Perhaps the key to a business's profitability is to keep expenses down by opening in an area with low costs.
Some high-cost-of-living cities and states court businesses by promising incentives to locate there. Others don’t need to because they already provide a favorable tax environment, low-cost utilities, and an affordable pool of talent that help operations turn on a dime. To help business owners find those states, B2B procurement platform Approved.com developed its Business Cost Index (BCI).
To measure business affordability in the nation’s 50 states, the BCI examined each across four metrics: the average annual wage in 2020, as reported by StatsAmerica; the average price of electricity to commercial consumers during May 2021 in cents per kilowatt-hours, as reported by the U.S. Energy Information Administration (EIA); the average price of Internet service per megabit, according to HighSpeedInternet.com; and the top corporate income tax rate paid by businesses in the highest tax bracket, according to the Tax Foundation.
To rank-order the 50 states, Approved.com then calculated overall business affordability by averaging the four metrics used to score them. The closer the overall affordability score is to a perfect 10, the less expensive the state is to operate a business there.
Here, in ascending order, are the top 10 cheapest states to run a business in 2021.
10. Ohio (tie)
Ohio had an average annual wage of $40,300; an average electricity price of 9.74 cents per kilowatt-hour; and an average price of $3.41 per megabit for Internet service. The state does not levy a corporate income tax rate on businesses in its highest tax bracket. Overall Affordability Score: 7.58 out of 10.
