Why Business Owners Love Texas
A stat-packed overview of why Texas is topping business charts and appealing to so many startups
Best States to Start a Business
Hover over states below to see ranking
It’s not easy to start a business. It wasn’t easy in Silicon Valley. It wasn’t easy on the “Silicon Slopes.” Wherever you go, it will be difficult. Location doesn’t guarantee success, but it does help.
When looking to start a business, no one can deny that certain environments are friendlier than others. Some states have fewer regulations; some cities have larger resource and talent pools. Sometimes the numbers are negligible; other times, they’re astronomical. For Texas, the numbers are overwhelming.
Data taken from Thumbtack survey
|Ease of starting a business||A-|
|Health & safety||A-|
|Employment, labor & hiring||A-|
|Training & networking programs||B|
Forbes, Business Insider, CNBC, Thumbtack, and WalletHub all rank Texas—or its major cities—in their top business-friendly US spots for 2017. Here’s why:
In their “2017’s Best & Worst States to Start a Business” study, WalletHub ranked Texas second overall, with their third-place ranking in “Business Environment” playing a large part. In the study, Business Environment is composed of eight weighted business factors, evaluating everything from production to longevity:
- Average Length of Work Week
- Average Growth in Number of Small Businesses
- Startups per Capita
- Average Growth of Business Revenues
- Five-Year Business Survival Rate
- Industry Variety
- Entrepreneurship Index
- “Digital States” Survey Grade
It’s no coincidence that Texas led the nation in gross domestic product (GDP) growth during the first quarter of 2017 while also ranking in the top five for “Highest Total Spending Incentives as Percentage of GDP,” according to WalletHub. Big spending in GDP can make a big difference. In this case, the divide between state spending created a 74x difference between the top five best and worst states.
All told, Texas boasts the largest state incentive budget, spending $19.1 billion per year on state incentive programs. $743 million of that goes toward corporate income tax credits, rebates, or reductions. Manufacturing benefits from the majority of these incentives, taking $11.7 billion, although agriculture and healthcare also see significant industry incentives.
Three major Texas cities— Laredo, Lubbock, and Amarillo—were ranked in the top five US big cities for “Most Accessible Financing.” This statistic was calculated by dividing the Total Annual Values of Small-Business Loans by the Total Number of Small Businesses.
In the 2017 fiscal year, the US Small Business Administration reported 1,616 SBA loans from its Houston District Office alone, for a total of $928 million. Unsurprisingly, Texas came in fourth and fifth in the nation for Education and Health. Manufacturing, science, and tech fields also had strong showing in Texas with a combined $120 million in SBA lending for 2017.
“Business Environment” ranked extremely high (in the top 5) in Houston, Austin, and San Antonio, TX. And it’s not just the metropolitan cities bringing up the average. Eight of WalletHub’s top 25 Large US Cities for Starting a Business in 2017 were Texas cities. Similarly, Laredo, Lubbuck, Amarillo, and Austin all made it to the Top 15 in the CNBC and Business Insider rankings. Smaller cities like Baytown, Port Arthur, Texas City, and Deer Park all rank in the top five in revenue per business.
While these smaller Texas cities can’t compete with the talent and resources of New York or Los Angeles, each of these cities have successfully tapped into rare resources of their own:
Special Strengths: Large bilingual workforce
Industries: Trade, transportation, utilities, education, healthcare
Industries: Education, health, agriculture
Special Strengths: State’s top cotton producer, cost of living, low unemployment rate
Industries: Renewable energy—wind turbines
Special Strengths: Third windiest city, strong housing market
Small Business Growth
WalletHub ranked Texas second in Small Business Growth for 2017. Forbes seconded the motion by classifying state’s startup activity as “best among the largest states.”
Austin and Laredo have been huge contributors in this area, earning them the fourth- and fifth-highest WalletHub rankings in new small business. According to SoftMatch, Austin leads the nation in startups per capita.
Following Austin’s lead, Houston and Amarillo are also getting into the small-business incubator game with innovative new concepts finished or in progress. Like The Cannon, Houston’s new “Campus for Entrepreneurs.”
We’ve long believed that Texans work hard, maybe even harder than the average American. Now there’s a number to prove it. According to WalletHub, Texas has the fourth longest average work week and Corpus Christi, Plano, and Irving rank in the top five for “Longest Average Work Week.”
Boasting some the best universities in the nation with universities like Rice, Baylor, University of Texas, and A&M, Texas benefits from a fresh crop of young talent. In addition to these schools, Texas companies recruit from primer trade schools, teaching mechanical skills like welding that feed right into the state’s industry demands.
Plano, TX, is ranked fifth in “Most Educated Population.” And it’s not by a small margin. WalletHub cites a 6x difference between the top five most educated population cities compared to the bottom five.
Houston also benefits from being one of the largest immigration hubs in the US. Just last year, the Houston Chronicle dubbed Houston “America’s most diverse city.” The high volume of bilingual people in Houston, Laredo, and other Texas towns help fuel the service sectors and allow new ideas to flow freely.
Oil and gas isn’t the only thing Texas does well. We’re known worldwide for our technology and healthcare sectors as well. In fact, Texas Medical Center is the largest medical center in the world. Texas Children’s Hospital is one of the top pediatric hospitals in the country and MD Anderson is “Making Cancer History.”
Meanwhile, tech giants like AT&T are expanding their reach with bold acquisitions, and Dell is becoming the benchmark for corporate computer equipment.
These industry leaders are making a name for Texas and creating more opportunity for new companies to further develop these industries.
Texas is rich with natural resources—from stretching oil fields to fertile soil. It’s also a strong producer of renewable energy. There’s plenty of wind to go around in the Texas Panhandle. Amarillo is turning its “third windiest city” title into a positive by converting the resource into energy with its many wind turbines. Texas currently produces the most wind power of any US state.
In Business Insider’s state rankings, they cited “high access to resources” as their main reasons for ranking their Texas selections—Laredo, Lubbuck, Amarillo, and Austin—as high as they did.
Despite the downturn in the oil and gas industry, Texas has maintained strong employment numbers. In addition to hosting the world energy capital, Houston, its gross state product has also seen continual growth for the past five years. Now that barrel prices as beginning to rise again, those numbers should improve. The Houston Chronicle reported that Houston alone could add as many as 70,000 jobs in 2018.
Cost of Living
While California ranks well in many business factors, its labor costs are through the roof. What you get in resources and a large pool of workers, you lose in wage and real estate costs.
In Texas, the living’s easy. Your money stretches farther with low housing costs and an abundance of high-wage jobs in both the service and industrial sectors. It’s also an ideal place for families with strong primary and secondary schools scattered throughout the state. It’s the proud home to fantastic brisket and the friendliest people. Remember, hospitality is a priceless comity when deciding where to start your next venture.