What counts as strong growth depends on where you're starting from
The share of new businesses each year varies substantially from county to county in Minnesota. This means community leaders should be careful to set business development goals based on their own community’s historical performance rather than comparing themselves to statewide averages.
More new businesses is usually good news. But more compared to what? Often, any new business development or establishment is seen as a net good. But a more useful question is: How much growth in new establishments would be below or above what would be expected in recent history? This data helps answer that question.
Same number, different meaning
For counties with historical averages below 3 percent, a year with more than a 3 percent share of new establishments would be above average. For other counties, different benchmarks might be more appropriate. Community leaders in Kittson County — in Minnesota’s most northwestern corner — might view a 3 percent share as a signal of stronger than expected new business growth, since the county’s historical average has run below that. Leaders in Hennepin County, however, might view this same 3 percent as unremarkable.
In other words, a level of new business formation activity that would be above average in Kittson County would be below average in Hennepin County.. The Minnesota statewide average for the percentage of establishments that are new, from 2016 through 2024, is approximately 4.2%. As shown below, only 12 of Minnesota’s 87 counties exceed this average.
Figure 1: Where are new establishments forming in Minnesota?
Average annual share of establishments that are new, 2016–2024
What the data shows
New establishment formation varies substantially across Minnesota. Average annual county shares range from approximately 2.1 percent to 5.1 percent, meaning the highest-rate counties have more than twice the rate of establishment formation of the lowest-rate counties. At the upper end, Hennepin and Washington counties each averaged approximately 5.1 percent; at the lower end, Red Lake County averaged 2.1 percent and Lac qui Parle County 2.2 percent. Most counties fall within a narrower middle band of approximately 2.7 percent to 3.5 percent.
Figure 2: Distribution of county-level averages of establishments that are new, 2016-2024
Counties with higher rates tend to cluster in and around the Minneapolis–St. Paul metro area and regional economic hubs like Rochester and St. Cloud. Many rural and more geographically peripheral counties fall into the lower-rate groups, but the pattern is not simply a divide between the Twin Cities and the rest of Minnesota. Several regional centers outside of the metro also stand out. Overall, the map shows that new-establishment formation is geographically uneven and that a relatively small group of counties had notably higher average rates of entry over 2016–2024.
What this means for your community
Leaders of state and regional business development and entrepreneurship programs can use this data to target resources and set goals that are achievable for each place’s unique starting point, rather than applying a one-size-fits-all benchmark.
We suggest that community leaders look at the data for their county at the beginning of a planning cycle, noting historical average, and have a discussion about what that average might represent in terms of the number of businesses. For a community with about 100 establishments and a 3 percent historical new business rate, three new businesses opening over a year would match its historical average, and five new businesses could be a potential stretch goal, depending on local conditions. These numbers do not account for businesses that close. Local leaders might also engage with Extension staff to explore what types of businesses have been starting and closing by sector.
It’s important to remember that there is always some degree of churn of businesses to be expected, and in many cases, some churn can be seen as a positive indicator of economic health (Artz et al., 2020). Too little churn can signal stagnant local conditions. This data provides one way to understand the new business side of churn. In future articles, we’ll explore business closures.
Research notes
- This analysis uses the YourEconomy Time Series (YTS) database to examine where new establishments are forming across Minnesota. An establishment is a physical operating location, such as a store, office, or facility; a company with multiple locations may therefore have multiple establishments.
- For each Minnesota county and year from 2016 through 2024, the analysis calculates the number of establishments that began operating that year as a percentage of all establishments in the county. Annual percentages are then averaged across the nine-year period. A multiyear average highlights persistent geographic patterns while reducing the influence of unusual changes in any single year.
- The measure is a rate relative to the size of each county’s existing establishment base, not a count of new establishments. For example, a value of 4 percent means that, in a typical year, approximately four out of every 100 establishments in that county were new. The map groups counties into five categories containing roughly equal numbers of counties, making it easy to compare their relative rates of establishment formation.
Artz, G. M., Eathington, L., Francois, J., Masinde, M., & Orazem, P.F. (2020). Churning in rural and urban retail markets. Review of Regional Studies, 50(1), 110–126.
