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Part I: Looking at the issues facing rural small businesses

Columnist Dean Swanson says this week we examine the scope of the problem facing small businesses in rural America.

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Rural entrepreneurs are the subject of SCORE’s latest study in its “Megaphone of Main Street” research series, which spotlights overlooked and undervalued small business communities.

Although starting and growing a successful small business can be more difficult in rural America, it also can be more impactful. By creating jobs, stimulating innovation and nurturing productivity, small and locally owned businesses can help rural towns and geographies prosper in ways that improve the physical, social and economic well-being of the people who live in them.

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In the wake of COVID-19, small businesses are holding communities together, creating two-thirds of net new jobs in the United States while accounting for nearly half (44%) of U.S. economic activity, according to the U.S. Small Business Administration. The bonds that small businesses create are especially strong in rural communities, which are home to one in five Americans or approximately 60 million people.

Indeed, businesses with fewer than 50 employees provide 42% of all jobs in rural America. That includes businesses of one, as their lack of population density means small towns historically have had higher concentrations of self-employed individuals than big cities.

“If you have a business that fixes air conditioners and furnaces in a rural place, it’s not going to employ 1,000 people like it might in a major city,” noted Mark Partridge, a professor of economics at The Ohio State University, in a recent interview with the Federal Reserve Bank. “So you tend to see more small businesses in rural areas.”

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Small businesses aren’t just more common in rural America, unfortunately they’re also more challenged. One reason is population stagnation, which is eating away at the supply of customers, employees and educators in rural communities. While the population in rural areas has declined slightly over the last decade, falling 0.6% from 2010 to 2020, the population in urban areas has increased, growing 8.8% during the same 10-year period, according to the U.S. Department of Agriculture’s Economic Research Service.

And then there’s poverty, the myriad impacts of which can impede the formation, growth and survival of small businesses. Although the rural poverty rate is declining, it remains elevated in rural America, reports ERS, which says 15.4% of Americans in rural areas live in poverty compared to 11.9% of Americans in urban areas.

Fortunately, small businesses are hardwired to treat obstacles as opportunities. Although starting and growing a successful small business can be more difficult in rural America, it also can be more impactful. By creating jobs, stimulating innovation and nurturing productivity, small and locally owned businesses can help rural towns and geographies prosper in ways that improve the physical, social and economic well-being of the people who live in them.

To ascertain the state of rural entrepreneurship and raise awareness about the needs of small businesses in rural communities, SCORE researchers asked a large sample of rural business owners how they’re faring in light of current events, what their greatest challenges are, and what can be done to satisfy their needs.

Two categories were examined, how economic anxiety persists and how business owners feel about the post-COVID economy and recovery. They were aske what their biggest challenges are and what solutions they believe will help them prosper.

The second category explored how businesses are hungry for talent and technology. The survey delves into the effects of population trends on small businesses in rural communities and how they impede access to workers and technology, including the technology infrastructure, expertise and education needed to participate in the digital economy.

SCORE analyzed responses from 3,345 individuals, 882 self-identifying as rural entrepreneurs. The businesses represent many industries and geographic locations throughout the United States.

Next week, we'll examine these two parts of the survey.

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Dean Swanson is a volunteer Certified SCORE Mentor and former SCORE chapter chairman, district director and regional vice president for the North West Region.

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