Family-owned businesses play a crucial role in the American economy. They embody the entrepreneurial spirit and community values that define many states, cities, and metro areas.
But what’s the current state of family businesses in the USA? Are their numbers growing or shrinking? Are they still key employers? And how are they paying the staff they do take on?
These questions inspired this latest study from OnDeck.
Based on data from the Census Bureau’s 2023 Annual Business Survey, it investigates where family businesses are thriving in the US and where the faceless corporations are taking over.
Here’s a breakdown of the study’s findings.
US states with the highest and lowest percentage of family-owned businesses
Business really is a family thing in South Dakota. With a score of just over 41%, it’s the state with the highest percentage of family-run businesses.
And it’s no accident. South Dakota is famous for its business-friendly climate. There’s no corporate income tax or personal income tax, making it easier for family-run businesses to keep more of their profits and pass on the company to the next generation.
New York scored the lowest of all in this first section of the study. Less than 1 in 5 businesses in the Big Apple are family-owned.
Family-run businesses in US metro areas
The San Antonio-New Braunfels, Texas, is the US metro area where you’ll find the highest percentage of mom-and-pop type stores. Over 34% of all businesses in this metro area are classified as family-owned.
It’s one of three metro areas where around a third of all businesses are kept in family hands. The other two are Fresno, California, and Oklahoma City.
The states where the percentage of family-run businesses is on the rise
Family businesses may not be booming in Delaware and Wyoming. However, they are on the rise. Between 2020 and 2021, these states saw a 3 to 4% increase in the number of family-owned businesses.
The same period saw some marginal growth in the percentage of family-run businesses in Connecticut, New Hampshire, and New Jersey.
But the picture is pretty bleak across the rest of the USA. The data analyzed by the OnDeck team reveals a drop-off in almost every state, with a big decrease in Louisiana (4.95%) and North Dakota (4.88%).
But the hardest-hit state for family businesses in 2020-21 was Alaska. In that twelve-month period, the number of family-run businesses in the state fell by over 7%.
Metro areas where the proportions of family businesses rose
The 12 months between 2020-21 were good for people who wanted to open and run a family business in the Memphis, Fresno, and Salt Lake City metros. All three had 4% more family-run businesses by the end of 2021.
But it’s the corporations and franchises that expanded the most in the New Orleans-Metairie metro. And that led to a decrease in the percentage of the area’s family-owned businesses. That figure fell by 6.28% during the year in question.
States where family-run businesses employ the most people
Family-run businesses are a bedrock of the US economy. Not only do they generate huge amounts of dollars, but they also employ millions of people, driving economic growth and stability.
Maine is the state with the highest percentage of people employed by family-run businesses in the USA. Almost half (46%) of the working population puts in hours at a family-run operation.
The other high scorers include Arkansas, Utah, and the capital state, Washington. In each case, 4 out of 10 people are employed by a family-run business.
Metro areas where family-run businesses are big employers
Salt Lake City is a metro area in Utah famous for its strong sense of community and traditional family values. And these certainly extend to the area’s approach to business and employment. With a score of 49%, it’s the metro area with the highest percentage of people working at family businesses.
Oakland and the Kansas City metros are not far behind, with scores of 42% and 41%, respectively.
Only around 1 in 5 people with jobs in the Buffalo-Cheektowaga-Niagara Falls metro can say they’re employed by a family-run business. It’s more evidence that New York state is not where family businesses thrive.
States where family-owned businesses pay the highest wages
This last part of the study focused on pay. It reveals that Oregon is where people working at family businesses can earn the most. Family-run businesses in the state pay an average salary of $60,000 annually.
The lowest wages are in Hawaii. Here, the average salary at a family operation is less than $35,000.
Metro areas with the highest and lowest salaries
If you live in the Birmingham-Hoover metro area, you’ll want to work at a family-run business. The metro’s super-generous employers pay the average worker over $71,000.
Again, pay is much less in Hawaii—salaries at family-operated businesses in the Urban Honolulu metro average just $30,441. No metro area across the USA scored lower.
