RURAL BUSINESSES



Rural businesses are those firms that are established and operate in rural settings, far from the metropolitan areas that have traditionally been the site of most non-agricultural business enterprises. Most businesses continue to conduct business in large cities or thriving suburbs, but analysts contend that technological advances, demographic changes, and increased attention to "quality of life" considerations have all combined to spur meaningful business growth in many rural areas as well. As of 1998, according to Terry Neese in LI Business News, about 20 percent of small businesses (defined as those having fewer than 500 employees) were located in rural areas.

Increased receptiveness to new businesses has also had an impact on the growth of commerce in some rural regions. As Brian Steinberg observed in Entrepreneur, "many small towns in states such as Iowa and Indiana are crying out for new businesses. Dependent for generations on sagging agricultural or manufacturing economies, these towns need entrepreneurs and the jobs they supply to stay economically viable."

CHARACTERISTICS OF RURAL BUSINESSES

In an article for the OECD Observer, Chantal Illouz-Winicki and Dennis Paillard discussed three special features of business creation in rural areas around the world that are not present in urban areas. For example, the majority of growth in rural economies comes from existing business enterprises rather than new ones, particularly in the industrial sector. This is by no means an indication that new businesses—industrial or otherwise—cannot survive in rural settings. It merely means that existing businesses are particularly well-equipped to continue once they have established themselves. Reasons for this include the higher percentage of family-owned businesses in smaller towns (which helps with issues of long-term continuity), less competition in local markets, and what Illouz-Winicki and Paillard described as "more determination when firms run into difficulties, through a genuine or perceived lack of alternatives."

Experts have also noted that businesses in rural areas tend to be characterized by their activities. Companies that specialize in providing personal services (propane delivery, rubbish removal, etc.) are commonplace, since there is a large and steady demand for these services, which in more metropolitan areas would be handled by companies armed with city contracts. Manufacturing establishments, on the other hand, are more scarce because of transportation and work force issues. "In isolated areas, business creation is usually aimed at local consumer markets (retailing, community services) or new market niches (products with a strong regional identity)," said Illouz-Winicki and Paillard. "In more accessible areas it is aimed more at services or intermediate goods (sub-contracting). It is notable that business services, from office maintenance to consulting, are still under-represented in rural areas because local markets are so small."

FACTORS IN RURAL BUSINESS GROWTH

The growing appetite for a simpler, more relaxed way of life has long been touted as a primary reason for the increase in rural businesses in recent years. Certainly, this has been a factor, but several other considerations warrant mention as well, including general economic conditions, demographic changes, and new modes of communication such as the Internet. Of course, not all rural regions experience business growth at the same rate; indeed, some rural areas continue to flounder even as others blossom with new business opportunities. "It is not easy to explain why an area is dynamic, or backward," admitted Illouz-Winicki and Paillard. "Complex forces are at work: specific local factors, structures and aspects that are hard to assess precisely, such as cultural traditions, business networks, and an attractive natural setting."

DEMOGRAPHIC CHANGES Business experts believe that demographic changes will likely continue to encourage growth in rural businesses over the next few decades. As more and more "baby boomers" enter into retirement age with disposable income, analysts point to rural businesses as some of that trend's chief beneficiaries. Moreover, this trend transcends national boundaries, for it can be seen not only in the United States, but in Canada, Europe, and other regions of the world. "Catering for senior citizens is a potential source of activity whose scale has to be assessed without delay," said Illouz-Winicki and Paillard. "This social group, more mobile than earlier generations, often with more disposable income than the rest of the population, is of growing demographic and economic importance. Rural areas are already benefiting from this trend in tourism, in high season and at other periods; and senior citizens are also becoming new residents, either temporary or permanent."

TRAVEL AND TOURISM The tremendous growth in the travel industry has been a significant source of income for many small towns in rural settings. Indeed, economists cite the travel and tourism industry as an engine of terrific economic growth in many rural areas that are blessed with notable natural or cultural surroundings. Many small towns located near national parks, sites of historical interest, and scenic areas have seen a surge in businesses aimed at nabbing tourist dollars, and many rural regions have ridden the growth in travel and tourism to new levels of economic prosperity. Of course, this is not a meaningful factor for many rural areas that are not situated in the vicinity of a national park or other popular tourist destination. Still, many rural city planners have successfully spurred new levels of economic activity by marketing attractive elements of the region (lakes and rivers, festivals, historical sites, etc.) so as to draw tourists.

