The 10 Worst States To Do Business In

Bad Move?

Entrepreneurs starting their own solution provider companies give considerable thought to critical aspects of their business, from which IT vendors to partner with to how the startup will be financed. But the business could be doomed to failure if the very first decision, where to base the new company, is the wrong one.

For the second year CRN Research has analyzed data on all 50 states, from the availability of experienced workers to business opportunities, from business costs to taxes and regulations. Based on that analysis we've ranked the states according to how business-friendly they are.

Here's a look at the 10 that came out as the worst states for solution providers to do business in.

No. 10: Nevada

Solution Provider 500 Companies: 0

Nevada's overall rank for business opportunity tumbled to No. 36 this year, while the state improved its ranking for taxes and regulations to No. 3. And the state still ranks near the bottom for workforce education and experience (No. 48), behind only Louisiana and Mississippi.

The Silver State's rankings for labor/employment costs (No. 35) and innovation and growth (No. 27) were on par with last year. In July the state's 7.7 percent unemployment rate was tied (with Michigan and Rhode Island) for third highest in the country.

No. 9: Kentucky

Solution Provider 500 Companies: 5

Kentucky is just a couple of spots behind Louisiana in the labor force education and experience criteria (No. 46). The state's rankings for business opportunity (No. 37), labor costs (No. 29) and innovation and growth (No. 39) were the same or little changed from last year.

But this year's analysis gave the Bluegrass State lower scores for taxes and regulations, including property taxes, resulting in a No. 23 ranking.

No. 8: Louisiana

Solution Provider 500 Companies: 3

While Louisiana scores No. 2 for its low labor costs, it's a case of getting what you pay for with the state ranking No. 49 (behind only Mississippi) in worker education and experience.

This year the Pelican State drew lower scores in innovation and growth (ranked No. 45) and in taxes and regulations (No. 21) than in 2013. But the state's rank for business opportunities did improve to No. 22.

No. 7: Alaska

Solution Provider 500 Companies: 1

With a population density of 1.3 residents per square mile (compared to 1,210.1 residents per square mile in New Jersey), the business opportunities in Alaska are going to be limited. This year Alaska was ranked No. 48 in business opportunity, ahead of only Rhode Island (No. 49) and Maine (No. 50).

Alaska was the only state that recorded a GDP contraction (by 2.5 percent) in 2013, according to the U.S. Department of Commerce. The Last Frontier state did improve its rankings in this year's CRN analysis in IT worker education (No. 16) and taxes/regulations (No. 32). But the state's labor costs remain high (No. 42), making it an expensive place to do business – if you can find the opportunities.

No. 6: Hawaii

Solution Provider 500 Companies: 0

Hawaii also improved its standing in this year's analysis. But the Aloha State remains a very expensive place to do business with its No. 49 ranking for labor and employment costs (second only to New York). It also has poor rankings for innovation and growth potential (No. 47) and business opportunity (No. 44). Heck, it's an island.

Hawaii does offer relatively low corporate tax rates, a major reason the state is ranked No. 8 in the taxes and regulations category.

No. 5: West Virginia

Solution Provider 500 Companies: 0

West Virginia was at the bottom of our state rankings last year, so this year's ranking marks an improvement. This year it received better scores for workforce education and experience (still low at No. 45), and for overall business opportunities (No. 38). But its ranking for innovation and growth remained an abysmal No. 49.

The Mountain State remained in the middle among all states for labor employment costs (No. 24) and taxes and regulation (No. 29).

No. 4: Arkansas

Solution Provider 500 Companies: 0

Arkansas was ranked No. 1 for having the lowest labor and employment costs. But it's a case of getting what you pay for with its No. 47 rank for workforce education and experience.

The Natural State was No. 50 in innovation and growth with low scores for the number of engineers and scientists within its workforce and the number of patents awarded to businesses within the state. The state was ranked No. 33 in both business opportunity and in taxes and regulations.

No. 3: Maine

Solution Provider 500 Companies: 1

Maine scored last (No. 50) among the states in the business opportunity criteria, given its low scores for economic climate, job growth and the number of SMB and enterprise customers that provide a potential customer base for a solution provider. The Pine Tree State also ranked poorly in taxes and regulations (No. 45) and innovation and growth potential (No. 42).

Maine does fairly well in terms of offering an educated and experienced workforce (No. 15), although its labor and employment costs are higher than in many states (No. 32).

No. 2: Mississippi

Solution Provider 500 Companies: 4

Mississippi scored dead last (No. 50) among the states in the workforce education and experience criteria. And its low rankings for overall innovation and growth (No. 46) and for business opportunities (No. 45) didn't help much. In July the state's 8.0 percent unemployment rate was the highest in the country.

The Magnolia State does have low labor costs going for it: It was No. 5 for overall labor and employment costs. And it was in the middle of the pack (No. 25) for taxes and regulations, thanks to its relatively low corporate income and franchise tax rates.

No. 1: Rhode Island

Solution Provider 500 Companies: 3

Rhode Island was ranked No. 49 for its business opportunities with low scores for economic climate (including job, income and gross state product growth) and the low number of small and midsize businesses. The state also ranked No. 45 for its high labor costs (including high unemployment insurance taxes), and No. 48 for high corporate taxes and a "business-unfriendly" regulatory environment.

Rhode Island did rank No. 18 for the education and experience levels of its workforce.

The Ocean State has been slow to recover from "The Great Recession" and had a 7.7 percent unemployment rate in July – below only Mississippi and Georgia, according to the U.S. Bureau of Labor Statistics.