Study says Midwest lags in start-ups; Michigan ranks last among all states

Stacy Wise started a steel-hauling trucking firm, purchasing seven trucks with loans from the city of Toledo and a bank.

A national study to be released today found that the Midwest lagged other regions in entrepreneurial start-ups last year, and had the lowest activity of any region in 11 years.

Michigan had a particularly large drop in start-ups and ranked last. Ohio was below the states' average.

Local small-business development officials say the results don't surprise them, and they cited a number of reasons for the poor showing: an economy that isn't attractive to start-ups, lack of venture capital, and lack of business-friendliness.

The Kaufmann Index of Entrepreneurial Activity, from the Ewing Marion Kauffman Foundation in Kansas City, Mo., found that nationally, on average, 290 out of every 100,000 adults started businesses each month last year, about the same as in 2005.

But Michigan's start-up activity fell from 230 per 100,000 per month in 2005 to just 16 per 100,000 a month last year. Ohio's fell from 270 per 100,000 a month to 220 per 100,000.

That study also concluded that Detroit had the lowest rate of entrepreneurial activity - 130 start-ups per month for every 100,000 population - among 15 major metro areas around the country.

Small-business experts in northwest Ohio and southeast Michigan say that the interest in starting businesses is high, even though enterprises are not being created in record numbers.

Stacy Wise, 29, said she started Keep It Moving Toledo LLC, a steel-hauling trucking firm, after working for another steel hauler for several years.

"I love it," she said. "It's a hustle every day, and it's a man's industry. That excited me."

Ms. Wise said she leveraged $50,000 in loans from the city of Toledo and a bank into seven trucks and hopes to get an eighth one soon.

Barbara Hamilton Matthews, 48, was laid off from her job as a legal secretary for a local law firm, started Trinity 3 of Ohio LLC, an accounting firm, and used a $5,000 "microloan" obtained through Assets Toledo, a local group that fosters entrepreneurship, to buy a computer and software.

Olivia Holden, executive director of Assets Toledo, said said dozens of prospective students have signed up for entrepreneurial classes, and 41 recently graduated, bringing the total to more than 600 in the last seven years - resulting in several hundred start-ups.

But she added that she has noticed a number of students recently dropped out because they lost their jobs.

"This [class] comes second," she said.

Wendy Gramza, executive vice president of the Toledo Regional Chamber of Commerce, said the Small Business Development Centers in a seven-county Toledo area have seen a decline in requests for help - from 935 in 2004 to 692 last year.

Ms. Gramza said there likely would be more interest in start-ups if the perception of the regional economy were better.

The 42 area counselors for SCORE - a small-business counseling group that's an offshoot of the U.S. Small Business Administration - expect to counsel about 1,000 this year, about half of whom hope to start businesses, said Jack Chezek, assistant district director for SCORE's northern Ohio region.

"If you're going to start a business you need a climate friendly to business, and I don't think Toledo is business-friendly at all."

But he contended that funding is still available "if a person has a good business plan and some funds of their own to put into it."

The Kauffman study did not break down data by metro areas, other than the biggest 15, because of insufficient data, said Robert Fairlie, a researcher from the University of California at Santa Cruz.

Mr. Fairlie said yesterday that he didn't analyze Midwest results, "but my gut feeling is that many people are moving out of the Midwest, and entrepreneurship occurs when the economy grows. There's a decline of industry in the Midwest."

Contact Homer Brickey at:

homerbrickey@theblade.com

or 419-724-6129.