2023 Best States For Black Entrepreneurs

The Mid-Atlantic and Southern regions are fortifying their reputations as the best states for Black entrepreneurs, with the Gulf states of Louisiana and Florida joining their ranks thanks to an increase in Black business creation within their borders. This is the finding from Merchant Maverick’s annual report on the Best States for Black Entrepreneurs.

Venture capital allocated to Black entrepreneurs fell sharply by 45% in 2022. Much of this is attributable to an overall decline in post-COVID VC funding across the board (36%), but the disparity still illustrates how Black business owners face stronger headwinds when it comes to securing financing.

Because Black business owners can face discrimination and have a harder time accessing the resources necessary to nurture a successful business, success rates can depend heavily upon location.

For this year’s report, we gave the heaviest weights to race-specific business indicators within each state:

• Black-owned businesses per million residents
• The percentage of the state’s workforce employed by Black-owned businesses
• Average annual payroll of Black-owned businesses
• Average annual income of Black business owners

We also factored in several general metrics pertaining to the overall business climate of the state:

• Regional price parity, a cost of living indicator
• Unemployment rate
• Top state income tax bracket rates

Key Findings

• The Mid-Atlantic region remains a hotspot for Black entrepreneurs, with Maryland, Virginia, and North Carolina making strong showings at ranks 1, 4, and 9. These states feature a proportionally high Black population and have all made focused efforts to nurture minority-run businesses within their borders.
• The South remains a fertile ground for Black-run businesses. These are, for the most part, states with well-established Black communities that have also benefited economically from recent migratory trends. Louisiana and Florida, in particular, appear to have benefited from this trend.
• As was the case in 2022, Northern states (with the exceptions of Maryland and Indiana) generally underperformed in our metrics, regardless of the size of their local Black populations. Ohio, the most highly ranked Northern state, came in at No. 12. New York, which has the most Black businesses in raw numbers as opposed to percentage of total businesses, ranked 23rd.
• Macro trends affecting business conditions more broadly also had a significant impact on this year’s rankings. States like Texas and Florida, which have seen a huge influx of new residents, performed quite well.
• Black-run small businesses still face significant challenges in America. Average annual payrolls at Black small businesses lag behind those of the average small business in every state. Maine came closest to parity, with Black businesses managing $680,000 in payroll compared to the state average of $751,000. In Montana, the most unequal state in this regard, the average Black-owned small business manages around nine times less than the state average.

The Top 10 States For Black Entrepreneurs In 2023

1. Maryland

Overall score: 78.8

Last year's rank (change):  2nd (+1)

Maryland has consistently ranked highly on Merchant Maverick’s list of best states for Black business owners, but this year it’s leading our charts thanks to its high concentration of Black-owned businesses at 1,090 per million (1st), and percentage of its workforce (1st) employed at Black-owned businesses. Black-business owners in Maryland earn an average annual income of $70,378 (3rd) and control an average annual payroll of $420,000 (8th). These factors more than offset Maryland’s high cost of living (43rd).

2. Tennessee

Overall score: 75.5

Last year's rank (change): 11th (+9)

With its varied economy largely dominated by healthcare, automotive, agriculture, and tourism, Tennessee also has a sizable Black population – 17% according to Census.gov. The Agriculture and Commerce state ranks better-than-average for Black businesses in every metric we measured and stands out, particularly in terms of its high annual income of Black business owners ($63,762, or 6th highest in the nation) and low cost of living (10th lowest nationally). Tennessee is also one of several states with no state income tax.

3. Nevada

Overall score: 73.4

Last year's rank (change): 4th (+1)

Moving up the list one space this year is Nevada. Despite Nevada’s relatively low Black population, Black business owners within the state perform quite well by many metrics, notably commanding average annual payrolls of around $519,000 (4th) and an average income of $61,818 (10th). That income will go a little farther in the Silver State thanks to its lack of income tax (1st). The rate of entrepreneurship among Black Nevadans is also well above average at 362 per million (16th). This year's main strike against Nevada is its relatively high unemployment rate of 5.2% (49th).

