Q: What is the best state in which to start a business? I am a certified life coach so I can conduct business pretty much anywhere. I am looking for a place with a high income rate vs. cost of living. From a Forbes article I read, the best currently is Washington State. Is this true, or do you think there are better options?
A: Though it looked at conditions for individuals rather than businesses, the MoneyRates.com Best States to Make a Living study might be a good jumping-off point for this discussion, because it factored in the two criteria you mention: incomes and cost of living. Beyond that though, there are some additional factors you may want to consider when choosing where to start your business.
The state of Washington topped the MoneyRates.com survey, and it meets your test of having a high average income -- one of the highest in the nation. The cost of living there is a little above average, but this is offset by the fact that Washington has no state income tax. Other states with relatively high average incomes when adjusted for the cost of living and state taxes are Virginia, Texas and Illinois.
Beyond the relationship of income and cost of living, there are some other things you should take into account when deciding where to start your business:
- What is the market for your services? You may want to look at demographic information. Which states have large populations in your average age group, and where is the population growing?
- How much competition is there in your field? Be sure to check on the number of similar service providers in your target area to make sure the market is not over-saturated.
- Do you plan to hire people? If so, locating in a state where incomes are high could become a liability rather than an asset for you.
- What is the regulatory environment for business start-ups? Tight regulations can be a barrier to entry as well as a source of ongoing compliance costs, so look before you locate.
- Can you provide your services online? MoneyRates.com has consistently observed that online banks have a cost advantage over traditional banks, which allows them to offer more free checking accounts and higher interest on savings accounts. Similarly, if there are aspects of your services that can be provided online, perhaps you can take a cue from this and locate where you can minimize your operational costs while marketing to more affluent parts of the country.
Good luck with your venture. You are wise to want to pick your spot, because the research you do in advance can pay off every day once your business starts up.
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