The best places in the USA to start a family business

Family businesses are central to the US economy. Nearly 1 in 3 of all North American companies are family-owned. Together, they generate over $7trillion a year.

Running a family business is an opportunity to build a better future for the next generation. And they've been a crucial way for marginalized people to overcome economic hardships and exclusion.

"It's a great privilege for me to say I own something," says restaurateur Will Turner. "My great-great-grandfather, Shadrack Starks, didn't have that privilege. He was born into slavery and only later became a free man."

So in honor of this important business model, Ondeck used data from the US Census Bureau to find out which states have the most family businesses.

You'll find a closer look at their study below.

But first, let's weigh up the pros and cons of starting a business with your family.

The pros of running a family business

Strong families stick together. Members often share the same outlook and values, and they'll always go the extra mile for each other. “Family businesses at their best are world-beating,” says Professor Nigel Nicholson of London Business School. “By contrast, the level of competition and distrust in non-family businesses can be seriously problematic.”

Decreased operating costs are another benefit of running and owning a family business. Family members are more likely to work for each other rather than just profit. And they'll have fewer issues deferring a paycheck for a month if cash flow is tight.

Family businesses are intergenerational. This encourages the kind of long-term thinking that drives real growth and success.

The risks of mixing family and business

But family and business don't always go together. In fact, working with those we love the most can exacerbate family conflicts and tension. And this can have disastrous consequences. Check out HBO's smash hit show Succession to see what happens when sibling rivalry has billion dollar consequences!

There are also some practical concerns to consider. Jerry Quiel, who ran a San Bernardino sign-making business with his brothers for many years, explains: "Everything was always about work. We never switched off. It used to tick my mom off at Christmas and all the holidays. All we would talk about is work."

Silky Pitterman is part of the Midwood wig dynasty in New York. She oversees the daily operation with her sisters, while their mother is the founder and CEO. The business is thriving. But it hasn't been an easy ride for the Pitternam sisters, especially during the early days.

"You have to have a certain personality to work with your family," says Silky. "It took me a while to learn how to work with my sisters, and be professional, and not say, 'I'm going to tell Mommy on you.'"

US States with the most family-owned businesses

South Dakota is the US state with the highest proportion of family-owned businesses. According to the OnDeck research, 43% of commercial enterprises in The Mount Rushmore State are owned and managed by families.

Idaho came a close second; 42.3% of its businesses belong to families.

Other high-scorers include Nebraska (37.9%), Montana (35.8%), North Dakota (34%), and Wyoming (33.7%.)

All states with a higher proportion of family-run businesses are concentrated in or around the Great Plains. This vast expanse of land stretches from the Great Lakes to the Rocky Mountains.

The Great Plains is perfect for growing essential crops and raising livestock. It's known as the agricultural heartland of the USA. Some even call it the nation's breadbasket.

Farming is one of the most family-centric industries in the United States. In South Dakota, almost 98% of the state farms are owned and tended by family hands.

The US state with the lowest percentage of family-owned businesses

Family and business are best kept separate, according to the residents of New York State. Just 1 in 5 (20.4%) companies in New York are family-owned.

But those that did set up shop in The Big Apple are among the oldest family enterprises in the country. Some are now managed by fifth-generation family owners.

New York's oldest family businesses include the ArtKraft Strauss Sign Corporation (founded in 1897), the Cascade Linen and Uniform Service Company (founded in 1898), and the Rambusch Decorating Company (also founded in 1898). Then there's the Ferrara Bakery and Cafe in Little Italy. It's been serving up coffee and cannolis since 1892.

Giant skyscrapers and glass towers will always define New York, but it's the smaller, family-owned enterprises that give the city its true character.

"It's remarkable that these family companies have survived for 100 years or more," said Kenneth T. Jackson, a local historian. "These companies create a sense of permanence and constancy in the city. They feel familiar. They make this giant and crazy place feel like a home."

The Northeast is NOT the place for family-run companies

New York isn't the only Northeastern state with a low percentage of family-run companies. In neighboring Massachusetts, only 20.4% of companies are classed as family-owned.

Things aren't much better in New Jersey (21.9%), Connecticut (22.2%), or Delaware (23.4%)

Maine is the one anomaly on the Northeastern side. Almost 1 in 3 businesses located in The Pine Street State (33%) are family-owned.

Family-owned businesses in the metro areas

With a population of just 35,579, Lima, Ohio, is one of North America's smaller metro city areas. However, it's a big supporter of local, family-owned businesses—over half (56.2%) of companies in Lima. Ohio, are family-run.

That's higher than any other metro area - and by quite some distance. Lima's nearest rival - the Houston, Woodlands metro area - scored less than 30% on the family-run business index.

Why are so many family businesses flourishing in Lima?

Local business owner Mike Powell believes it's down to Lima's strong sense of community.

"We support each other," says Mike, whose family-run store has been doing business in Lima for over two decades. "We work with each other. If one goes down, then that hurts the whole community."

The people of Ithaca in New York State could learn a few things from this cooperative approach to local business. Less than 1 in 10 companies in the Ithaca metro area are owned and managed by families. That's the lowest figure in the entire study.

Spouse owned businesses

Would you like to run a business with your wife or husband? For some, that sentence sends a shiver down the spine. And don't feel guilty if that's you. Even the most loving couples need a bit of their own space.

But for others, it's an exciting chance to build something special with that one special person. That's certainly the case for many of the good folk in Idaho. An incredible 35.6% of Idaho firms are co-owned by spouses.

Keely and Hank Zengler are a husband and wife business team that relocated to Idaho from California to set up a jelly and jam store. "We both love it here," says Kelly. "It's family oriented. It's the ideal place to build a sustainable business we can pass on to our young sons one day. We feel like we're living the true American dream together."

Maybe the Zenglers should start a side business in marriage counseling?

They'd make a fortune in the New-Haven metro area. Only 5.3% of local business owners are brave enough to run a business with their marital spouse!

Check out all the Ondeck charts and tables for a full breakdown of the study data.
New study reveals which states have the most family-owned businesses (mapped)
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