Is your state in the top 10 for online business friendliness?

Almost every week we see a new article with a headline like “10 best cities for startups” or “10 most business-friendly states.”

Frontier Communications, the digital, long distance, cable TV, and Internet service provider, just released their “Top 10” list and it has a specific focus that makes it interesting: 10 Friendliest States for Online Business.

To pay special attention to the attributes that make an area more promising to online businesses, Frontier weighed five factors:

  • Technology. They considered the state’s average megabits-per-second (Mbps) speed, as well as public access to broadband internet and technical support.
  • Demographics and Population. They looked at population totals, gender percentages, and median household incomes while conducting their research.
  • Workforce and Education. What’s the percentage of those offering Bachelor’s and/or advanced degrees? What are the minimum wage and unemployment rates?
  • Economic Climate. Factors here included the state corporate sales tax rates, corporate income tax rates, number of SBA loans given, and how many local businesses were launched and closed within a calendar year.
  • Cost of Living. What’s the average home cost in each state? Are the real-estate taxes manageable? How burdensome would your energy bills be?

Here’s their ranking:

  1. Virginia ranked highly for its technological capabilities and its high quality workforce, and the state already has a strong business friendly reputation. (More on that below.)
  2. Washington has many economic averages that are better than the nation as a whole, including income. It also has no corporate income tax.
  3. Low unemployment, home to many high-powered companies, and a hotbed for tech startups propel this state.
  4. Oregon ranked very highly for its technological capabilities and its commitment to internet access for all.
  5. It’s huge, a long-time hub for global businesses, is virtually unparalleled for technical capabilities, and has a strong economy.
  6. District of Columbia: Lots of foreign capital, an educated workforce, strong economy, and an “agreeable” cost of living. (I should probably also note here that D.C. isn’t a state.)
  7. Lots of Ivy League schools nearby and a very corporate tax friendly state.
  8. Working hard to provide great Internet access.
  9. Strong economy, excellent tech capabilities, and Red Wing (the city, not the hockey player) is trying to become a tech hub like Austin and Silicon Valley.
  10. Low unemployment, a well-educated workforce, and a commitment to improving its tech capabilities.

When I see these top 10 lists, I’m often surprised by how much they can vary. In some ways, the criteria selected can be arbitrary. Take cost of living for example. We know that the cost of living in California, the District of Columbia, and parts of Virginia are sky high, yet they do quite well on this list. In fact, a high cost of living typically correlates to a well-educated and tech-savvy population, where wages are high.

To shed more light on the conclusions of this list, I decided to cross reference it with Forbes’ 2016 list of best states for business. I think that any state listed on both the Frontier list and the Forbes list, must certainly have a lot going for it. So, here are the winners of double honors:

  • First on Frontier, sixth on Forbes.
  • Second on Frontier, ninth on Forbes
  • Third on Frontier, first on Forbes (for the second year running, by the way).

It’s also interesting to note that California and Maryland, which make the Frontier list, sink to numbers 30 and 31 on the Forbes list respectively! Further, although Texas failed to make the Frontier list, we know that the Lone Star state was by far the biggest supplier of new jobs when the rest of the country was suffering through The Great Recession.

Are there significant reasons that would make a state good for online businesses but less so for a traditional business? Probably. However, in my experience virtually every new business has an important online component. This would make it wise to check the Frontier rankings important no matter what kind of business you plan in the near future.