Best (And Worst) States 2014: Business Opportunities For Startup Solution Providers

The Top Five And The Bottom Five

An entrepreneur starting up a solution provider business may have a sound business plan, the best people, and top-notch technology and services. But a new business in a state with a poor economic climate and few customer prospects stands little chance of success.

CRN's analysis of the best and worst states for starting a solution provider business included an examination of each state's business opportunities. The criteria included the number of SMB and enterprise businesses in a state, as well as the number of fast-growing companies -- all providing a potential customer base for a solution provider. Also considered was the state's economic climate, economic expansion and development (access to capital and other factors), availability of broadband telecommunications, job growth rates and manufacturing value-added.

The first five states have the highest scores (No. 5 to No. 1), followed by the five with the lowest rankings (No. 46 to No. 50) for overall business opportunities.

Business Opportunities No. 5: Virginia

Virginia was No. 1 in the overall CRN "Best States" analysis, and the state has a lot going for it from the business opportunity standpoint. That includes having many fast-growing businesses (ranked No. 3) and small and midsize businesses (No. 12). And despite recording GDP growth of only 0.1 percent in 2013, it was ranked No. 5 for its economic climate.

The Old Dominion State is No. 5 in high-wage traded services (the share of employment in sectors in which the average wage is above the national median) and No. 4 in manufacturing value-added (per production hour worked as a percentage of the national average). Virginia, however, was ranked only No. 35 for job growth.

Utah scored well in a lot of business opportunity criteria, including ranking No. 1 (tied with Colorado and California) in economic expansion and development/access to capital. It was No. 2 in manufacturing value added and No. 11 for economic climate -- the state's GDP grew 3.8 percent in 2013, putting it in the top 10 among all states.

One downside is that the Beehive State ranked only No. 32 for the number of SMB and enterprise businesses in the states. But many of the businesses it does have are fast-growing companies, a criterion in which Utah ranked No. 5.

Business Opportunities No. 3: Colorado

Like Utah, Colorado enjoyed 3.8 percent GDP growth last year, boosting the state's economic climate rank to No. 15 and its job growth rank to No. 5. The state also tied with California and Utah for No. 1 in economic expansion and development.

Colorado ranks No. 15 for the number of small and midsize companies in the state and No. 9 for the number of fast-growing companies -- all of which provide a potential customer base for a startup solution provider.

Business Opportunities No. 2: Minnesota

Minnesota ranks highly for business opportunities largely on the strength of its solid economy: The state's economic climate ranked No. 9, including its 2.8 percent GDP growth in 2013, and No. 11 for economic expansion and development.

The North Star State was ranked No. 4 for high-wage traded services and No. 18 for manufacturing value-added. The state scored No. 16 for the number of SMBs in the state and No. 19 for the number of fast-growing companies that call Minnesota home.

Business Opportunities No. 1: Texas

The Texas economy has exploded in recent years, providing fertile grounds for entrepreneurs looking to start a business. In the CRN analysis, the Lone Star State ranked No. 1 for economic climate -- its 3.7 percent GDP growth in 2013 put it in the top 10. It scored No. 5 for economic expansion and development, and it ranked No. 4 for job growth.

As for providing potential customers for a solution provider, Texas ranked No. 2 for the number of enterprise businesses in the state, No. 4 for SMBs and No. 12 for fast-growing companies.

Business Opportunities No. 46: Vermont

Now we get to the states with the fewest business opportunities. Vermont's economic climate was ranked only No. 23 (its 2013 GDP growth was a middle-of-the-road 1.9 percent), while it was ranked a low No. 31 for economic expansion and development.

But Vermont's biggest weakness is that it doesn't have a lot of businesses that make up a solution provider's potential customer base. The state ranked No. 34 for fast-growing companies, No. 48 for the number of SMBs in the state, and No. 49 for enterprise businesses.

Business Opportunities No. 47: New Mexico

New Mexico's 2013 GDP growth was a lackluster 1.5 percent, likely a factor in the state's No. 41 ranking in economic climate. The state's job growth was ranked No. 42 among the states (it had a 6.6 percent unemployment rate in July). And it was No. 48 in high-wage traded services, but No. 1 in manufacturing value-added (thanks to electronic manufacturing clusters in Albuquerque and Santa Fe).

Business opportunities are limited by the low number of fast-growing companies in the state (No. 47) and small/midsize companies (No. 38).

Business Opportunities No. 48: Alaska

No surprise here in that Alaska, a big, empty state, was ranked No. 50 for both the number of SMB and enterprise businesses in the state and No. 40 for fast-growing businesses.

The Last Frontier State did rank No. 14 for its economic climate, despite its 2.5 percent decline in GDP in 2013 (the only state with negative GDP growth last year). Other scores, such as manufacturing value-added (ranked No. 49) and job growth (No. 46) are also poor.

Business Opportunities No. 49: Rhode Island

Rhode Island was dead-last in CRN's overall "Best States" analysis this year, and its poor showing in business opportunities criteria was certainly a factor. It was ranked No. 49 for economic climate (GDP growth in 2013 was a mediocre 1.4 percent), while its score for economic expansion and development was a middling No. 23. The state's scores for manufacturing value-added (ranked No. 41) and job growth (No. 40) were low as well.

The Ocean State was a middle-of-the-pack No. 25 for fast-growing companies, but it ranked only No. 44 for the number of SMB companies and No. 42 for enterprise companies in the state.

Business Opportunities No. 50: Maine

Maine is almost two states: Much of the Pine Tree State's population remains concentrated along the southern coast while large parts of the state's interior remain sparsely inhabited and economically depressed. The state ranked No. 43 for its economic climate (economic growth in 2013 was an anemic 0.9 percent, putting it among the bottom 10 of all states). But the state did rank No. 29 for economic expansion and development.

Maine ranked No. 39 for the number of SMB companies in the state, No. 43 for large companies and No. 36 for fast-growing companies. And in job growth, the state was No. 49 -- behind only No. 50 Illinois.