Every year, about 1 million new businesses spring up in America, according to the Bureau of Labor Statistics. Something inspires the nation’s entrepreneurs to give it a go — and a national small business workforce of some 61 million employees is grateful for it.
It would be nice to have one clear, single reason that Americans keep on starting their own businesses: independence, maybe, or the desire to contribute something unique to the market. But of course, a big commitment like this requires more complex thought and motivation. Still, while every business owner has their own background story as to what brought them here, a common set of motivations persist.
Every year, the Census Bureau asks America’s business owners what it’s all for. They provide a list of popular reasons for owning a business, and entrepreneurs rate each one by importance. And it turns out, the reasons vary depending on where in the country you’re based.
Across the U.S., entrepreneurs seem to agree that “To be my own boss” or have “Greater income” are the most popular reasons to start a business. But below the surface, there are more diverse trends at play. So, OnDeck decided to look at popular but unique reasons in each state for why people start businesses. To do this we calculated how much more popular a particular reason is in each state and metropolitan area than in the U.S. overall — and we found that often, this most ‘local’ reason for starting a business was rated almost as high as those two most common reasons.
How We Conducted This Study
OnDeck sourced data from the U.S. Census Bureau’s 2020 Annual Business Survey, which asks business owners to rate the importance of each of a list of reasons for owning their business. For our data set, we analyzed the reasons that local business owners rated ‘very important.’ A location quotient method was used to determine the most popular unique reason in each state and metro area.
- New York and Delaware are the only states where “Couldn’t find a job” is the main reason for owning a business.
- One reason is that people who lost their job in the pandemic are reluctant to take a new job on a lower rung.
- East coast business owners tend to be motivated by family connections such as a family business or role model.
- West coast owners are more motivated by family responsibilities and the freedom to work when they choose.
New Yorkers Can’t Find a Job But Vacation States are Full of Ideas
If you can make it there, you’ll make it anywhere. And if you can’t make it there, you can always start your own business. New York is one of just two states where “Couldn’t find a job” is a disproportionately popular reason for starting a business. Elsewhere, there is a trend among eastern states to carry on a family business (although family businesses are more common in the west) or follow the example of a trusted friend or family role model; to the west, flexibility and balancing work and family life are more common priorities.
But the truth is that New York and Delaware’s jobless entrepreneurs aren’t necessarily those who are new to town; they include those who’ve lost their job (our data is from the 2020 survey) and are reluctant to take a step down on the ladder just to find work. Rather than take work at a junior level or in a different industry, jobless professionals are choosing to start again on their own terms. “Starting a new business by repackaging the skills and experience honed for decades into a new career is exciting,” said NYC careers coach Nancy Ancowitz.
However, even in New York and Delaware, only around one in ten business owners say they did it to find work. More prevalent around the country is the desire to balance work and family or to work more flexible hours (a “very important” reason for 58.4% of Delaware’s entrepreneurs). New Mexico is the state where “starting a business as the best way to realize an idea” is most common, followed by Florida and Hawaii, which are two of the three states with the most tourism companies. When you have a killer idea, the key is to research and tailor it thoroughly — without losing that kernel of inspiration that makes it unique.
These Five Metro Areas Are In It for the Earnings Boost
Entrepreneurs in five out of the ten most populous metro areas are primarily in it for an earnings boost. The metro areas around Chicago, Dallas, Houston, Philadelphia and Phoenix all state this as their most popular unique reason for starting a business. However, it’s worth noting that the salary of the average small business owner is only 3% higher than that of the mean wage for everybody. While there are success stories that hit way above the average small business owner wage of $60,151, they are dragged down by those who scrape by with as little as $29k/year.
Even if you believe you have watertight figures that show you could boost your earnings by by starting your own business, it’s worth remembering that nobody knows anything about how your market will respond. Perhaps this is one reason that entrepreneurs in the Atlanta metro area rate the importance of making an idea come true so highly. With its low cost of living and melting pot of tech innovators, Atlanta offers a relatively safe setting to take a chance on a big idea that may need a little more time to grow.
Business owners in McAllen–Edinburg–Mission metro area in South Texas show the most unified reasoning for starting a business. Fully 76% of them are in it to be their own boss. “I loved my job, but at the end of the day, I wanted to be my own boss and find ways to help other women with the same entrepreneurial spirit,” says Monika Alvarez, who quit her job as a sales director to launch Club 6 Dígitos, a business coaching and development company in Mission. “Going from the stability of a full-time salary to only making $12,000 in my first year of business was very difficult. After this, I decided to seek out guidance from experts and mentors to get where I wanted to be.”
Look Before You Leap
Starting a business may be the most important decision in your life. It involves a major investment of time, money, commitment, passion and sustained motivation and energy. Your inspiration for doing it may be a deeply personal story or the universal drive for freedom and security. Still, your pros and cons list should be long and carefully balanced. You can find our full data on the reasons why people start their own businesses in every state and metro area in the interactive table below.
METHODOLOGY & SOURCES
Data on the reasons for starting a business in each U.S. state and each of the 100 most populous metropolitan areas was taken from the Annual Business Survey (2020, latest data available), carried out by the U.S. Census Bureau. The percentage of business owners who answered ‘very important’ to questions about different reasons for starting a business was tallied up for each state and metropolitan area.
To find the top states and metro areas for each reason, we found the locations where the highest proportion of local business owners considered a particular reason to be ‘very important’ in their decision to start a business.
The most popular unique reason for each state and metro area was calculated using a method akin to location quotient, i.e., a measure of how much more important that reason is to business owners in a given state or metro area than in the United States overall. For example, 65.4% of business owners in Utah said ‘balance work and family’ was very important to them as a reason for starting their business, which was 1.13 times higher than 57.6% of business owners who said it was very important to them in the United States overall. This means its location quotient was 1.13, and it was the highest of all reasons in Utah, which is why it was deemed Utah’s most distinct reason for starting a business.
The reasons in the survey ‘work for self’ and ‘start own business’ were excluded from our analysis due to being too similar to the reason ‘be my own boss.’ Population estimates from the U.S. Census Bureau were used to determine the 100 largest metropolitan areas by population.
The data was gathered in December 2022.