4. Virginia

Overall score: 70.4

Last year's rank (change): 1st (-3)

In Virginia, where roughly 20% of the population is Black, Black-owned businesses are flourishing. Despite higher-than-average income taxes and a moderately high cost of living, Virginia ranks well overall due to its high number of Black-owned businesses per capita (732, or 3rd in the country) and its relatively high percentage of the workforce employed by Black-owned businesses (1.85% or 5th highest nationally). This Mid-Atlantic state also benefits from a low unemployment rate, clocking in at just 3.0%.

5. Georgia

Overall score: 70

Last year's rank (change): 8th (+3)

Atlanta has developed a reputation for being a center of Black wealth within the United States. The Peach State has the second highest rate of Black entrepreneurship at 1,036 per million, as well as the second largest percentage of its workforce under Black leadership at 2.32%. While the annual average income for Black business owners isn’t as high here as in some other states ($58,316, 16th), Georgia’s relatively low cost of living (95.8 RPP, 26th) does make that income go a little farther.

6. Louisiana

Overall score: 65.9

Last year's rank (change): 20th (+14)

Louisiana jumped an impressive 14 places on our list since last year. Roughly a third of the Bayou state’s population is Black, and unsurprisingly, Louisiana ranks high in terms of Black-owned businesses per capita (672 or 7th highest) and in the share of the workforce employed by Black-owned businesses (2.01% or 4th highest). Cost of living and income taxes are also comfortably low in this small business-friendly state, both ranking 13th lowest compared to other states.

7. Indiana

Overall score: 65.2

Last year's rank (change): 15th (+8)

With a Black population a few points less than the national average (10.2%), Indiana is perhaps the most surprising entry in our Top 10 this year. Indiana’s outlier credibility comes not just from its relatively low cost of living (19th) and taxes (11th), but the percentage of its workforce under Black leadership at 1.18% (9th) and the average annual payroll of Black-run businesses at $445,000 (6th). With a relatively low rate of Black entrepreneurship (27th), this suggests a smaller number of high-performing Black-run businesses within the Hoosier State.

8. Texas

Overall score: 65

Last year's rank (change): 3rd (-5)

Texas dropped five places since last year but still made it into the top 10. Black business owners in the Lone Star State benefit from a high average annual income ($62,426 or 9th highest nationally) and no income taxes, both of which help to offset the higher-than-average cost of living. With its 20% Black population, Texas also has a decent number of Black-owned businesses per capita (360 or 17th) and percentage of the workforce working for Black businesses (1.03% or 15th).

9. North Carolina

Overall score: 63.4

Last year's rank (change): 6h (-3)

North Carolina narrowly maintains its spot in the Top 10 in 2023, despite falling three places. Boasting relatively high levels of Black business ownership (613 per million, 8th) and the 6th highest percentage of a state’s workforce under Black leadership (1.66%), North Carolina could be considered a lower-cost alternative to Maryland. The trade-off to that lower cost of living (93.8 RPP) is a considerably lower average annual income of $51,737 (24th)

10. Florida

Overall score: 62.1

Last year's rank (change): 26th (+16)

Florida is a new addition to our list this year. The Sunshine State has the 5th-highest share of Black-owned businesses per capita (681), the 4th-lowest unemployment rate (2.5%), and no income tax. Though the 1.05% of Florida’s workforce employed by Black-owned businesses doesn’t come close to matching its 17% Black population, this figure is still the 13th-highest nationwide. Florida’s high cost of living (ranking 34th best nationwide) and low average payroll of Black-owned businesses (42nd) are still holding this tourism-dependent state from ranking higher on our list.

Raw Data

Map View Of All 50 States

Complete Ranking Of All 50 States

Methodology

For this report, we collected data from seven different metrics for each state. For each metric, states were given a score out of 100 based on each state’s rank, with the best-ranked state scoring 100 and the worst-ranked state scoring 0. These individual metric scores were then multiplied by specific weights to achieve an overall score for each state.

These four metrics equally accounted for 75% of the overall score:

• Black-owned employer businesses per capita
• Percent of the workforce employed by Black-owned businesses
• Average annual payroll of Black-owned businesses
• Average annual income of Black business owners

And the next three metrics equally accounted for 25% of the overall score:

• Cost-of-living
• Unemployment rate
• State income rate

Our data was pulled from multiple separate sources, including the US Census Bureau's 2020 Annual Business Survey, the US Census Bureau's 2021 American Community Survey, the Tax Foundation, and the US Bureau of Labor Statistics.