepreneurs amid the economic challenges of 2022.
The Grand Canyon State came in at No. 15 in the nation in the study, called Best and Worst States to Succeed in Business, from Florida-based management software firm Harrington Group International.
The researchers delved into federal data with a focus on nine metrics across three categories: workforce and consumer habits, which considered job growth, where educated workers are moving and consumer spending; business culture, which considered business growth rates, startup survival rates and information from a business self-assessment survey from the U.S. Census Bureau; and financial climate, which considered GDP growth and a state’s credit rating.
Arizona’s showing was highest in the workforce and consumer habits category, where it ranked No. 11, benefitting from a 3.7% rate of job growth and a net migration of educated workers just topping 47,000. Consumer spending in the state is up 13.1%.
Job growth nationally is slightly higher than in Arizona, hitting 4%, but national consumer spending was lower at 12.7%. The report said people’s willingness to spend money is considered a critical short-term measure of how the economy is doing overall.
As for the business culture category, where Arizona came in at No. 21, the business growth rate — the year-over-year change in new business applications — was 3.5%. Of Arizona startups that launched during the year up until March 2016, 49.5% were still operating as of March 2021. And businesses in the state gave themselves a 58.5 assessment score.
That state business self-assessment score was higher than the national score of 56.4%, and Arizona’s business growth rate bucked the national decline of -0.09%, but Arizona’s startup survival rate was slightly lower than the U.S. average of 50.3%.
Arizona’s lowest rating, No. 33, was for financial climate. The state trailed national averages in two of three key metrics for the category. It showed negative gross domestic product growth of -1.9% between the first and second quarters of this year, compared with the national decline of -0.6%. The state’s S&P credit rating of AA in October was slightly below the national AA+ rate — S&P’s second-highest rating.
When it comes to tax revenue from 2021, 35.7% of Arizona’s revenue came from personal and corporate income taxes, which is a lower percentage than the U.S. rate of 46.9%. Harrington said it considers a lower income tax burden as better for business.
How businesses are faring nationally
While some places certainly are struggling more than others, Harrington said the national picture reveals some positives.
“The business environment isn’t so bleak at the national level,” the report said. “Employment has risen over the past year, at 4%, while more than a third of business owners say their companies are doing better than usual and compared with a decade ago, startups are more likely to stay in business, with a five-year survival rate of 50.3%.”
Florida came out on top in the report, with the state’s consumer spending and job-growth rates (15.6% and 4.9%, respectively) as key highlights, along with its AAA S&P rating and 6.9% state tax revenue rate.
After Florida, the top five included Texas, Tennessee, South Dakota and Idaho. The five worst states for business, according to the report, are District of Columbia (No. 47), Kansas (No. 48), New York (No. 49), Illinois (No. 50) and Connecticut (No. 51).
