A recent report by WalletHub ranks Connecticut as the second-worst state in the nation to start a business, trailing only Rhode Island.
The findings highlight significant challenges for entrepreneurs, including high business costs, a lackluster business environment, and minimal small business growth.
Key Factors in Connecticut’s Low Ranking
WalletHub’s analysis evaluates states based on three main categories:
- Business Environment: Connecticut scored poorly due to low employee enthusiasm, limited small business growth, and a stagnant startup ecosystem.
- Business Costs: High labor costs, expensive office space, and significant state taxes contributed to its ranking.
- Access to Resources: Connecticut performed better here, ranking 13th, due to its access to financing and skilled human capital.
Small Businesses in Connecticut
Small businesses, defined as those with fewer than 500 employees, comprise 97% of all businesses in the state and employ half of the workforce.
Despite this, Connecticut has struggled to recover jobs lost during the 2008 financial crisis and the COVID-19 pandemic, with its workforce still 1.5% below pre-2019 levels.
While job growth has been stagnant, business applications in Connecticut rose by 5.6% between 2023 and 2024, though this increase lagged behind neighboring states like Rhode Island (10.5%) and Massachusetts (8.5%).
Government Efforts to Support Entrepreneurs
Governor Ned Lamont highlighted Connecticut’s efforts to support startups in his 2025 State of the State address, citing programs like the Boost Fund, which provides low-interest loans to businesses and nonprofits.
“Over the last few years, we have had more new business startups than ever before,” Lamont said, emphasizing initiatives like apprenticeships and job training programs.
Despite these efforts, WalletHub ranked Connecticut 46th nationally for small business growth, and the state continues to face challenges with labor costs, office space affordability, and access to a skilled workforce.
Expert Insights
Experts like Texas A&M Associate Professor Stephanie Black stress the importance of a supportive business ecosystem:
“State policies, particularly corporate tax rates, significantly influence where entrepreneurs decide to start businesses. However, infrastructure, workforce availability, and access to markets are equally crucial.”
Top States for Startups
In contrast, states like Florida, Georgia, and Utah ranked as the top three places to start a business due to their favorable tax rates, affordable costs, and strong entrepreneurial ecosystems.
Conclusion
Connecticut’s struggles to attract and support startups underscore the need for continued reforms in taxation, business costs, and workforce development.
While the state has taken steps to address these issues, it faces an uphill battle in improving its appeal to entrepreneurs in the competitive national landscape.
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