Midwestern Governors Association
Young Entrepreneur’s Survey
February 2013
Midwestern young entrepreneurs see the region’s economy on the upswing and many
have plans to expand operations and increase hiring. Most young entrepreneurs in the region
started their businesses the old fashioned way—with their own funding and without outside
financing or assistance. And, most Midwestern young entrepreneurs are home grown and see the
region’s people as its biggest asset.
These are among the key findings of a survey of young entrepreneurs in the Midwest
region. The survey of 351 business owners age 20-40 in 9 Midwestern states (Illinois, Indiana,
Iowa, Kansas, Michigan, Minnesota, Missouri, Ohio and Wisconsin) was conducted October 15November 1, 2012, and was sponsored by the Midwestern Governors Association (MGA),
chaired by Iowa Governor Terry Branstad, in partnership with Des Moines Area Community
College, Monmouth College, the Iowa Economic Development Authority and the Iowa
Association of Business and Industry. The sample for the survey included businesses that were
selected randomly from across the 9 member states of MGA. The goals of the survey were to
gauge attitudes regarding the region’s economic future and to learn what
policies/regulations/climate drive innovation and entrepreneurialism.
Profile of Midwestern young entrepreneurs
The typical Midwestern young entrepreneur is between 30 and 40, has some postsecondary education, been in business longer than 5 years, is a first time entrepreneur, worked at
a similar business prior to striking on his or her own, has 10 or fewer employees, is currently
focused on their local market and is a native of the region. Results from the survey data show
that Midwestern young entrepreneurs possess the following characteristics:
Age: Nearly two-thirds of the respondents (64.7%) are from the oldest cohort of 3540 years of age. In fact, an overwhelming majority of entrepreneurs (85.5%) are
between 30 and 40 years old.
Years of operation: Most entrepreneurs (74.1%) have been in business longer than 5
years and 35.6% have more than 10 years experience. Their longevity and the current
age of entrepreneurs suggest that many started their businesses in their late 20s or
early 30s.
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Entrepreneurial “rookies”: Nearly three-fourths of the respondents (72.6%) said that
this was the first time they have started their own businesses, while 27.4% said they
had done so previously.
Prior experience: Nearly 6 in 10 respondents (59.8%) said they worked at a similar
businesses prior to starting their own firms, while 29.3% worked at larger firms.
Operational scope: Two-thirds of Midwestern young entrepreneurs (66.4%) report
their current primary business market focus is local, while 20.5% have a regional
focus, 9.1% national and 4.0% global.
Employees: While 20.5% of respondents have no employees other than themselves,
most young entrepreneurs in the Midwest (61.8%) have 10 or fewer employees.
Midwest natives: An overwhelming majority of respondents (69.8%) said they lived
in their communities their entire lives and most (78.1%) started their businesses in the
Midwest because of their roots in the region.
Education: Nearly three-fourths of the respondents (72.7%) have some postsecondary education and 41.9% have a bachelor’s degree or higher level of education.
Gender: Men comprised 69.2% of respondents to the survey.
Race/ethnicity: The overwhelming majority of respondents were Caucasian, with
3.4% being Asian-Americans, 2.8% being Hispanics and 2.3% being AfricanAmericans.
Midwest economy is on the mend with positive signs for the future
After enduring the worst economic conditions since the Great Depression, Midwestern
young entrepreneurs see their local economies improving, although there is room for significant
growth. Nearly one-third of the survey respondents (30.8%) said that local economic conditions
were getting better and 20.8% said conditions are getting worse. Nearly one-half (47.0%) felt
that economic conditions were staying the same. Also, similar numbers believe the Midwest
economy is getting better (32.2%), with 19.9% feeling conditions in the region are getting worse
and 34.5% say that are staying the same.
The improved outlook is manifesting itself in opportunities for growth and employment
increases. One-fourth of young Midwestern entrepreneurs (24.8%) plan to increase employment
in the next six months with most saying they plan to add up to five new employees. Threefourths (74.1%) plan to maintain current employment levels and only four respondents said they
plan to decrease employment. Even entrepreneurs who feel local and regional conditions are
worsening do not plan staff reductions for the most part.
A further indication of the brightening prospects for the region is that 43.6% of young
entrepreneurs in the Midwest plan to increase operations and capacity in the next 6 months and
only 6.3% plan reductions in operations. One-half (50.1%) say that their operations and capacity
will remain the same. Four in 10 firms (39.9%) that plan to increase capacity will add
employees, indicating perhaps that they are able to improve efficiencies and productivity in their
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operations or that uncertainty in the national and global economy and in the Federal fiscal
situation is tempering potential growth.
