This article discusses:
- Facts about women-owned businesses
- Benefits for female entrepreneurs
- The best states for women to start a business
- The worst states for women to start a business
According to the Small Business Administration (SBA), approximately 12 million businesses in the U.S. were owned by women in 2017. Women-owned businesses also contribute $388.1 billion in payroll each year.
Even with these astounding metrics, women are still underrepresented in business. However, their numbers continue to grow as more and more women are looking to start their own companies. With that in mind, some states are better than others for female-led businesses.
So which is the best state for women to start a company? Read on to gain insight into female entrepreneurialism in the U.S.
Facts About Women-Owned Businesses
Of the 12 million female-owned businesses, 1.1 million employed workers while the remaining were self-employed entrepreneurs without workers on the payroll. Together, women-owned businesses contributed $1.8 trillion in revenue to the U.S. economy.
Here are some other facts about women-owned businesses:
- Social assistance and healthcare sectors led the way for female-owned enterprises. Together, they accounted for 16.9% of female firms. Professional, technical, and scientific services ranked second in representing women-owned firms (16.4%), followed by the retail industry (11.7%).
- According to the SBA, 54.7% of its Microloan program loan proceeds were distributed to female-led or owned businesses. This is despite the fact that women seem to have more of a challenge in securing a conventional business loan.
- Almost 40% of women-owned businesses have been operating for at least 11 or more years, while 42% have been operational for five years or less.
- According to American Express, female-owned companies in the U.S. grew at an annual rate of 3.9% from 2014 to 2019. This figure is higher than the growth rate of all businesses combined, which saw a growth rate of 1.7% a year during the timeframe.
- As per Inc., female entrepreneurship has grown by 114% over the past 20 years.
- According to a Biz2Credit study, the average-sized business loan for women entrepreneurs was 33% lower in 2020 than it was for men.
- According to Visa, 59% of female respondents in a survey said their business model included both a brick-and-mortar and an online presence.
- The National Association of Women Business Owners points out that 20% of companies having $1 million or more in revenue are women-owned.
- As per the U.S. Census Bureauâs Annual Business Survey (ABS), arts, entertainment, recreation, real estate, rental and leasing, and construction firms saw the biggest growth in women-owned businesses from 2017 to 2018.
The Benefits for Women-Owned Businesses
While the pandemic has been challenging for businesses and entrepreneurship all around, many experts say that the future of business is primed for female business owners.
The largest advantage for females who want to own a business is clear – instead of working for someone else who can limit how much you earn, you can set your own business goals and have unlimited potential in earning an income that resonates with you. Female entrepreneurship means you are more in charge of your future. Who wouldnât want to have a piece of that pie?
Another benefit for women-owned businesses is that there is a lot of support for females who want to run their own companies. For instance, the federal government, along with other organizations that support women, offers grants and contracts that are awarded only to women business owners.
But to have a better chance at some of these contracts, itâs beneficial to have your business certified to increase your chances of winning a contract.
There are two main kinds of certification for women-owned businesses: the Women-Owned Small Business certification (WOSB) and the Womenâs Business Enterprise National Council certification (WBENC).
Getting certified will increase your visibility as a female-led business and offer you greater opportunities.
Some states are also better than others for women-owned businesses. Many of those have programs that offer enhanced support and assistance to female startups.
The 5 Best States for Women to Start a Business
Before starting a business in a particular state, you may want to see where that state ranks in terms of available resources and support to female entrepreneurs.
Business taxes are another consideration as some states have higher rates while others are lower, meaning you can hold on to more of your income and revenue.
Itâs also a good idea to consider the local economy where you plan to operate your business. If an area has a high unemployment rate, that isnât a good sign for your business.
You may also want to reach out to local Chamber of Commerce offices to learn what percent of businesses are led or owned by women. It could indicate how supported female-led enterprises are in a region or state.
Many factors help determine which states will prime your business for success. Weâve done the homework for you so you can pare your focus down to the states most likely to support you and ensure that your business grows and reaches its full potential.
According to human resource and payroll firm Paychex, Maryland ranks first in the U.S. for female business ownership. It doesnât hurt that the Old Line State has a 77.65% startup survival rate.
Women entrepreneurs in Maryland earn the second-highest income in the U.S. at an average of $81,839 annually. Women-owned businesses are also responsible for hiring 22.6% of Marylandâs workforce, placing them 4th in the nation.
