ACHIEVING SCALE

Why Small Towns Are Boons for Small Business

Main Street is enticing in more ways than one, from reversing the brain drain to pleasing local clients.
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With most major companies headquartered in urban hubs such as San Francisco, New York, Boston and Chicago, Main Street is not usually the first place that comes to mind when discussing entrepreneurship. But believe it or not, 63 percent of small business owners say smaller cities are better for small business, according to Rocket Lawyer's most recent Semi-Annual Small Business Index.

Locales like Austin, Virginia Beach, Colorado Springs, San Antonio, Nashville, Dallas-Ft. Worth and Raleigh-Durham are among the best cities for founding and growing small businesses, according to the Thumbtack survey. A few traits touted about these towns are first-class networking, low taxes, minimal regulations, high-quality talent pools, affordable commercial real estate, lower living costs, and availability of federal contracts.

Some of these cities go out of their way to support an entrepreneurial culture as well. Austin's annual South by Southwest festival, for example, shines a spotlight on innovation and the Texas capital city every Spring.

But the regions that are perhaps best known for startups--San Francisco, the Silicon Valley, and New York's Silicon Alley--are conspicuously absent from the list.

A Nerdwallet survey of America's 20 biggest cities found that New York and San Francisco sport positive growth prospects and talented workforces. However, they ultimately prove to be unfriendly to new small businesses due to their higher tax levels and stricter regulations and licensing requirements, which make hiring and compliance more difficult for smaller companies with fewer resources.

What is it about small towns that attracts small businesses?

"There are often more small businesses in a concentrated area that support each other and the community around them," says Lisa Bobulinski, owner of Texas-based LKB ARCHITECTURE. "In return, the community supports these businesses. These business owners understand what it takes to 'make it' and want to see those around them succeed as well."

CorpNet.com CEO Nellie Akalp describes this congregation of small businesses as "a school of little fish [that] team up and swim as one big fish to avoid being eaten." In other words, she says, small businesses are swimming in an ocean that's far more dangerous than ever before.

Small businesses can help each other by paying it forward and referring customers to neighboring businesses. Local groups, such as those hosted through Meetup.com, for example, allow small businesses owners to collaborate and support one another.

Small and mid-size towns also can be attractive because larger cities are more intimidating to small businesses.

"Since more established competitors are found in bigger cities and small businesses, especially those in the startup phase, they aren't always able to compete with them in terms of inventory, price and turnaround time," Bobulinski continues.

Likewise, customer bases in larger cities can be different than their small town counterparts. Sometimes big city customers gravitate toward larger businesses because they value price and speed over quality of services.

But this doesn't mean small/mid-sized towns are for everyone. Before you decide whether to set up shop in a smaller town or a metropolis, here are a few things to consider:

A Better Way to Assess Your Competition

It's important to predict how well you might fare competitively against existing businesses in the city you select. For example, the small town of your choice might already be home to well-established and loved businesses. Alternatively, it may lack a wide variety of options, thus offering you a window of opportunity to meet local cravings for something new. For example, it may be challenging to establish a new pizza restaurant in a community which already has a well-loved pizzeria that's been around for fifteen years. On the other hand, you may strike gold by recognizing a town's demand for fusion cuisine and choosing to open a Thai-Malaysian restaurant.

Local Flavor Wins Customers

A big advantage of launching your business in a smaller metropolitan area is being able to cater to clients within your region. A small commercial painting business, for example, will likely draw most of its clientele from within a certain radius of its homebase. Similarly, if you plan to offer a product or service that appeals to a community's specific heritage, tourism, or regional taste, then basing your operations in that respective region is a natural fit for your business.

Reverse the Brain Drain

Another good reason to start your small business in a comparably small town is the level of business savvy and knowledge that you could bring to a community that may be missing that expertise. Many small towns lack an adequate supply of business and technological aptitude. A good idea for a successful business model is one that targets existing local businesses by providing professional consulting services and skills training that are in demand.

IMAGE: Shutterstock
Last updated: Jan 9, 2014

CHARLEY MOORE | Columnist | Founder & chairman, Rocket Lawyer

Charley Moore is the founder of Rocket Lawyer, the simple and affordable online legal service that is used by millions of businesses, entrepreneurs, lawyers, and individuals for any legal situation, world-wide.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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