Have you ever wondered what makes a state the perfect place to launch a business? Maybe you’re dreaming of opening a cozy coffee shop or a cutting-edge tech startup, and you’re curious about where your dreams might thrive. For many, Iowa conjures images of rolling cornfields and tight-knit communities, but when it comes to business, it’s not exactly stealing the spotlight in 2025. Ranking 24th in a comprehensive study of America’s top states for business, Iowa’s position raises questions. What’s holding it back, and are there hidden gems in its economic landscape that entrepreneurs should know about? Let’s dive into the numbers, the strengths, and the challenges that define Iowa’s business environment.
Unpacking Iowa’s 2025 Business Rankings
Iowa’s 24th-place ranking in 2025’s business competitiveness study isn’t exactly cause for celebration, but it’s not a disaster either. The state scored 1,297 out of a possible 2,500 points across 10 key categories, from economy to infrastructure to quality of life. While it shines in some areas, others reveal cracks in its foundation. To understand Iowa’s position, we need to break down its performance, category by category, and see where it excels and where it stumbles. Spoiler alert: there’s a mix of pleasant surprises and some tough realities.
Economy: A Mixed Bag with a Downward Trend
Iowa’s economy, with a score of 200 and a rank of 39th, is a bit of a head-scratcher. On one hand, the state’s unemployment rate of 3.6% in May 2025 is respectable, showing a relatively stable job market. But here’s the kicker: Iowa’s GDP shrank by a whopping 6.1% in Q1 2025. That’s a red flag for anyone eyeing the state for business expansion. A shrinking economy can signal trouble for startups or established companies looking to grow.
“A declining GDP often reflects broader challenges, like reduced consumer spending or supply chain hiccups, which can hit small businesses hardest.”
– Economic analyst
Why the dip? Some point to Iowa’s heavy reliance on agriculture, which can be volatile due to weather, trade policies, or commodity prices. For entrepreneurs, this means weighing the risks of an economy that’s not firing on all cylinders. Still, I’ve always believed that a stable unemployment rate offers a glimmer of hope—people are working, which means there’s still money flowing, right?
Infrastructure: A Solid Foundation
Iowa’s infrastructure, scoring 221 and ranking 19th, is a bright spot. With a B- grade, the state’s roads, bridges, and utilities are reliable enough to support businesses. Whether you’re shipping products across the Midwest or setting up a logistics hub, Iowa’s infrastructure won’t leave you stranded. Rural areas, in particular, benefit from decent connectivity, which is a big deal for small businesses looking to compete in a digital world.
- Well-maintained highways for efficient transportation
- Reliable utility networks for consistent operations
- Growing broadband access, even in rural regions
That said, Iowa’s not perfect. Some remote areas still lag in high-speed internet, which can frustrate tech-driven businesses. If you’re planning to launch an e-commerce platform, you’ll want to double-check connectivity in your chosen location. Still, compared to other states, Iowa’s infrastructure is a quiet strength that deserves more attention.
Workforce Challenges: A Weak Link
Here’s where things get tricky. Iowa’s workforce score of 150 and 41st rank (with a D grade) is a major hurdle. Finding skilled workers is a struggle, especially for industries like tech or manufacturing that demand specialized talent. The state’s population, just over 3.2 million, limits the labor pool, and brain drain—young professionals leaving for bigger cities—doesn’t help.
“A limited workforce can stifle innovation and growth, especially for businesses needing niche skills.”
– Business consultant
In my experience, a small workforce isn’t a dealbreaker if you’re strategic. Iowa businesses might need to invest in training or tap into remote talent pools. But let’s be real: if you’re launching a tech startup, you’ll need to hustle to find the right people. Partnering with local universities or offering competitive benefits could be your edge.
