Which States and Metros Have the Most Family-Owned Businesses?

Family businesses are the bedrock of the economy. Globally, family-owned businesses make up more than 70% of GDP and 60% of employment, delivering higher total shareholder returns, deeper feelings of fulfillment and stronger levels of employee trust and engagement.

At the same time, business ownership accounts for a substantial level of family wealth. Business equity makes up 34% of American families’ non-financial assets, second only to primary home ownership. It can bring a family together and create a legacy for generations to come.

But the family entrepreneur lays a lot on the line when they start a small business or consider making major changes or expanding. Financial and emotional investments can be hard to keep separate from the family unit, which bears the pressures as well as the rewards of business life.

Changeable economic conditions present great business opportunities along with the risks. So, OnDeck took this moment to investigate which parts of America have the most thriving family business scenes right now — and to update our findings from our 2023 study on the state of family-owned businesses across America.

What We Did

We gathered data on the number of firms, employees and annual payroll for family-owned and non-family-owned firms in every U.S. state and large metropolitan area from the U.S. Census Bureau’s 2023 Annual Business Survey. Next, we calculated the percentage of family-owned businesses, total employees working for family-owned businesses and the average wage at family-owned businesses for each area. We also calculated the percentage change in family-owned businesses from 2020 to 2021.

Key Insights

• Some 41.52% of businesses in South Dakota are family-owned, the most of any state.
• San Antonio-New Braunfels, TX, is the metro area with the most family businesses (34.11%).
• The number of family businesses is growing fastest in Delaware, rising 3.67% year-on-year.
• The average family-owned business employee in Birmingham-Hoover, AL, earns $71,610 — the highest rate of any metro area.
• In the state of New York, just 24.60% of the workforce is employed by family-owned businesses, the lowest rate of any state.

South Dakota is the State with the Most Family-Owned Businesses

First, we looked at the states and metropolitan areas with the highest percentage of family businesses. The five states with the most family businesses are all in America’s West or Midwest. On the other hand, the five states with the fewest family businesses are predominantly Northeastern and coastal. The state of New York has just half of the family-owned businesses, by proportion, of South Dakota, which has the highest percentage of family-owned businesses in America.

South Dakota has maintained a steady population of locally-born inhabitants over the past half century, and nearly every farm is family-owned. However, the state’s leading industry may need fresh blood as the workforce ages — around two-thirds of South Dakota farmers are at least 55 years old. Generation-spanning rural work also benefits from an occasional check-in with business experts, who can help family businesses capitalize on their strengths:

“One of the areas that showed through for this family was the strength they have as a family that supports each other and their work ethic,” says Agatha Johnson, a consultant who worked with the family-owned agricultural manufacturer MDS Manufacturing. “This does not mean they did not have their differences or challenges; it means they had shared values, which were seen each day and even in difficult times. Every meeting that was set and the topics that were discussed — difficult or not — they showed up and did the hard work.”

The metropolitan area with the most family-owned businesses (34.11%) is San Antonio-New Braunfels, TX. This makes it one of just three metro areas where more than one-third of businesses are family-owned. The Gruene Lokal Marketplatz in New Braunfels has become emblematic of the area’s independent spirit and has begun holding an annual ‘Small Business Saturday.’

“You don’t see any big box retailers in Greune,” says the event’s creator, Tammy Wood. “We are a city filled with small businesses, and a lot of them have been around here for a while. So those shoppers are a big factor in what makes this city successful year-round.”

Number of Family-Owned Businesses Increasing Fastest in Delaware and Wyoming

Next, we looked at the areas where the percentage of family-owned businesses is increasing. These figures reflect the rise and fall of family businesses between 2020 and 2021, as reported in the 2023 Census Bureau Annual Business Survey.

We found that the number of family businesses in Delaware and Wyoming is rising annually at a significantly higher rate (3.67% and 3.19%, respectively) than elsewhere. Meanwhile, the proportion of family-owned businesses in Alaska is falling far faster (-7.11% year-on-year) than elsewhere.

CNBC called Alaska “America’s worst state for business in 2021,” with pandemic-related issues particularly restricting consumers and business owners in hard-to-reach areas hit by transit and telecommunications issues. Rising costs have continued to pile up with knock-on effects; for example, transportation costs have impacted food prices.

On a metro-by-metro basis, Memphis, TN-MS-AR (5.69%), enjoyed the greatest rise in family-owned businesses. Memphis is home to at least five family-owned eateries over 100 years old. The Memphis economy grew back faster than the average U.S. rate following COVID-19, with particular job growth in the hospitality and leisure industry.

New York is the State Where Family Firms Employ the Least People

Next, we looked at the states and metros where family-owned businesses employ the most people. We found eight states where more than two-fifths of the workforce are employed by family firms. Meanwhile, New York is the only state where less than a quarter of workers are in a family business. The three metropolitan areas with the fewest employees of family businesses are all at least partially in the state of New York.