Current entrepreneurial conditions
The survey results show that Midwestern young entrepreneurs were largely self-reliant in
starting their businesses. While more young entrepreneurs in the region are optimistic rather
than pessimistic, they still face some challenges to the economic climate in the future.
Private financing: Seven in 10 respondents (70.7%) said that they self-financed their
start-ups while 29.3% relied on other sources. The private financing source cited
most often was banks (22.2%) followed by Angel Investors (4.0%) and venture
capital (0.6%).
Public finance assistance: Very few start-ups received government funding for their
businesses. Just 2.3% of responding firms reported they received local and federal
assistance and .6% received financial help from state governments.
People/culture: The economic climate of the Midwest has some relation to the people
and culture of the region. When young entrepreneurs were asked which three words
they would use to describe the Midwest, the most popular answers were cultural traits
that have long been associated with the region. The leading descriptions of the
Midwest were that people were friendly, down-to-earth, hardworking, and displayed
family values. Since most young entrepreneurs are originally from the Midwest, it is
likely that these factors are a major attraction that keeps them from relocating and can
be a factor in attracting start-ups from outside the region.
Challenges: Young entrepreneurs listed a wide variety of challenges they face in
growing their firms. They lacked a consensus on any specific issue with general
economic conditions rated most highly (20.8%) followed by governmental issues
(13.4%) and financial issues (12.5%). Governmental issues were cited as a challenge
most often by firms with national and global markets and those planning to add
employees.
Public sector opportunities to help entrepreneurs thrive
To promote entrepreneurial opportunities and greater innovation, the survey points to
several targeted measures that governments could undertake.
Tax reduction/simplification: When asked directly what specific policies at any level
of government that could help them grow their businesses, the recommendations from
respondents varied widely with tax cuts or simplification cited most often (24.2%).
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Further research may be needed to explore problems with the levels of local taxation
and property tax systems. Government officials at all levels could examine ways to
simplify the tax structure and seek ways to encourage entrepreneurs through targeted
tax relief measures and incentives.
Job training: While most Midwestern young entrepreneurs said that their employees
were adequately prepared for their jobs, 17.1% had difficulties finding properly
trained employees. Officials could seek more information from entrepreneurs on
ways to target job training assistance to start-ups to meet their needs.
Innovation, R & D: When young entrepreneurs were asked what government could
do to help businesses develop new products, processes or other innovations, the
leading response given was tax credits for research and development (R & D)
spending (30.2%). Another 8.8% of respondents said government should help
promote partnerships between entrepreneurs and universities and 3.4% suggested
reforming patent laws. Roughly one in 11 respondents (8.5%) advocated for smaller
government and fewer regulations. And, 8.8% mentioned taxes although as many
wanted governments to provide tax credits as advocated tax relief. Public officials at
all levels could target R & D tax credits for entrepreneurs to stimulate the innovation
economy.
Finance: With 12.5% of young entrepreneurs citing financial issues as their greatest
challenge in growing their firms and 9.1% advocating changes in bank loan
restrictions as a way to grow their firms, public officials should consider targeted
assistance to entrepreneurs seeking financing alternatives. Further research may be
needed to explore the roles and relationships of community banks, federal
regulations, and entrepreneurs.
Networking promotion: Young entrepreneurs in the Midwest said that their best
source of information that helped them start up or grow their businesses was other
entrepreneurs (51.0%). Roughly one in 10 respondents said government agencies
were most helpful (6.0% for local government agencies and 4.3% for state
government agencies) and 4.8% said that universities were most helpful. Seeking out
their peers is more prevalent among first-time entrepreneurs. Public officials could
sponsor networking opportunities for entrepreneurs by hosting either face-to-face
meetings or virtual support groups.
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Field Date: October 15-November 1, 2012
Completed Surveys: 351
Margin of Error: +/- 5.65%
Q1. What best describes the type of business you are in?
Accounting............................................................................7
Auto....................................................................................22
Computer (IT).....................................................................13
Construction/Home Improvement......................................34
Insurance...............................................................................6
Landscaping........................................................................11
Law.....................................................................................16
Pet Services (except Vet)....................................................13
Restaurant/Bar.....................................................................15
Retail...................................................................................42
Real Estate..........................................................................35
Salon Services (Nail, Spa, Etc)...........................................18
Service Industry (Trainer, Photography, Etc).....................38
Transportation.......................................................................8
Veterinary.............................................................................4
Other...................................................................................69
2.0%
6.3%
3.7%
9.7%
1.7%
3.1%
4.6%
3.7%
4.3%
12.0%
10.0%
5.1%
10.8%
2.3%
1.1%
19.7%
Q2. For statistical purposes only, would you please tell me which category your age
alls into?
20-25...................................................................................13
26-30...................................................................................38
31-35...................................................................................73
36-40.................................................................................227
3.7%
10.8%
20.8%
64.7%
Q3. How many years has your firm been in existence?
