When it comes to small business, the Indianapolis region faces a good news/bad news scenario.
Usually, we feel slighted at being left out of an economic ranking of top metropolitan areas. But the region’s absence from a recent report by leading micro-lender Kiva and Visa Inc. (“Small Business Trouble Spots”) was cause for relief: As reported by Norm Heikens at the IBJ’s Small Biz Matters blog, the study ranked the large metros that saw the demise of 1% or more of its small enterprises (10 employees or less) during the recession (2006-2008).
Among our regional peers, Kansas City and Columbus, Ohio lost 2% of their small businesses, while Cincinnati, Cleveland, Detroit, Louisville, Milwaukee, Memphis and St. Louis all made the list of those losing at least 1%. Greater Indianapolis stayed roughly even, which was good enough to outperform much of the urban Midwest.
That’s the good news. But because small businesses have been our most reliable job creators in the recent economic past, treading water won’t drive our recovery going forward. Another recent report ("Starting Smaller, Staying Smaller: America's Slow Leak in Job Creation"), this one by the Kauffman Foundation, warns that smaller ventures aren’t producing new positions at the same rate as prior decades.
For the last thirty years, larger companies have created and eliminated jobs at roughly the same rate, accounting for a slight loss in total positions. Small companies have been responsible for all net job growth. But the total jobs being created by small enterprises as a percentage of total U.S. employment has steadily shrunk – from 3.5% in the 1980s to an even 3% in the 90s, to 2.6% during the last decade (2000-2009), according to Kauffman. As seen in the Kiva-Visa report, the number of new employer businesses being created plummeted during the recession, as the survival rate for existing small firms dropped as well.
Though Indianapolis has fared reasonably well in terms of job growth and other measures of economic progress (i.e. population growth), it’s clear that we will have to continue to focus on the issues that are critical to small businesses – access to start-up capital, entrepreneurial support services and infrastructure, and continuing to encourage a risk-taking business culture.