The ongoing population and business declines in rural America are undeniable, but they need not be inevitable. Those who say that rural America is destined for perpetual decline forget that this was the prediction for large urban centers in the 1970s.
-- Neil A. Belson, Promoting Rural Entrepreneurship and Rural Economic Development, Third Way (Jan. 7, 2020).
For those that live amongst the farms and ranches of the rural United States, the fact that there are challenges uniquely faced by small businesses is no surprise. However, we benefit from learning more about the source of these challenges. These are the core challenges faced by rural businesses:
- accessing broadband;
- accessing healthcare;
- accessing goods and services;
- obtaining quality employees;
- accessing sufficient networking opportunities;
- ability to engage in effective marketing; and,
- access to business guidance and education.
(Via the Small Business Majority, Examining The Unique Opportunities and Challenges Facing Rural Small Businesses (Feb. 19, 2019) (link)
The lack of broadband access hampers rural businesses from competing on the same level, technologically, as suburban and urban businesses. The Federal Reserve Bank of San Francisco reports that only 35% of in-person transactions occur via cash. Customers use debit and credit cards for the remaining 65% of transactions. At the same time, some point of sale credit card terminals rely on dedicated telephone connections, an increasingly large number run via wi-fi and the internet (such as with Stripe or Square payment processing). Additionally, knowledge workers - accountants, attorneys, engineers, marketing consultants, medical professionals, and the like - require internet access for professional research. Finally, as more technology businesses move from the idea of software as a block of code that lives on a consumer's hard drive to Software-as-a-Service (SaaS) that lives on the internet, all businesses will increasingly need to access the internet for bookkeeping, word processing, and other concerns.
Additionally, since the COVID-19 pandemic, rural businesses have been hampered by the lack of broadband in that virtual meetings are effectively impossible without high-speed connectivity. For example, evidence shows that here, in rural Trinidad, Colorado, small business owners were traveling to urban Pueblo, Colorado, for professional services. See RPI Consulting, LLC, Trinidad Colorado Market Analysis & Opportunity Assessment (June 2020) (link to PDF) (the “RPI Consulting Report”); and RPI Consulting, LLC, Presentation regarding Trinidad Colorado Market Analysis & Opportunity Assessment (June 2020) (link to slide deck). One can draw from this local example that businesses do not believe that they can obtain sophisticated services locally. Additionally, because there are no professional services locally, local entertainment and hospitality businesses miss out on the revenue generated by employees of professional services companies.
Lack of local access to adequate healthcare for rural businesses means that employees who need healthcare have to travel long distances to suburban and urban hubs. See RHIhub, Healthcare Access in Rural Communities (last reviewed Nov. 24, 2020). The lack of healthcare leads to ineffective care for smaller workplace injuries, which leads to smaller injuries eventually becoming more significant problems that require more time off work for employees (creating a larger labor burden for rural employers). Also, because potential employees with disabilities will need medical care access, rural businesses suffer from an inability to hire a more diverse worker pool.
Accessing Goods and Services
As previously mentioned, rural small businesses struggle to obtain necessary supplies and equipment from the local economy, such as printer toner cartridges. See Bridget Weston, Opportunities and Obstacles for Rural Entrepreneurs, SCORE (Aug. 2019). Office supply stores are rare in rural communities. The relative isolation of rural US communities means that overnight delivery from businesses such as Amazon is either impossible or prohibitively expensive. Because of challenges such as these concerning the rural supply chain, rural small businesses are at a competitive disadvantage compared to suburban and urban enterprises. Small businesses in rural areas are offering fewer of their goods and services due to the lack of a supply chain or offering their goods and services with an additional cost passed on to consumers due to the non-local supply chain.
Obtaining Quality Employees
Simply by virtue of the smaller population of rural areas, rural small businesses are limited in their ability to find the right employee. See the RPI Consulting Report previously mentioned above. Thus, rural small businesses find themselves unable to build a diverse and inclusive workforce. See Ashley Bozarth and Whitney M. Strifler, Strengthening Workforce Development in Rural Areas (Federal Reserve Bank of Atlanta 2019) (pdf link). Rural small businesses are also forced to take unqualified and under-qualified employees. Rural small businesses spend more sweat equity training those unqualified and under-qualified employees or addressing problems created by those employees that would not be tolerated in areas with a more ample pool of eligible workers. A more serious concern is that employers may feel forced to retain employees engaged in more serious misconduct because they do not think they can replace them, even though the business owner knows they should terminate the employee. A business that feels forced to retain such employees will find itself more likely a victim of fraud and embezzlement, more likely to be subject to discrimination lawsuits, and more exposed to negative publicity due to employee misconduct.
Accessing Sufficient Networking Opportunities
In the above sections, we observed how limited availability of professional services and goods impacted businesses directly, but they also create indirect limitations in the form of insufficient networking opportunities. Professionals in rural areas struggle to obtain referrals due to the lack of allied professionals. The lack of professionals also means that trade enterprises, such as electricians and plumbers, miss out on referrals from professionals who lack time to engage in DIY repairs. See J. Kirk Ring, Ana Maria Peredo, and James J. Chrisman, Business Networks and Economic Development in Rural Communities in the US Entrepreneurship Theory and Practice 34 (1) (Jan. 2010) (PDF link) (but note that rural areas have much stronger informal social bonds than urban areas).
Accessing Effective Marketing
When I first moved to my rural community, the executive director of the local chamber of commerce told me she was glad I had moved to the area because I was the first professional to build websites in town. Similarly, when I interacted with other business owners, I learned that they were often paying exorbitant maintenance fees for website management merely because there were no others to provide such services at reasonable prices.
Due to the lack of professionals in the area, businesses lack the information to participate in practical, low-cost marketing solutions in place of more costly analog alternatives, such as newspapers and glossy circulars. Companies were not aware that their profits were tied to tourism. No professionals were engaged in marketing strategy and business intelligence to help rural businesses use Google My Business more effectively. Because 60% of all retail purchases start with smartphone research by consumers, rural small businesses need to learn how to be mobile-friendly, whether on their website or earned media and social platforms like Google Maps and Yelp. Therefore, the absence of professionals to point the need for mobile-centric marketing in rural communities further diminishes profit potential for small businesses in those communities.
Accessing Necessary Business Guidance and Education
The cascade of problems that limit profit potential for small businesses often means that rural community business organizations, such as local chambers of commerce, are not available to provide businesses with guidance and support. See Nikki Foster, Entrepreneurship in Rural Communities: An Emerging Strategy Presents Opportunities and Challenges (Federal Reserve Bank of Minneapolis Nov. 2001). As a result, rural businesses are behind the times when it comes to technology, compliance, and growth strategies.
Rural entrepreneurs and small business owners face numerous challenges to growth and profitability, not just those mentioned here. However, the challenges mentioned in this article represent challenges that repeatedly pop up in discussions with rural business owners. These challenges leave rural enterprises short-staffed, isolated, and struggling to connect with other businesses and customers. Overcoming these challenges should be a priority for policymakers in rural communities.