Less than 1 year....................................................................9
1 to 3 years..........................................................................13
3 to 5 years..........................................................................69
5 to 10 years......................................................................135
More than 10 years............................................................125
2.6%
3.7%
19.7%
38.5%
35.6%
Q4. Is this the first time you've started your own business?
Yes - first time..................................................................255
No - have done so previously..............................................96
72.6%
27.4%
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Q5. Why did you decide to start your own business?
Always wanted to own my own business...........................65
Flexibility............................................................................41
Want to be my own boss.....................................................87
Chance to make more money than other career paths........47
Other.................................................................................111
18.5%
11.7%
24.8%
13.4%
31.6%
Q6. What was your occupation previous to owning your own business?
Worked at a large firm......................................................103
Worked at a similar business............................................210
Previously not employed.....................................................38
29.3%
59.8%
10.8%
Q7. Is your business's focus primarily local, regional, national or global?
Local.................................................................................233
Regional..............................................................................72
National...............................................................................32
Global..................................................................................14
66.4%
20.5%
9.1%
4.0%
Q8. How many employees do you currently have?
None, just me......................................................................72
20.5%
1..........................................................................................32
9.1%
2 to 5.................................................................................132
37.6%
6 to 10.................................................................................53
15.1%
11 to 25...............................................................................36
10.3%
More than 25.......................................................................26
7.4%
Q9. What are your firm's plans in the next 6 months regarding the number of
employees?
Increase up to 5...................................................................72
Increase by more than 5......................................................15
Stay the same....................................................................260
Decrease by up to 5...............................................................3
Decrease by more than 5.......................................................1
Q10. What are your
operations/capacity?
firm's
plans
in
the
next
6
Increase operations/capacity.............................................153
Stay the same....................................................................176
Decrease operations/capacity..............................................22
20.5%
4.3%
74.1%
0.9%
0.3%
months
regarding
43.6%
50.1%
6.3%
2
Q11. In general, are the employees you hire adequately prepared for their job
responsibilities?
Yes....................................................................................291
No........................................................................................60
82.9%
17.1%
Q12. Do you invest any of your firm's funds in research and development?
Yes......................................................................................80
No......................................................................................271
22.8%
77.2%
Q13. Did you receive funding from local government to start your business?
Yes........................................................................................8
No......................................................................................343
2.3%
97.7%
Q14. Did you receive funding from State government to start your business?
Yes........................................................................................2
No......................................................................................349
0.6%
99.4%
Q15. Did you receive funding from the Federal government to start your business?
Yes........................................................................................8
No......................................................................................343
Q16. Is your business self funded?
2.3%
97.7%
Yes....................................................................................248
No......................................................................................103
70.7%
29.3%
Q17. Did you receive funding from an Angel Investor to start your business?
Yes......................................................................................14
No......................................................................................337
4.0%
96.0%
Q18. Did you receive funding from Venture Capital to start your business?
Yes........................................................................................2
No......................................................................................349
0.6%
99.4%
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Q19. Did you receive funding from a bank to start your business?
Yes......................................................................................78
No......................................................................................273
22.2%
77.8%
Q20. Did you receive funding another source to start your business?
Yes......................................................................................26
No......................................................................................325
7.4%
92.6%
Q21. What specific policies at the local, state and/or federal level of government
could help young business persons like you grow your business?
Change bank loan restrictions.............................................32
Education (Training).............................................................7
Improve economy.................................................................6
Less government involvement............................................14
Less regulations..................................................................22
Lower interest rates...............................................................5
Repeal Obamacare................................................................7
Tax Cuts (simplify).............................................................85
Other...................................................................................42
Don't know..........................................................................94
Refused...............................................................................37
9.1%
2.0%
1.7%
4.0%
6.3%
1.4%
2.0%
24.2%
12.0%
26.8%
10.5%
Q22. What could government do to help businesses like yours develop new products,
processes or other innovations?
Tax credit for R&D spending...........................................106
Promote partnerships with universities...............................31
Reform patent laws.............................................................12
Other.................................................................................202
30.2%
8.8%
3.4%
57.5%
Q23. What is your best source of information that has helped you start and/or grow
your business?
Other entrepreneurs...........................................................179
State government agencies..................................................15
Local government agencies.................................................21
Universities.........................................................................17
Other.................................................................................119
51.0%
4.3%
6.0%
4.8%
33.9%
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Q24. What are the great challenges you face in growing your business?
Advertising..........................................................................14
Capital.................................................................................24
Competition........................................................................17
Customers (Finding, keeping).............................................29
Economy.............................................................................73
Employee issues..................................................................17
Financial issues...................................................................44
Gas Prices..............................................................................7
Government issues..............................................................47
Other...................................................................................49
DK/Refused.........................................................................30
4.0%
6.8%
4.8%
8.3%
20.8%
4.8%
12.5%
2.0%
13.4%
14.0%
8.5%
Q25. Which of the following best describes your origin?
