What types of small businesses thrive in each state?

Small businesses are the backbone of local economies — creating jobs, fostering creativity and supporting community growth. The nature of these businesses is frequently adapting to consumers’ needs. With the impacts of COVID-19 still being felt nationwide years later, as well as the changing needs of an aging population and a resolute shift toward environmentally conscious policies, opportunities for innovation and investments are as rife as ever. 

Our team analyzed data from the U.S. Census Bureau’s County Business Patterns program, looking at the number of small businesses in various industries — from renewable energies to retail. All businesses have under 50 employees, and we examined the growth of these industries between 2016 and 2021 to find out which small business types are growing the fastest and where. 

Key findings

Here’s a summary of our key findings about the fastest-growing types of small businesses and the cities they’re thriving in:

• Renewable energy industries were the fastest-growing between 2016 and 2021. The number of businesses in solar power generation grew by 203% during this time. Wind power generation businesses grew by 135%. However, between the two industries, there are fewer than 1,000 total establishments that have fewer than 50 employees.
• More real estate agencies opened than businesses in any other industry. Almost 48,000 new establishments opened between 2016 and 2021, representing an increase of 43.4%.
• Idaho saw the biggest increase in the number of small businesses across all sectors. The state saw an increase of 19.9%, which is equivalent to over 9,000 new establishments. It was followed by Utah (16.8%) and Nevada (16.8%), but all three states combined had fewer than 28,000 small businesses.
• More new businesses opened in California than any other state. Over 80,000 establishments opened between 2016 and 2021. Florida came in second with 66,509 new establishments, and Texas came in third with 57,630 new establishments.
• More new businesses opened in the Los Angeles-Long Beach-Anaheim, California area than any other. 40,419 new businesses opened in this area between 2016 and 2021. However, Boise City, Idaho, saw the biggest overall growth, with an increase of 26.5%.

The fastest-growing small businesses nationwide

The past decade has been a fertile landscape for those looking to start small businesses. Businesses in the renewable energy industry saw the highest percentage increase in the number of businesses compared to any other industry. However, the actual number of establishments in these industries stayed relatively low.

The number of solar power generation establishments with fewer than 50 employees more than tripled, growing from 145 to 440 nationwide. Wind power generation establishments grew by 135% from 252 to 592. When looking at the number of establishments opened in total, however, there were more new businesses in the real estate industry than any other type, with almost 48,000 new establishments.

Businesses in personal care, such as nail salons and barber shops, took a hit during the pandemic-induced lockdown. Despite this, the industry showed significant growth between 2016 and 2021, with increases of 35.1% and 45.3%, respectively, in the number of new establishments across the U.S. E-commerce businesses also saw impressive growth, with the number of small online and mail-order retailers rising by 48.9%.

Cities and states where small businesses are thriving

There is a distinct pattern in the cities seeing the greatest small business growth, with many located in fast-growing metropolitan areas in the West and South. Cities like Boise City, Idaho, Provo-Orem, Utah, and Austin-Round Rock, Texas all top the list, with increases of over 20% in the number of small businesses operating in these areas. 

Overall, 33 out of the 50 U.S. cities with the most small business growth between 2016 and 2021 are in the South, and 15 are in the West. The top ten areas where small businesses are thriving include: 

• Boise City, Idaho.
• Provo-Orem, Utah.
• Austin-Round Rock, Texas.
• Greeley, Colorado.
• Crestview-Fort Walton Beach-Destin, Florida.
• Orlando-Kissimmee-Sanford, Florida.
• Kennewick-Richland, Washington.
• Ogden-Clearfield, Utah.
• Cape Coral-Fort Myers, Florida.
• Riverside-San Bernardino-Ontario, California.

Cities and states where small entertainment businesses are thriving

This industry includes those in the arts, entertainment and recreation, including independent writers, artists and performers. It also includes sports teams and clubs, arcades and museums. A surprise leader in new small entertainment businesses is Provo-Orem, Utah. Provo-Orem has seen a growth of 52.5% in the number of small entertainment businesses. Despite this, it has only seen an increase of 97 establishments.

The Los Angeles-Long Beach-Anaheim area saw the biggest increase, with 6,366 new small entertainment businesses between 2016 and 2021. It also happens to be the second-fastest growing area by percentage, with an increase of 38.3% in that same five-year period. This was also reflected on a state level, with California seeing the highest overall growth in small entertainment businesses — both as a percentage increase and in total numbers.

Cities and states where the most small farms are cropping up

Small agricultural business growth is surprisingly high in major cities like Miami (43.8%), San Francisco (28.2%) and Boston (24.3%). Oklahoma City saw the highest growth rate, with a 120% increase in agriculture, forestry, fishing and hunting establishments between 2016 and 2021.

Oklahoma topped the list at 26.5%, followed by: 

• Hawaii (21.2%).
• Pennsylvania (16.6%).
• Delaware (15.2%).
• Missouri (12.5%).
• Florida (11.7%).
• California (10.2%).

Cities and states where small bakeries are on the rise

With over 2,000 new establishments across the U.S. between 2016 and 2021, bakeries and pastry shops were among the biggest growing small business types nationwide — increasing by 31.9%. While on a city level, the growth in small bakeries largely aligns with the general increase in small businesses across the U.S., the industry is seeing particular success in:

• Davenport, Iowa (200%, third-highest).
• Barnstable Town, Massachusetts (175%, fourth-highest). 

