Founder Data ReportMontana Is a Small-Business State in 18 of Its 19 Industries. Its Industry Mix Explains Only a Sixth of It.
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The obvious explanation for why some states run on small business is that they have more of the industries small business is good at. The Census Bureau publishes the crossing that tests it, and the obvious explanation turns out to be the smaller half of the answer almost everywhere.
45.9% of U.S. private-sector jobs are at firms with fewer than 500 employees, but the figure runs from 66.3% in Montana to 39.6% in Florida. Two things could cause that: a state could hold more of the industries that are nationally small-firm industries, or it could run the same industries at a smaller scale. The Census Bureau publishes employment by state crossed with industry sector, which separates them exactly. Industry mix is the smaller factor — 23% of the total variation against 77% for within-industry scale — and it is the smaller factor in 39 of the 51 jurisdictions. Montana’s small-firm share sits +20.5 points above the nation; only +3.3 of that is what it makes, and +17.1 is how it makes it.
- National small-firm employment share is 45.9%; by state it runs 39.6% to 66.3%.
- Industry mix accounts for 23% of the spread between states. Within-industry scale accounts for 77%.
- Montana’s small-firm share beats the national figure in 18 of the 19 sectors it has, covering 85% of its private-sector jobs.
- No state clears all 19 sectors — 18 of 19 is the ceiling, and four states reach it.
- The District of Columbia is the exception that proves the rule: its share is above national purely on industry mix, and its employers are larger than national inside industries.
Some industries really are small-business industries
The premise is not wrong, it is just not the whole story. Sorted by the share of employment at firms under 500 employees, the 19 major private sectors run from other services at 85.0% down to management of companies at 10.3%. Construction is a small-business industry almost everywhere at 80.7%. Utilities and management of companies are not, and cannot be. So a state heavy in construction and light in utilities should score above the national average on composition alone. The question is how much of the real spread that accounts for.
Orange is the small-firm share of that sector’s employment, on the natural 0–100% scale — the bar length is the percentage itself. All 19 major private sectors are shown, ordered high to low, covering 99.99% of private-sector employment. The remainder is 11,852 jobs the Census Bureau could not classify to a sector; they are carried in every calculation here and charted nowhere.
Source: U.S. Census Bureau, Statistics of U.S. Businesses 2022, national file us_state_naics_detailedsizes_2022.txt, employer firms by state and enterprise employment size, retrieved from the Census static dataset release and re-verified on September 16, 2026.
But that is not what separates the states
Take each state’s actual industry mix, apply the national small-firm share for every sector, and you get the share that state would have if its employers were the same size as everyone else’s. The difference between that and reality is the part mix cannot explain. The two add up to the state’s full gap exactly, with no residual. Run it for all 51 jurisdictions and industry mix accounts for 23% of the variation. For the ten states furthest above the national figure the pattern is consistent: Montana is +20.5 points up with only +3.3 from mix, and Maine is +8.6 up with +0.2 — almost nothing.
Orange is the state’s own distance above the national 45.9%, on a shared 0–21-point scale. The sub-line splits that distance into the two causes, which sum to it exactly. A positive mix figure means the state holds more of the nationally small-firm industries; a positive second figure means its employers are smaller inside the same industries.
Source: U.S. Census Bureau, Statistics of U.S. Businesses 2022, national file us_state_naics_detailedsizes_2022.txt, employer firms by state and enterprise employment size, retrieved from the Census static dataset release and re-verified on September 16, 2026.
Montana runs the same industries at a smaller scale
The clearest way to see it is one state, sector by sector. Montana’s small-firm share beats the national figure for that sector in 18 of the 19 sectors it has. In health care it is 56.1% against 43.7% nationally; in retail 51.6% against 34.2%; in manufacturing 69.7% against 40.9%. This is not a state that swapped factories for construction sites. It is a state where the factories, the shops and the clinics are all smaller. The one sector that goes the other way is agriculture and forestry support, at 74.9% against 83.2% — and it is 0.4% of Montana’s jobs.
