Rural businesses have unique advantages and challenges
If you’re thinking of starting a small business in a rural community, you’ve come to the right place. While it might seem like entrepreneurs have an uphill battle getting ventures off the ground in a small town, there are some key advantages to starting rural. A dynamic e-commerce market is slowly but surely changing the calculus of urban vs. rural business and encouraging a new generation of startups to invest in smaller communities.
As you begin to develop your small business plan, it pays to think about both the pros and cons of starting a rural business. Let’s look at whether a small-town venture is a good fit for your industry and how the unique challenges of rural regions might help or harm your profit margins.
Rural businesses face less competition
Urban areas are bustling hubs of industry, and while that might be attractive in terms of proximity to a larger customer base, a talented and engaged labor pool, and other resources, it’s also a liability of sorts. Cities are packed with your competitors, and it may be tough to get a small start-up the attention it deserves in an already crowded marketplace.
In the previous business landscape, the lucrative flow of dollars in urban areas canceled out some of the disadvantages of operating in major cities. After all, as realtors constantly tell us, it’s all about location, location, location. However, the growing power of e-commerce and online business is rapidly rendering this mantra a moot point. Depending on your industry, a high-profile office building or a storefront in a vibrant district may deplete more overhead than it’s worth and place you at closer proximity to competitors that siphon off your customers.
Being a big fish in a small pond also has advantages in terms of how vital you are to the rural business ecosystem. For instance, the scarcity of other businesses in your niche may create a reliance on your service or product. It can also build a network of fellow entrepreneurs who have a vested interest in seeing your enterprise thrive because it creates a healthier, more prosperous business community.
Financing is more accessible in rural communities
One of the trickier parts of launching a business in any location is securing the capital you need, but there’s evidence rural businesses may have the upper hand in this challenge. The 2016 SBCS (Small Business Credit Survey) indicates that 80 percent of rural small business owners were able to get financing compared to 75 percent of their urban counterparts.
There are a few reasons lines of credit and business loans might be easier to obtain in rural communities. Smaller towns typically rely more heavily on local, independent banks and credit unions with lending qualifications that support staying local and prioritize investing back into the community. Cities are more often home to branches of national banks whose compliance to lending requirements are mandated by corporate interests and shareholder profits.
Several programs and grants also incentivize entrepreneurs who want to start businesses in rural communities in specific industries, including financing solutions from both the government and the SBA (Small Business Administration). Look into your options to see if starting your small business in a rural location could give you the edge when applying for a loan.
Connectivity is crucial
When your business relies on a virtual marketplace, leveraging a rural location to lower overhead costs is a fantastic idea even corporate giants like Amazon advocate. The lower cost of living, including rent and mortgages that are a fraction of urban areas, are incredibly attractive incentives. However, your ability to stay connected to your customers and suppliers will be vital to success. Reliable internet access and a network that has the bandwidth to support your business should be a key consideration in whatever location you choose. Sites such as Allconnect provide comparative lists of available plans in each zip code.
Connectivity is also essential in terms of finding and retaining talent to help your business grow. Rural communities can present challenges in terms of having lower levels of education and a smaller labor pool, so you may need to get creative on social media platforms to attract employees.
Small businesses grow slower in rural communities
Rural businesses may have less competition and better access to financing, but they grow more slowly. It’s important to be realistic about what this means for your profit margins and overall business strategy. Slower growth, however, doesn’t always mean less revenue or lower rates of success. In fact, a rapid rate of growth often leads to a chaotic and toxic work environment and the overextension that can spell financial disaster for both small and large business ventures.
Rural communities are incredibly loyal to the local businesses that form the backbone of their economy, but it takes time to build that relationship and trust. Studies show that the percentage of locally-owned businesses within a community correlate positively to higher levels of education, income, and employment.
Lower overhead means better profit margins
Profitability is more complicated than revenue and sales. It’s also about overhead costs that operate a storefront, maintain a website, or staff an office space. In rural areas, expenses like rent, insurance, and taxes that are part of business overhead are more affordable.
The same economic factors that lower overhead costs for businesses in rural communities also present a lower cost of living for employees to enjoy. Even necessities like groceries or small luxuries such as entertainment are less expensive in rural regions. This can make your small business an attractive employer for families and professionals looking to escape escalating urban costs.
Launching a startup in any location is challenging, but there are many reasons choosing a rural community can be a boon for your business. While growth may be slower and staffing can be challenging, you’ll enjoy lower overhead, less competition, and better odds at securing the financing you need. As long as your strategy takes into account some of the specific difficulties you may face in a smaller economic ecosystem, your business should be well positioned to leverage a rural locale and make it work for your bottom line.
Written by: Madison Crader, BOSS Contributor
Madison specializes in content related to small business digital marketing and building brand awareness. She has a passion for helping entrepreneurs grow their business and set long-term goals.