Most Americans are probably unaware that Iowa is one of the top states in the country for starting and running a business. According to an annual CNBC report, Iowa was the 20th best state for business in 2021. Over time, the Hawkeye State has developed into a business hub, where many entrepreneurs now opt to establish their businesses.
Here are some statistics that should help entrepreneurs understand the state of small businesses in Iowa.
Quick Iowa Small Business Statistics for Entrepreneurs
- 99.3% of all Iowa businesses are small businesses.
- 47.8% of all employed people in Iowa work for small businesses.
- Military veterans make up 4.7% of employees and own 7.8% of small businesses.
- Racial minorities account for 7.8% of employees and own 4.5% of businesses.
- There are 2,704 small business exporters in Iowa.
- In the 2021 CNBC “Best States for Business” report, Iowa scored a B+ in the cost of doing business and cost of living, but also scored a D in access to capital.
- Access to qualified employees is not an issue for small businesses in Iowa. Iowa has a literacy rate of 99%, which is the highest in all of the US, and also has the highest graduation rate at 90%.
- According to US Bureau of Labor Statistics data, one out of every five new small businesses in Iowa since 1994 has failed within a year.
- In 2020, the Council of State Governments ranked Iowa as the lowest-risk, highest resilience economy of any state in the US.
- Iowa does not levy sales or use taxes on manufacturing machinery equipment and computers.
Iowa Small Business Statistics
1. What is considered a small business in Iowa?
The Iowa SBA (Small Business Administration) defines a small business based on firm revenue (from $1 million to more than $40 million) and employment (from 100 to over 1,500 employees).
There are currently 273,969 small businesses in Iowa that represent 99.3% of all businesses in Iowa.
2. How many people are employed by small businesses in Iowa?
There are approximately 652,496 Hawkeyes working for small businesses in Iowa. They represent 47.8% of all Iowa employees.
The state’s minimum wage is $7.25, which is the same as the federal minimum wage. This wage applies to most employees in Iowa, with tipped employees and student workers as exceptions. Small firms with annual revenues of less than $300,000 are exempt from paying the minimum wage, and employers are permitted to pay less than the Iowa minimum wage for the first 90 days of employment. In Iowa, tipped employees must be paid at least 60% of the state’s minimum wage.
All increases in the minimum wage in Iowa counties are only symbolic and not legally obligatory. The minimum wage in Johnson County is $10.25 per hour. Linn City has a $10.25 per hour minimum wage as well. The minimum wage in Polk City is $10.75 per hour. Wapello has a $10.10 hourly minimum wage. This variation continues throughout the state.
3. Iowa small business statistics by industry
The construction industry is the largest sector in terms of small business investment, with a total of 34,898 small businesses operating in this sector. A large share of these businesses, 26,272 to be exact, have no employees. Another 7,986 have between 1–19 employees, while 640 have 20–499 employees.
The mining, quarrying, and oil and gas extraction sectors have the least share of small business investment, with only 640 small businesses working within them.
4. Iowa small business ownership by ethnicity
The current population of Iowa stands at 3,190,369 residents. White/Caucasian Iowans are the largest ethnic group in the state, representing 89.9% of the population. They are followed by Hispanic/Latino Iowans (6.3%), Black/African Americans (4.1%), Asians (2.4%), American Indians and Alaska Natives (0.4%), and Native Hawaiians and Other Pacific Islanders (0.1%).
The data below show how small business ownership is distributed among these ethnic groups:
- White/Caucasian — 251,145
- Hispanic/Latino — 6,288
- Black/African American — 5,641
- Asian — 5,818
- American Indian and Alaska Native — 250
- Native Hawaiian and Other Pacific Islander — 70
5. Iowa small business ownership by gender
Women own 94,759 small businesses in Iowa, which is 43.3% of all businesses in the state. Around 85,000 of these businesses have no employees, while another 9,759 have employees.
Men are the majority business owners with 149,277 small businesses. Approximately 115,000 of these are nonemployer businesses, while another 34,277 have employees.
6. Business taxes in Iowa
According to the 2021 State Business Tax Climate Index published by the Tax Foundation. Iowa was ranked 38th in the nation for the structure of its tax system. The state was ranked 15th for sales taxes, 38th for individual income taxes, 34th for unemployment insurance taxes, 39th for property taxes, and 38th for corporation taxes.
The state’s sales tax rate is at 6%, while the top corporate tax rate stands at 12%.
7. Small business financing in Iowa
Here is a list of options for small business owners to get loans in Iowa:
- Iowa Targeted Small Business Program: Minorities, women, disabled veterans, and entrepreneurs with impairments can apply for small business loans under the Iowa Targeted Small Business (TSB) Program. The loans are offered through the Iowa Center for Economic Success, a nonprofit organization.
- Iowa Innovation Acceleration Fund: The Innovation Acceleration Fund is a fantastic alternative for high-growth technology enterprises in Iowa. This initiative is operated by the Iowa Economic Development Authority (IEDA) in order to make Iowa more appealing to tech firms. Qualifying for this Iowa small company program is quite difficult. But businesses that meet the criteria can get up to $500,000 in investment. The cash can be in the form of a loan or a royalty, which you repay with a share of your previous year’s earnings.
- Iowa High Quality Jobs Program: IEDA also offers the Iowa High-Quality Jobs Program, which helps qualifying small businesses pay part of the expenses of constructing, expanding, or improving a company facility in Iowa. Successful enterprises may be eligible for a financial package that includes loans, grants, tax credits, tax exemptions, and tax refunds.
8. Small business challenges in Iowa
In Iowa, one of the most pressing concerns for small business owners in Iowa is labor shortage. It was already an issue before COVID-19, but the epidemic has exacerbated it significantly.
In January 2020, right before the COVID-19 pandemic hit, there were 1.68 million Iowans in the workforce, and the percentage of Iowans working was 70%, according to state labor data. There were 85,600 fewer Iowans in the workforce in November 2021, the latest month for which state workforce statistics are available, and the share of Iowans working was down more than three percentage points, to 66.8%.
Tax compliance is another issue, especially for entrepreneurs who are new to business and don’t have a knack for bookkeeping. Staying on top of your taxes is very important if you don’t want to lose your trade license.
To stay up-to-date with your taxes you need to find a reputable registered agent in Iowa who will help you with your business setup process, send tax compliance notices so you don’t miss any important filing date, and even help you find qualified employees for your business.
Read my review of the best registered agents in Iowa to find out which company is best for you.
9. Iowa small business export statistics
In 2019, 3,308 firms exported goods worth $12.2 billion from Iowa. Small businesses accounted for 2,704 of the total exporters, or 81.7%. Small businesses shipped $2.2 billion in products, accounting for 17.7% of total exports by recognized businesses.
The Final Word
Iowa has a lot to offer employers and employees alike, with businesses and entrepreneurs from all over the world flocking to the state because of its strong infrastructure, high quality of life, excellent education system, thriving import/export market, and plethora of business and economic opportunities.
According to recent national rankings, Iowa is a top place in the country to start a business, live affordably, and enjoy quality of life amenities, but there are several areas where the state can improve to ensure it has an adequate workforce and the resources needed to start new businesses and expand existing ones.
- US News
- The Gazette
- National Association of Manufacturers
- CNBC – Top States for Business
- Iowa Data Center
- Iowa City (icgov.org)
- Iowa Economic Development
- Iowa Capital Dispatch
- World Population Review
- US Small Business Statistics