Hawaiʻi entrepreneurs just got another tough reality check. In a nationwide scorecard of where it is easiest to launch a company, the islands landed near the bottom, spotlighting challenges that locals have been talking about for years.
Hawaiʻi placed 48th out of 50 states in WalletHub’s 2026 "Best & Worst States to Start a Business" study, posting an overall score of 34.80 and finishing last in cost of living. The analysis from WalletHub also tagged the state with weak marks for labor costs, industry variety and growth in small-business numbers, based on 25 indicators across business environment, access to resources and business costs.
Those numbers land on top of tough national odds. Roughly one in five new establishments fail within the first year, and about half do not make it to their fifth birthday, according to the U.S. Bureau of Labor Statistics. For Hawaiʻi founders juggling higher wages, steep housing costs, and smaller, more scattered customer bases than on the mainland, that survival math gets even tighter.
State Response and Proposed Bills
State economic officials say they are not ignoring the warning signs. Department of Business, Economic Development, and Tourism (DBEDT) Director James Kunane Tokioka told KHON2 the agency is trying to tackle high costs, challenges scaling to export markets, and limited access to modern infrastructure. Ideas on the table include shared research-and-development and manufacturing facilities and new export channels to help local firms reach customers beyond the islands.
Those concepts show up in the work of the Business Revitalization Task Force created by Act 142 (2024). The group has signed off on a final report for the 2026 legislative session that outlines a package of policy recommendations, according to DBEDT.
What the Numbers Mean for Entrepreneurs
The fine print in the rankings underlines why launching a company here can feel like an uphill climb. Hawaiʻi ranks 47th for labor costs and 46th for growth in the number of small businesses, according to WalletHub. That combination makes it harder for startups to hire and keep workers, secure affordable space and convince outside investors that they can scale, especially when operations need to stretch across multiple islands.
What to Watch This Session
Lawmakers are moving bills that lean on the task force’s work as a roadmap. According to LegiScan, House Bill HB1612 would set a long-term competitiveness goal for Hawaiʻi and require DBEDT to report annually on progress. A separate measure, Senate Bill SB2263, would create a working group to craft policies aimed at improving the business climate, according to LegiScan.
The task-force report from DBEDT is serving as the basic blueprint that legislators and business advocates are drawing from this session as they try to push Hawaiʻi higher in the rankings and make it less punishing to start a business close to home.
