As part of our yearlong project "The State of Small Business," Business News Daily plans to report on the small business environment in every state in America. In this installment, we asked a few of Indiana's 500,000 small business owners about the challenges and opportunities of operating in their state. Here's what they had to say.
Indiana is a state where entrepreneurs see promising developments. As the economy of Indiana transitions from an industrial and agricultural hub to more modern, tech-driven industries, entrepreneurs are finding new opportunities. With a strikingly low cost of living, a deep labor market filled with technically skilled workers, and a stable, growing economy, small business owners in Indiana are optimistic.
However, there are a few obstacles for the entrepreneurial Hoosier to overcome. The first and foremost is accessing capital, which tends to remain most heavily concentrated on the coasts and in big cities. The other major challenge is Indiana's isolation from the largest markets in the U.S. Still, small business owners throughout the state say things are looking up and Indiana is poised for a prosperous future.
Strong labor market
The first thing we noticed about Indiana is the explosive growth in its labor market, while the unemployment rate remains at a healthy 5 percent. Although there's a plethora of available talent, a modest unemployment rate means competition isn't exceptionally fierce for entrepreneurs looking for skilled labor. Moreover, Indiana has the ability to continue turning out well-educated workers.
"There is plenty of great talent available in this part of the country – both coming right out of the strong universities in the region, as well as more senior people who are in established companies and looking for new roles," Don Aquilano, managing director of venture capital firm Allos Ventures, said.
"There is a very rich talent pool," said Eric Smith, CFO for e-commerce company One Click Ventures. "For instance, Indiana is home to some strong tech universities and colleges like Purdue, Notre Dame, Rose-Hulman and Indiana University. Also, there are strong organizations that focus on bringing technical talent to the state, like TechPoint."
Low cost of living
Between low prices and low taxes, the cost of living in Indiana is exceptionally low. According to Sperling's Best Places Cost of Living Index, Indiana's cost of living is about 14 percent lower than the national average. That makes up for the state's low per-capita personal income, which is also about 14 percent lower than the U.S. as a whole.
"Low gas prices, free parking, no tolls on roads, great farm products produced locally, raw materials in easy reach – all of it conspires to make Indiana extremely low in cost of living," John McDonald, CEO of IT-company CloudOne, said.
In addition, the state boasts low taxes. Its personal income tax rate is a flat 3.3 percent, while the corporate income tax rate stands at a flat 8 percent. Sales taxes are a bit high at 7 percent, but compared with the surrounding states, Indiana's overall tax burden is particularly low.
What Indiana lacks in robust economic growth, it makes up for in stability. According to the Bureau of Economic Analysis, although Indiana has at times lagged behind the nation, the stateꞌs economic growth has been consistent and predictable since 2011.
"Indiana has provided us with an ideal climate to grow our small business," said Scott Jones, co-founder and CEO of Ben's Soft Pretzels. "This is because we don't have to wonder if something is going to change in the next week, month or year. We know that we are based in a stable state."
Few large markets
Some of the largest markets in the country are on the coasts, and Indiana is isolated from all of them. The Windy City is located in neighboring Illinois, but cities like New York, Los Angeles, Miami and Seattle are much too distant for many small business owners to harness the power of those population clusters. Even the large cities in Texas tend to be too far south for small business owners to take advantage of.
"I think that the biggest challenge would be that we are removed from large population centers in the country, so that presents challenges in accessing capital and easy access to markets for these business ideas to gain traction," Smith said. "However, the environment in Indiana has shown signs of growth and activity in the past few years."
Access to capital
Obtaining growth capital is typically harder in the Midwest than it is on the coasts, and Indiana is no different. While finding support to start a business is becoming more commonplace than it was a few years ago, entrepreneurs report still having trouble finding the money they need to expand.
"[Access to capital is] improving," McDonald said. "Our challenge is growth-stage capital, namely in incenting venture, growth-stage and private-equity firms to consider and to make investments in Indiana companies."
"Funding for startups is fairly robust in the region, with every city … having an angel group, and many having economic development agencies or other seed funds," Aquilano said. "There is, though, a 'Series A Gap' for companies in between, with relatively few regional firms investing at that stage and difficulty attracting firms from outside the region."
Resources for small businesses in Indiana
If you're a small business owner in Indiana looking for resources to help you move forward, here are a few organizations you might want to learn more about.
SCORE's volunteer business professionals and expert "mentors" give counsel and guidance to entrepreneurs looking to start or expand their businesses. The services are free and volunteer-driven. Here are some of the chapters in Indiana.
U.S. Small Business Administration District Offices
The U.S. Small Business Administration offers financing and grants, as well as consultations and counseling services. There are also opportunities to apply for federal government contracts through the SBA and avenues for obtaining assistance after natural disasters.
Indiana Small Business Development Centers
Indiana hosts a number of development centers for small business. Each is dedicated to supporting the development and retention of small businesses, helping entrepreneurs do everything from crafting business plans to navigating the state's tax code. You can find your region's small business development center at the link below.
Are you an entrepreneurial organization or resource for small business owners, but are not listed here? Let us know. Contact the author at email@example.com.