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April 1, 2020

Amid global crisis, new study ranks Maine No. 2 in startups that hire employees

While the ongoing public health crisis may create gloomy prospects for new businesses in Maine, a just-released national study says the state’s startups are a hardy bunch.

More Maine startups began paying employees within two years than ventures in almost any U.S. state, according to the New Business Employer Report by the Ewing Marion Kauffman Foundation.

The foundation reported that 17.17% of new businesses in Maine made their first payroll within eight quarters, based on 2018 data — the most recent available — from the U.S. Census Bureau. Only Washington, where the proportion was 17.36%, was higher.

The average across the states and the District of Columbia was 11.3%, and Delaware recorded the lowest rate, 6.59%. In New England, Rhode Island had the second-highest rate, 14.53%.

The study, published in March, examined a wide range of factors to gauge how new businesses fare in each state. In addition to the percentage that went on to cut paychecks, Kauffman compiled measurements such as the average time between new business applications and the first payroll.

Based on some of these criteria, the foundation also calculated what it calls the New Employer Business Actualization Speed Index, a snapshot of how many and how soon startups make a payroll. Maine’s index was 0.91, second only to North Dakota and South Dakota, which tied at 0.93.

The average index was 0.79, and Washington, D.C., had the lowest score, 0.6.

While Maine’s numbers show that many entrepreneurs in the state succeed and grow to employ others, the percentage has been waning in recent years. The nationwide average was over 21% in 2005, when Kauffman first began reporting the levels, and has steadily declined since then.

In Maine, the percentage of new businesses issuing payroll within eight quarters was 29.45% in 2005, and last year was 18.67%.

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