THE INTERNET AND OTHER TELECOMMUNICATIONS ADVANCES The amazing capacities of the Internet and other relatively new means of telecommunications have enabled business owners in even the most remote locations to dramatically expand their potential customer base. "Small remote communities are attempting to bridge their isolation by taking their businesses and even their local governments online," wrote David Goodman in Inc. " 'Community networking,' as the phenomenon is known, brings the Internet to people in far-flung outposts. Rural businesses have seized the opportunity to play in the big leagues, with entrepreneurs of every stripe now hawking their wares in cyberspace." Goodman cited the following as key steps for any rural business community hoping to establish an online presence:

  1. Organize—This step could take the form of organizing Internet training for local business owners and managers.
  2. Outreach—Talk to people and community organizations face-to-face to explain how the Internet can help their business.
  3. Educate—According to Goodman, providing classes on Internet use to both employees and the larger community can help rural businesses "develop a critical mass of technoliterate citizens."
  4. Target—Provide workshops and training seminars specifically tailored to individual business sectors so that their membership can see how an Internet presence can benefit them.
  5. Provide Access—Small towns should follow the lead of their larger brethren, which often provide the public with free access to the Internet at local libraries or community centers.

Finally, the rise of telecommuting and other communication advances has made it increasingly possible for software developers, freelance writers, graphic artists, and others who maintain home-based businesses to establish themselves wherever they wish, provided they have reliable computer and/or postal resources at their disposal.

COMMON OBSTACLES TO BUSINESS GROWTH IN RURAL AREAS

A significant percentage of new businesses in rural areas are established businesses that relocate. Indeed, many entrepreneurs have established their business ventures in rural regions of the country in recent years. This trend has been especially evident among small business owners who have decided to relocate for "quality of life" reasons. These entrepreneurs are sometimes limited in their relocation options by customer demographics and other factors, but the desire for quieter, less hectic lifestyles has proven to be a potent one, as families search for homes that are not bedeviled by traffic, crime, and other attributes often associated with large cities.

Nonetheless, small business owners are urged to weigh the obstacles that often confront businesses that decide to relocate in rural locations. These hurdles range from different cultural standards and finding new friends to negotiating new ways of transporting goods or finding quality employees. In addition, services in rural areas often do not match those that can be routinely relied upon in more metropolitan areas. Unreliable electrical service, skimpy or nonexistent overnight delivery options, and increased telecommunications costs (for regular telephone service as well as Internet connections) can all complicate the efforts of businesses in rural locations. These difficulties can be particularly problematic for businesses that are involved in high-tech areas. "For technology-dependent businesses to thrive in remote areas, connecting a computer to the Internet is the easy part," wrote Goodman. "Finding employees who have the savvy to use the technology or … finding someone to fix your computer can be far more challenging."

FURTHER READING:

Goodman, David. "Small Town, Big Connections: Community Networking Gives Rural Business a Chance to Play in the Big Leagues." Inc. June 18, 1996.

Illouz-Winicki, Chantal, and Dennis Paillard. "New Business in Rural Areas." OECD Observer. February-March 1998.

Neese, Terry. "Rural Businesses Will Face Challenges in Global Market." LI Business News. December 25, 1998.

Steinberg, Brian. "Green Acres: Why Some Entrepreneurs are Saying 'Goodbye, City Life.' " Entrepreneur. October 1997.

Stickey, Marcia. "Home-Grown Businesses Find Rural Niche: Rural States Need to Break Out of the Urban Economic Development Mold." Successful Farming. February 1995.

Venable, Tim. "Getting Better Location Assistance: Here's How." Site Selection. April 1996.

Weber, Fred I., Jr. Locating or Relocating Your Business. Small Business Administration, n.d.



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