The declaration came after one slurp of broth at an upscale Bloomington restaurant: “Not as good as Darn Good Soups” — and loud enough for the rest of the restaurant to hear.
Pat and Jamie East were dining at the next table over, filing away the latest evidence that residents still missed a popular local eatery shuttered years ago.
Then-owner Nels Boerner closed up shop during the uncertain early days of the pandemic rather than renew a 10-year lease, Pat East recalled. He struck a deal with Boerner to buy the business — including the chef’s 66 original recipes — and reopen the restaurant.
East entered a joint venture agreement with a 90-year-old Bloomington institution, The Chocolate Moose ice cream parlor, to share a storefront, sales system, staff and more.
Darn Good Soups reopened to fanfare last October. East plans to expand this fall.
Locally owned businesses “are the backbone of these communities,” he said. “If these companies wouldn’t exist, who fulfills not only that service or product they’re providing, but who sponsors the local little league softball team, or who sponsors the local football team?”
East, a Bloomington native, has helped start a digital advertising company and two business-related nonprofits — and exited all three — since returning and settling down in the city.
Outside his soupy endeavors, he works as an adviser to cohorts of small Hoosier businesses, as part of a “Main Street” accelerator program run by Gener8tor Management. A $4.8 million contract with the Indiana Economic Development Corp. directs about $500,000 to that initiative over three years.
But state officials are also looking at how to keep existing businesses in Indiana.
“Retaining great businesses is as essential as attracting new ones,” said Brian Schutt, who leads the recently established Office of Entrepreneurship and Innovation. He co-founded Homesense Heating and Cooling, as well as co-working space and startup incubator Refinery46, before Gov. Mike Braun appointed him to the role a year ago.
The office this year launched a “Keep IN” initiative to get small business owners thinking about how to hand off their companies when they leave, instead of closing them down — and prompt potential successors to consider entrepreneurship through acquisition.
Focus on prospective retirees
Businesses owned by those aged 55 or older represent an estimated $206 billion in Indiana private sector revenue annually, according to an Indiana Business Research Center “Silver Tsunami” report completed in March for Schutt’s office. More than a quarter of Indiana’s employment depends, directly and indirectly, on continued operation of such firms, a follow-up report found.
The center pulled from a February McKinsey and Co. study — which estimated that 92% of small and midsize business exits in 2022 ended in closure instead of a sale or succession — to present three takes on what Indiana stands to lose. If all 44,000 businesses with aging owners were to close, the state would miss out on the $206 billion output, about 906,000 jobs and $61 billion in labor income.
At a 92% closure rate, the losses would hit $191 billion in output, 834,000 jobs and $56 billion in labor income. Even in a rosier 75% closure scenario, Indiana would risk losing $155 billion in output, 680,000 jobs and $46 billion in labor income, the state report estimates.
Schutt attributed the high potential closure rate to a “lack of preparation.”
“We just believe the more owners we can get thinking about this sooner, the more likely the state is to retain more of these businesses — which is going to be obviously great for those owners, great for their employees, and importantly, great for the communities where the businesses exist,” he said.
The office has also partnered with the Indiana Chamber of Commerce on a series of free and anonymous succession planning webinars, with the first occurring June 25 and the next in the works.
Todd Hurst, the chamber’s senior vice president of strategic partnerships and impact, said successful transfers are up to the private sector in the end, but that the state can serve as a convener.
“Do we have the systems in place? Are we connecting the right dots to help this function effectively, so that it can be a space that continues to grow and thrive with some of these main street businesses?” Hurst mused. “Because ultimately, it does connect into the thriving economy in terms of quality of place — places that people want to come and live in Indiana to do their work, right?”
Hurst said the “kickoff” meeting also presented an opportunity to gather feedback on the particular areas in which entrepreneurs wanted help.
“There are definitely questions around what … should I, as a business owner, be thinking about from a legal perspective, and how far in advance do I need to start thinking financially before I want to make a transition or begin a succession strategy,” he said.
Keep IN also includes a pilot with SMB.co, offering owners in three economic development regions free tools to check their exit readiness, plan out a timeline and obtain estimates of their firm’s value.
The office is also continuing its research efforts with a 15-minute survey, administered in partnership with the Exit Planning Institute, to gauge how ready small business owners are to transition out.
Entrepreneurs say leadership, values key
Before buying a company, East was on the other side of the equation.
He and his wife founded and ran Hanapin Marketing for 16 years before selling the digital advertising firm to a competitor, Brainlabs, in 2020.
“Pretty much my entire adult life was this company,” East said. “And so it was really just kind of time to move on. And, you know, there was also part of me that knew that in the hands of a different owner, a more capable owner, they could they could achieve a lot more, too.”
He began planning to exit years out, primarily by building out a dependable leadership team.
“We started doing things like … making me redundant,” East said. “… Many businesses that exist today are solely dependent upon the owner, which makes them difficult to sell” — or, at least, for a good price.
He also focused on values.
“I knew that I wanted to build a really impactful company that treated its employees well, that did really good work, that had really great clients … et cetera. And when I looked at all of those things that we wanted to do, it lined up really well with being the right profile of a company that somebody wants to buy,” East said. “A company that’s worth selling is a company worth running.”
For Nick Smarrelli, a businessman now teaching entrepreneurship at Butler University, values were key in finding the right successor for GadellNet, the information technology services firm he helped start.
He wanted the company to keep its name — in honor of one of a fellow founder — as well as its B Corp. certification, which comes with social and environmental commitments.
“I created, literally, a list and sent it to any of the organizations that we were talking to that were investing in our business,” Smarrelli said. “I literally wrote in the email, ‘If you negotiate on any of these topics, I will walk away and speak to somebody else.’ … And they honored it, and they were great.”
Like in East’s experience, backups smoothed the transition — including a six-person executive team and plenty of documentation.
“That was important for us, that no part of the business was relying on just one person,” Smarrelli said.
Now, at Butler, he guides students along the process through the entrepreneurship program he directs.
Some students own their own businesses, but some run university-owned firms for stints that last for the length of an academic year.
“Anything done is always documented and never just in the head of somebody else,” Smarrelli said. “And so … it’s cultureized in the programming, because you know you do not hold that job forever.”
Schutt, the state’s entrepreneurship director, said succession planning efforts are focused on the ownership level for now, but that a look at key staff could be part of the initiative’s evolution.
Succession planning is part of “healthy operational discipline” for Lydia Henshaw.
She acquired Journey Warehousing in 2023 and ran it for until its acquisition last year by logistics network Neace Transportation, where Henshaw now serves as partner and chief operating officer.
“We always need to be thinking about, you know, who is it that can step in the current roles of leadership, whether the company is sold … or whether you have key leaders that choose to leave for one reason or another,” she said, envisioning a years-out “scaffolding” of budding proteges.
Henshaw emphasized training and development. She has started bringing operations managers into monthly financial reviews to give them a broader perspective of the company’s profits, losses and more.
“It’s a very like flexible way to… help them build the muscle, so that when it’s time for them to step into those conversations or those roles, you know, they’re able to to do it with more confidence because they’ve been exposed,” Henshaw said.
The stronger a team, she added, the stronger the company — and the price.
Indiana Capital Chronicle is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Indiana Capital Chronicle maintains editorial independence. Contact Editor Niki Kelly for questions: info@indianacapitalchronicle.com.