Maryland is also 10th for the percentage of female-led employer firms, and 27.5% of the stateâs firms are led by women.
The state also offers a supportive environment as well as business resources available for women-owned businesses.
Texas is one of the fastest-growing female entrepreneur-friendly states and tops our list. The Lone Star State has carved a reputation for being business-friendly while attracting female business owners because it doesnât levy a corporate income tax rate at the state level.
Texas is also at the center of the tech hub, so if your startup or business is IT-related, youâll find no better place than Texas to own and operate your business.
Another thing to consider: In the past five years, female-led startups in Texas raked in $814 million in venture capital funding. Not too shabby!
In Colorado, a whopping 44.5 percent of businesses are owned by women. And the number continues to grow each year. The lessening gap is a testament to Coloradoâs support of women-owned businesses.
Colorado also boasts one of the lowest unemployment rates (3.5%) and is consistently one of the best places for women to start a business. It also has major startup and tech hubs in Denver, Colorado Springs, and Boulder.
The Centennial State is also known for its resilience in recovering from economic changes. With todayâs economic turbulence, thatâs a huge thing!
Technical, professional, and scientific services are popular sectors in Colorado, as are real estate, construction, retail, and health care.
The only reason Colorado didnât top our list is because of the stateâs exorbitant cost of living, which seems to grow each year.
Florida has rapidly moved up in the rankings over the years as one of the best states for female-owned businesses. Currently, 35.8% of businesses in Florida are owned by women.
Venture capital funding, which has previously been harder for women to secure, has become increasingly more common for Floridaâs female entrepreneurs. Female-led startups in Florida have raised $286 million in venture capital in the last five years.
Florida also has a plethora of resources and networking opportunities for women who run their own businesses, including workshops, business mentoring, and small business grants.
Most women-owned businesses in Florida are in the service industry.
Montana may not be the first state youâd think of when considering which states are best for female-owned businesses. But just over 22% of the Big Sky Countryâs workforce has a woman entrepreneur at the helm. Overall, Montana has the second-highest rate of female-owned businesses per capita.
If you need more encouragement about rooting your startup in Montana, hereâs another impressive statistic. Montana startups have an 81% survival rate across the board.
While female small business owners in Montana have one of the lowest average incomes in the U.S., the cost of living there is low compared to the rest of the country, so things balance out in the end.
Montana also has lots of organizational support for female entrepreneurs by way of networking, training, counseling, and mentoring.
Other top states for women-owned businesses
These states may not be in this yearâs top five for women-led businesses, but theyâre still impressive in their support for female entrepreneurs.
- New York
- North Carolina
Middle of the Road States for Female Entrepreneurs
These states may not be near the top for women wanting to start their own business, but they arenât at the bottom either.
The business landscape for women is changing for the better, and you just might be one of the many female entrepreneurs to help move these states up in the rankings for women-owned businesses.
- New Mexico
- Rhode Island
- New Jersey
Worst States for Women to Start a Business
Just as there are states with supportive environments and programs that help female entrepreneurs, some states are best avoided for women who want to start new businesses.
In general, these states arenât very supportive of working women and have higher unemployment rates for women and lower pay ratios compared to men. Consequently, most of them also have the lowest percentages of women-owned businesses.
Data compiled from the U.S. Census Bureau and the Bureau of Labor Statistics shows that these states rank the lowest for women-owned businesses.
- New Hampshire
- North Dakota
- South Dakota
- West Virginia
- New Hampshire
Some states clearly offer more benefits to women wanting to start their own businesses. Overall, women face more challenges than their male counterparts when starting a business.
But things are changing for women, and female entrepreneurs are finding more success than ever before.
The state you choose to operate your business can ultimately put the odds in your favor, particularly those with supportive and conducive environments for women-led businesses.
Once you decide where youâll start your business, you may need to look into a small business loan to help fund your venture. Youâll want to partner with a funding specialist that is supportive of women-owned businesses. As Sarah Dhar discovered, some loan providers are better than others.
Sarah comes from a long line of boutique hotel owners and wanted to open her own lodging facility in the Catskills. Biz2Credit quickly moved to approve Sarahâs business loan, and the turnaround time for receiving her funds was faster than she ever could have hoped for.