Maine (46.39%) is the state with the most family business employees. This is despite Maine being only the 18th top state by proportion of family-owned businesses — with 30.52% of firms owned by families. A coalition of small Maine businesses recently campaigned for legislation for a local paid family and medical leave program despite the costs that small firms might incur.

“Small business owners are humans,” said the coalition’s director, Selecca Bulgar-Medina. “[T]hey have families, and they want the same things that any other private individual wants in life, in their community and in their society.”

The metropolitan area where family-owned businesses employ the most people is Salt Lake City (49.18%), which is out in front by a significant margin. Some 30.74% of Salt Lake City businesses are family-owned.

These companies include Colonial Flag, whose employees handmade the 150-foot U.S. flag seen at this year’s Super Bowl. “We have some amazingly talented employees here that are able to figure out the math, lay things out on the tables here, and get the measurements right,” said Jacob Swenson, Colonial Flag’s chief operating officer.

Other companies include the 130-year-old Sweet Candy Co., currently run by the third, fourth and fifth generations of the Sweet family, which employs 228 people.

Oregon’s Family-Owned Businesses Pay the Highest Wages

Finally, we checked the states and metros where family-owned businesses pay the highest wages. The best state to get paid by a family firm is Oregon, where the average salary is $60,011 — nearly twice that of Hawaii ($33,410). New York offers the third highest salaries, although family businesses are relatively scarce, making up just one-fifth (19.40%) of the state’s companies.

Salaries at Oregon’s family businesses are particularly impressive when you consider that Oregon has only the fourteenth-highest salaries across all business types. Oregon’s average household income is significantly higher than the U.S. average, but the overall average salary in Oregon ($62,680) is just $2,669 higher than that among family firm employees.

At the other end of the scale, employees of family businesses in Hawaii have a significantly lower average salary ($33,410) than the overall local average ($61,420). And the metropolitan area of Urban Honolulu has an even lower average of $30,441, the lowest pay of any metro area by a drop of $8,531 per year.

The minimum wage in Hawaii rose to $14 an hour at the start of 2024 and is scheduled to increase again in 2026 and 2028. This may be a hard rate for small local businesses to hit, but at the same time, the Hawai‘i Workers Center estimates that 48% of Hawaiian households earn too little to cover their basic needs.

Some Hawaiian firms are turning to more imaginative ways to strengthen employee engagement and loyalty. However, with higher-paid employees expecting a wage hike to keep ahead of their minimum-wage colleagues, small business owners will need to reach into their pockets to keep everyone happy.

Critical Mindsets

McKinsey & Company notes that family-owned businesses are accustomed to wielding “adaptability, resilience, and impact: they have the structures and best practices required to withstand business challenges in uncertain times.” And the consultancy highlights “four critical mindsets” that give certain family firms the edge. These include focusing on a purpose beyond profits, thinking and investing on a long-term scale, remaining “financially conservative and cautious about debt and high-risk investments,” and maintaining efficient internal decision-making processes.

As family companies come and go around the U.S., it is worth noting that some regions where family firms are thriving the most are not areas traditionally associated with high business performance. Something else is at play: and alongside the canny business strategies promoted by McKinsey, the unique strengths and philosophies of the family-owned business must play no small part.

Methodology

To determine which states and metropolitan areas have the most family-owned businesses, we focused on all U.S. states and metropolitan areas with a population of at least 1,000,000. For each metropolitan area and U.S. state, we gathered data on the number of employer firms, number of employees and annual payroll for both family-owned and non-family-owned firms from the U.S. Census Bureau’s 2023 Annual Business Survey.

For each location, we calculated the percentage of family-owned businesses, the percentage change in family-owned businesses from 2020 to 2021, the percentage of total employees working for family-owned businesses and the average wage at family-owned businesses (total payroll divided by employee count).

This data was analyzed in February 2024.

Additional Sources

Arnold, E. (2023). Editor’s Note: San Antonio’s big happy family (of businesses). bizjournals.com
Cohn, S. (2021). Alaska, in ‘hard-core survival mode,’ is America’s worst state for business in 2021. cnbc.com
Conway Center for Family Business. (2015). Family Business Facts. familybusinesscenter.com
Hayes, H. (2023). ALL IN THE FAMILY: SWEET CANDY COMPANY. saltlakemagazine.com
Inc. (2023). These Are the 50 Best Places in America for Starting a Business. inc.com
Institute for Family-Owned Business. (2023). Maine Family Business Awards. fambusiness.org
Lucas, S. (2013). How to get a fair salary in a family owned business. cbsnews.com
Unanue, A. (2023). Most family businesses don’t look like ‘Succession.’ Here’s what America’s enterprising families bring to the table. fortune.com
U.S. Bureau of Labor Statistics. (2023). May 2022 Metropolitan and Nonmetropolitan Area Occupational Employment and Wage Estimates – Urban Honolulu, HI. bls.gov