Orange is Montana’s small-firm employment share, slate the national benchmark for the same sector; both bars run on the same 0–100% scale, so the pair is directly comparable. The ten sectors shown hold 84.9% of Montana’s private-sector jobs. Montana is above the national figure in all ten, and in 18 of the 19 sectors it has.
Source: U.S. Census Bureau, Statistics of U.S. Businesses 2022, national file us_state_naics_detailedsizes_2022.txt, employer firms by state and enterprise employment size, retrieved from the Census static dataset release and re-verified on September 16, 2026.
A small-business state is not a state that picked different industries. It is a state where the same industries are run by smaller companies.
Where industry mix does do the work
It is the bigger factor in 12 of the 51 jurisdictions, and the clearest is the District of Columbia. Its small-firm share is +3.3 points above the nation, and mix contributes +7.0 — the largest composition effect in the country — while within-industry scale runs -3.8. Read plainly: Washington has an unusually small-firm industry mix and unusually large employers inside those industries, and the first outweighs the second. Nevada shows the same tension resolving the other way: mix is +3.5 but its employers are large enough inside industries (-4.3) to put the state -0.9 points below the national figure overall. When the two components disagree, the total tells you nothing about either.
Each jurisdiction’s gap from the national figure splits into two components that sum to it exactly. The split above is the total size of each component across all 51, added without regard to direction: 198 points of within-industry movement against 58 points of mix. Orange is the within-industry component, slate the compositional one. Because the two can point opposite ways in the same state, this measures how much work each does, not how much of any single state’s gap it explains.
Source: U.S. Census Bureau, Statistics of U.S. Businesses 2022, national file us_state_naics_detailedsizes_2022.txt, employer firms by state and enterprise employment size, retrieved from the Census static dataset release and re-verified on September 16, 2026.
Three limits worth stating. The size band is the company’s national employment, not its employment in the state, so a Montana branch of a national chain counts in the 5,000-plus band — which is the right frame for who your competition is locally and the wrong one for how big the businesses headquartered there are. The sectors are the 19 major ones; a finer cut would move some of what reads as scale here into mix, because a state can be heavy in a small-firm corner of a large-firm sector. And every cell in this file is deliberately perturbed before publication to protect individual businesses, so the fine detail carries noise — all 19 national sector figures and every state total used here carry the Census Bureau’s low-noise flag, and no figure charted above comes from a cell flagged otherwise.
Frequently Asked Questions
Why do some states have more small-business employment than others?
Mostly because the same industries are run by smaller companies there, not because the state has different industries. Across all 51 jurisdictions, within-industry scale accounts for 77% of the variation in small-firm employment share and industry mix for 23%, and within-industry scale is the larger factor in 39 of them.
Which industries have the most small-business employment?
Other services at 85.0% of its U.S. employment at firms under 500 employees, agriculture and forestry support at 83.2% and construction at 80.7%. At the other end, management of companies is 10.3% and utilities 18.8%.
Is Montana really a small-business state?
Yes, and on the harder test. 66.3% of its private-sector jobs are at firms with fewer than 500 employees against 45.9% nationally, and it beats the national figure sector by sector in 18 of the 19 sectors it has. Only +3.3 of its +20.5-point gap comes from its industry mix.
Does any state have smaller firms in every industry?
No. 18 of 19 sectors is the highest any state reaches, and four do — Maine, Montana, Oregon and Vermont. At the other end, Georgia's small-firm share beats the national figure in only 4 of its 19 sectors.
What does this mean for a small business owner?
That your state's ranking is a fact about the scale of the businesses around you rather than about which industries are viable there. In a high-share state most of the payroll you compete with for staff is written by companies your own size; in a low-share state more of it is written by companies that can outbid you. The industry you are in is roughly as small-business-shaped as it is anywhere.
Published by The Lonely Entrepreneur — the community and coaching platform for entrepreneurs who are building alone. lonelyentrepreneur.com
This article is for educational purposes and is not a substitute for professional financial or legal advice.