Lived here entire life (long-time native)...........................245
Moved here from outside the Midwest region....................30
Moved here from inside the Midwest region......................55
Born in a foreign country, moved here...............................21
69.8%
8.5%
15.7%
6.0%
Q26. Do you think the economy in the area where you live and work is currently
getting better, getting worse or staying about the same?
Better.................................................................................108
Worse..................................................................................73
Same..................................................................................165
Undecided.............................................................................4
Refused.................................................................................1
30.8%
20.8%
47.0%
1.1%
0.3%
Q27. Do you feel the Midwest economy is doing better than other regions of the
United States, worse or about the same?
Better.................................................................................113
Worse..................................................................................70
Same..................................................................................121
Undecided...........................................................................38
Refused.................................................................................9
32.2%
19.9%
34.5%
10.8%
2.6%
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Q28. Why did you start your business in the Midwest, as opposed to another part of
the country?
Better opportunities.............................................................20
Cost of living......................................................................17
Family in area.......................................................................6
Grew up in area...................................................................89
Live in area........................................................................185
Other...................................................................................28
DK/Refused...........................................................................6
5.7%
4.8%
1.7%
25.4%
52.7%
8.0%
1.7%
Q29. What are one of three words that you would use to describe the Midwest as a
whole?
Beautiful/Great place to live...............................................27
Blue Collar............................................................................4
Changes of seasons.............................................................22
Comfortable/Down to earth................................................35
Conservative.......................................................................15
Good/Friendly.....................................................................67
Hardworking.......................................................................43
Nice/Safe.............................................................................30
Negative..............................................................................19
Other...................................................................................63
DK/Refused.........................................................................26
7.7%
1.1%
6.3%
10.0%
4.3%
19.1%
12.3%
8.5%
5.4%
17.9%
7.4%
Q30. What are two of three words that you would use to describe the Midwest as a
whole?
Beautiful..............................................................................11
Blue Collar............................................................................3
Ag (Farming)......................................................................13
Change of Season................................................................10
Conservative.......................................................................16
Family values......................................................................43
Friendly...............................................................................64
Hardworking.......................................................................41
Home...................................................................................15
Rural......................................................................................7
Safe.....................................................................................10
Negative..............................................................................17
Other...................................................................................56
DK/Refused.........................................................................45
3.1%
0.9%
3.7%
2.8%
4.6%
12.3%
18.2%
11.7%
4.3%
2.0%
2.8%
4.8%
16.0%
12.8%
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Q31. What are three of three words that you would use to describe the Midwest as a
whole?
Ag..........................................................................................9
Change of Season................................................................24
Comfortable/Down to earth................................................21
Conservative.......................................................................15
Education..............................................................................5
Family/Home......................................................................23
Friendly...............................................................................51
Hardworking.......................................................................31
Honest/Loyal.......................................................................35
Middle Class.......................................................................10
Safe.......................................................................................7
Other...................................................................................58
DK/Refused.........................................................................62
2.6%
6.8%
6.0%
4.3%
1.4%
6.6%
14.5%
8.8%
10.0%
2.8%
2.0%
16.5%
17.7%
Q32. And again, for statistical purposes only, what is your race or ethnicity, white,
black, Asian, Hispanic or something else?
White.................................................................................305
Black.....................................................................................8
Asian...................................................................................12
Hispanic..............................................................................10
Something else....................................................................10
Refused.................................................................................6
86.9%
2.3%
3.4%
2.8%
2.8%
1.7%
Q33. What is your highest degree or the last grade that you completed in school?
Grade school.........................................................................4
Some high school..................................................................5
High school graduate..........................................................82
Some college, no degree.....................................................43
Vocational training/2-year college......................................65
4-year college/bachelor's degree.........................................99
Some postgraduate work, no degree.....................................2
2-3 years postgraduate work/master's degree.....................27
Doctoral degree...................................................................19
Not sure/Refused...................................................................5
1.1%
1.4%
23.4%
12.3%
18.5%
28.2%
0.6%
7.7%
5.4%
1.4%
Q34. Gender
Male..................................................................................243
Female...............................................................................108
69.2%
30.8%
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Q35. In which state is your business in?
IA........................................................................................39
IL.........................................................................................39
IN........................................................................................39
KS.......................................................................................39
MI........................................................................................39
MN......................................................................................39
MO......................................................................................39
OH.......................................................................................39
WI.......................................................................................39
11.1%
11.1%
11.1%
11.1%
11.1%
11.1%
11.1%
11.1%
11.1%
8