Nobody ever said California was an easy place to do business.
Yet, even with all the grumbling about its economic environment, the state’s economy keeps outperforming the critics.
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My trusty spreadsheet peeked inside numerous “best state for business” rankings and related economic stats to create its own national ranking of business climates. By these calculations, California is the nation’s 15th-best state for business.
How? Well, 36 business and economic metrics were used to create five yardsticks of business performance, measuring entrepreneurship, workforce, economic strength, business friendliness and the costs to do business.
A sixth yardstick was a compilation of eight other “best states for business” rankings. This shows how others view the same discussion and serves as a check against the math of my spreadsheet.
Melding those six yardsticks together revealed that the best spots to run a business: Utah is No. 1, followed by North Carolina, Texas, Colorado and Florida.
And the worst? Alaska, then Hawaii, Louisiana, West Virginia and Mississippi.
Putting bragging rights aside, let’s use these rankings to see what’s working and what isn’t for California’s business scene. Peek inside the scorecard to see California’s strongest business trait to its weakest.
No. 1 for entrepreneurship
California thrives on out-of-the-box thinking. Creative twists help replace what’s lost to a difficult-to-navigate business landscape.
This yardstick weighed rankings of everything from venture capital to business survival rates to innovation potential and technology usage.
After California’s top grade for entrepreneurship came Colorado, Texas, Illinois and Massachusetts.
The least innovative states? Hawaii, Alaska, Arkansas, West Virginia and Kentucky.
No. 6 for workforce
If California is an anti-business state, it’s also got pro-worker vibes – a big bonus to the Golden State’s focus on innovation.
This yardstick weighed rankings of everything from college graduation rates and wages to labor productivity, job growth and worker rights.
The five states better than California for employees were Massachusetts at No. 1, then Utah, Washington state, Maine and Virginia.
The bottom five job markets were Wyoming, Louisiana, Alaska, Oklahoma and Mississippi.
No. 7 for economic strength
Even with all the hoops that businesses have to jump through in California, the state still turns out an impressive amount of goods and services. Companies want to be where the action is.
This yardstick weighed rankings of everything from gross domestic product growth, business health, economic risks and access to capital.
The six states with stronger economies that the Golden State by this math were Texas, North Carolina, Florida, Utah, Massachusetts and Delaware.
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The worst? Rhode Island, then Alaska, Vermont, Mississippi and Hawaii.
No. 30 for business friendliness
California’s bureaucracy can make it hard for businesses to succeed. Many policies limit the state’s economic potential.
This yardstick weighed rankings of everything from overall economic infrastructure, to access to resources, to business lending – as well as the everyday quality of life.
This math that graded the Golden State at No. 30 says New Jersey is the most business-friendly, followed by Colorado, Massachusetts, Minnesota and Idaho.
The worst? New Mexico, then Alaska, Louisiana, West Virginia and Hawaii.
No. 49 for costs
No surprise: California is an expensive place, and the business world is no exception. This financial headache makes Golden State business success challenging.
This yardstick weighed rankings of everything from the prices of business formation and electricity to day-to-day operational expenses to the business tax burden.
By this math, the low-cost states for business are North Dakota, Oklahoma, South Dakota, Wyoming and Mississippi.
The only place costlier than California was New York. Coming in at No. 3 was Massachusetts, followed by New Jersey and Maryland.
What others think
The last slice of this “Best for Business” scorecard eyeballed how other rankings scored the states.
If you don’t like my calculations, here’s the consensus view from CNBC, Rich State/Poor State, America’s Dashboard, CEO Magazine, MoneyGeek, National Business Capital and two from WalletHub: California ranked as the 27th-best place for business.
The consensus top five? Utah, Texas, Florida, North Carolina and Indiana.
And the worst places to do business, collectively, according to other rankings? Alaska, then Hawaii, West Virginia, Rhode Island and Louisiana.
Final thought
All these “best state” scorecards mix statistical science with some mathematical art.
For example, the choice and weighting of each metric within the scorecard can alter the final results. Note that for this scorecard’s final grades, equal importance was given to six key business metrics.
What if the importance of costs was doubled? That’s California’s weak spot. As a result, the Golden State’s No. 15 overall ranking would fall to No. 24.
Or imagine if the influence of entrepreneurship was doubled? California’s strongest trait would help its ranking jump to eighth-best.
So I suggest that any “best state” scorecard be viewed best as a discussion starter – not as any iron-clad grading system.
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at [email protected]
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