Cost of Doing Business: A Hidden Gem
If there’s one area where Iowa shines, it’s the cost of doing business. With a score of 198 and an 11th-place rank (earning an A- grade), Iowa is a budget-friendly spot for entrepreneurs. The state’s corporate tax rate of 7.1% and individual income tax rate of 5.7% are reasonable, and the low cost of real estate makes setting up shop affordable.
| Metric | Iowa’s Value | National Context |
| Corporate Tax Rate | 7.1% | Moderate |
| Individual Income Tax | 5.7% | Competitive |
| Gasoline Tax | 48.40 cents/gallon | Above Average |
Lower costs mean more room to experiment, especially for startups. Imagine leasing a storefront in Des Moines without breaking the bank or keeping overhead low while you scale. That’s Iowa’s appeal. However, the higher-than-average gasoline tax (48.40 cents per gallon) could sting for businesses reliant on transportation.
Business Friendliness: Room for Improvement
Iowa’s business friendliness score of 143 and 24th rank (with a B- grade) suggests a mixed bag. The state offers some incentives, like tax credits for new businesses, but regulatory hurdles can slow things down. For example, permitting processes in certain counties can feel like wading through molasses, which frustrates entrepreneurs eager to hit the ground running.
Still, Iowa’s government, led by Governor Kim Reynolds, has pushed for pro-business policies. The state’s Aaa/AAA bond rating signals financial stability, which is reassuring for investors. If you’re willing to navigate some red tape, Iowa’s welcoming vibe for small businesses can still be a draw.
Quality of Life: Small-Town Charm
Iowa’s quality of life score of 156 and 16th rank (with a C+ grade) reflects its small-town appeal. Affordable housing, safe communities, and a slower pace make it attractive for families or entrepreneurs seeking balance. The cost of living, ranked 9th with a score of 39, is another feather in Iowa’s cap.
But let’s not sugarcoat it: Iowa’s winters can be brutal, and cultural amenities are limited outside cities like Des Moines. For young professionals or businesses aiming to attract top talent, this can be a tough sell. Still, for those who value community over flash, Iowa’s charm is hard to beat.
Technology and Innovation: Falling Behind
Iowa’s technology and innovation score of 123 and 29th rank (with a D+ grade) is a sore spot. The state lags in fostering a tech ecosystem, with limited venture capital and few innovation hubs. For tech entrepreneurs, this means looking elsewhere for funding or networking opportunities.
“Innovation thrives where risk-takers and resources collide. Iowa needs more of both to compete.”
– Tech industry expert
That said, Iowa’s universities are starting to churn out tech talent, and grassroots efforts are sprouting in cities like Cedar Rapids. Perhaps the most interesting aspect is how Iowa could pivot—leveraging its agricultural roots for ag-tech innovation. It’s a long shot, but stranger things have happened.
Education: Middle of the Pack
With a score of 48 and a 38th rank (earning a C grade), Iowa’s education system is solid but not spectacular. Schools produce dependable workers, but the state struggles to compete with education powerhouses. For businesses needing highly educated employees, this could be a sticking point.
Still, Iowa’s community colleges offer practical training programs, which can be a lifeline for industries like manufacturing. If you’re in a trade-heavy business, this could work in your favor. The key is tapping into local resources and building partnerships.
Access to Capital: A Tough Climb
Iowa’s access to capital score of 19 and 37th rank (with a D- grade) is a major obstacle. Securing funding for startups is tough, with venture capital scarce outside major cities. Entrepreneurs might need to rely on personal savings or local banks, which can feel like swimming upstream.
In my view, this is where Iowa needs to get creative. Crowdfunding or angel investor networks could bridge the gap. For now, though, if you’re launching a high-growth startup, you might need to look to nearby hubs like Chicago for funding.
What’s Next for Iowa?
Iowa’s 24th-place ranking in 2025 tells a story of potential tempered by challenges. Its low cost of doing business and solid infrastructure make it a viable option for small businesses or industries like logistics. But the state’s weak workforce, lagging technology, and limited access to capital are hurdles that can’t be ignored.
- Focus on workforce development through training programs
- Boost tech innovation with targeted incentives
- Streamline regulations to improve business friendliness
For entrepreneurs, Iowa offers a trade-off: affordability and stability in exchange for some growing pains. If you’re willing to navigate the challenges, the state’s small-town charm and low costs could be the foundation for something great. What do you think—could Iowa be the underdog that surprises us all in the coming years?