These areas, overall, had low growth between 2016 and 2021.

Wyoming saw a huge 600% increase in the number of bakery establishments, the most of all states, followed by Idaho (147.1%) and North Carolina (101.6%). On the flip side, Delaware saw the biggest fall in the number of small bakery establishments, with numbers reducing by 31.6%. West Virginia (-25.8%), Montana (-12.5%) and Rhode Island (-7.5%) also saw decreases in small bakeries.

Cities and states with the most small e-commerce business growth

One of the many long-lasting impacts of the pandemic was the growth in the number of nonstore retailer establishments (29%) and direct shipping and mail order houses (48.9%). The boom in online shopping gripped mid-size southern cities in particular, with 94% of the top 50 cities for nonstore retail growth located in the South. Gulfport-Biloxi-Pascagoula, Mississippi, saw the highest rate of growth at 135%, followed by Mobile, Alabama (133.3%) and Crestview-Fort Walton Beach-Destin, Florida (82.7%).

All 50 U.S. states saw an increase in nonstore retail businesses between 2016 and 2021. Delaware saw the most growth at 74.3%. It was followed by Wyoming (67.3%) and Hawaii (53.2%). The only other non-mainland state, Alaska, saw the smallest increase, with two new nonstore retailers opening in five years, representing an increase of 2.2%.

Cities and states where personal care services are growing the most

Personal care businesses — such as barber shops, beauty salons and nail salons — grew nationwide, with an increase of 14.7% from 2016 to 2021. On a state level, Idaho saw the biggest increase in personal care services at 48.6%, followed by Utah (43.4%) and Texas (38.6%). While almost all states saw an increase in personal care service-related businesses, Kentucky saw a reduction of 4%. 

Out of the top 50 cities to see increases in personal care services between 2016 and 2021, Mobile, Alabama saw the biggest growth of 81.8%. 

• Boise City, Idaho, came in second at 60.4%. 
• Dallas-Fort Worth-Arlington, Texas, had the third-highest increase in percentage growth but the highest net number of new businesses (1,163) in personal care.
• Fayetteville, North Carolina, and Waco, Texas, saw increases in personal care businesses that far outpaced overall business growth in these areas.

Cities and states where small contractors are flourishing

The number of small specialty trade contractors working across the country rose by 11.1% between 2016 and 2021 – this includes businesses such as roofers, plumbers, painters and floorers. They’re thriving in places like Boise City, ID (increasing by 59%), Provo, UT (41%) and Austin, TX (31.1%), with these fast-growing cities presenting plenty of opportunities for trades contractors. 

On a state level, Idaho has seen the biggest overall increase in specialty trade contractors with total numbers growing by 44.3% – followed by Utah (29.7%) and Florida (22.7%). The only states to see a net decrease in the number of small contractors are West Virginia (falling by 3.7%), North Dakota (2.5%) and New Jersey (0.9%).

Cities and states where breweries, distilleries and wineries are on the rise

Small breweries were the tenth-fastest growing type of establishment across the country, with the industry seeing a 75.8% increase in small businesses between 2016 and 2021. Spirit and liquor distilleries were not far behind, with an increase of 63.3%. 

In fact, breweries, distilleries and wineries are among the fastest-growing small businesses nationwide. Alcohol-related businesses have seen particularly high growth in cities where overall small business growth has been relatively slow, like: 

• Springfield, Missouri. 
• Tulsa, Oklahoma.
• Bridgeport, Connecticut.

Looking at all 50 states, Connecticut saw the highest rate of growth in alcohol-related establishments with fewer than 50 employees at 142.9%, followed by Maryland (131%) and Georgia (108.1%). North Dakota is the only state with no overall net change in the number of alcohol-related businesses, while Hawaii (-13.3%) and Delaware (-14.3%) both saw a decrease. Interestingly, the data shows that Mississippi is the only state in the country with no alcohol-related small businesses — down from seven in 2016.

California has the highest overall number of alcohol-related establishments with fewer than 50 employees nationwide, with 2,089 in 2021 — up by 19.7% from 2016. Washington state had the second highest at 646 establishments, significantly less than half that of California.

Cities and states where small business tech is growing

California continues to be the nation’s tech hub, with almost 30,000 small tech businesses — almost double that of second-place Texas. However, the state only saw an 8.8% increase in the number of small tech establishments between 2016 and 2021 — with 15 states ranking higher. Texas was ninth among these and Florida eighth, but Wyoming and Delaware saw the biggest increases at 66.6% and 62.6%, respectively.

Seven states saw a decrease in the number of small tech businesses registered, with West Virginia seeing the steepest drop at 8.4%, followed by Minnesota (-6.6%) and New Jersey (-5.9%). New York and Massachusetts also experienced decreases. 

While San Francisco, the renowned center of tech entrepreneurs, is still among the 50 fastest-growing cities for small tech businesses, it’s only 31st on the list with a growth of 12.6% from 2016 to 2021. Other cities with lower costs of living and high educational attainment are also starting to emerge as hotspots for the industry, including: 

• Austin, Texas (27.3%).
• Provo-Orem, Utah (27.2). 
• Charleston, South Carolina (21.8%).

Sources

1. United States Census Bureau - County Business Patterns.