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My first visit to rural America was in 2005, driving along the main road of a small Texas town of roughly 7000 residents called Mexia, towards land that my husband’s family has ranched for generations. Mexia is a large town by relative definition – famously home to the only Walmart in all of Limestone County. The next town over is Tehuacana, Texas, with a population of 283 people.
Less than 20 percent of Americans live in rural areas, but rural areas cover 97 percent of U.S. land mass. Rural areas are defined by the U.S. census as communities with less than 50 000 people. Their populations have steadily shrunk over the last few decades as (most often) younger generations have moved to urban and suburban areas. Rural areas were slower to recover after the 2008 financial crisis and overall see slower growth than their urban counterparts. According to the U.S. census only 17 percent of business operates in rural areas, the majority of business is located in cities. With increases in infrastructure and broadband investment for rural areas, this trend might slowly be shifting. Rural areas are more economically and demographically diverse than ever.
Rural America in Door County, northern Wisconsin
With a shift away from farming and small manufacturing towns, rural communities now support a wide range of jobs, from digital services to advanced manufacturing to recreational tourism. Rural Americans have some of the highest rates of upward economic mobility in the nation, with higher high school graduation rates and higher rates of homeownership, than their urban counterparts. Could ‘keeping it rural’ be a positive trend for small businesses and rural communities alike?
Location, Location, Location
Through Amcham Finland’s Launchpad USA platform we work with many Finnish companies heading into the U.S. market, briefing them, working with them, and walking them through critical decisions like market entry and operational locations. Gone are the days where California and New York were the obvious and perhaps only realistic choices, our successful members have entered and expanded in many other cities and clusters.
Many people assume that if you locate your business in an urban area, like New York or L.A. you are bound to be more successful than others located in more rural areas. At first glance, this might make sense because cities have more consumers, more prospective employees, easier access to business assistance ecosystems, logistic and supply chain infrastructure, and more capital flows through urban areas.
However, locating to an urban environment does come with some drawbacks – significant competition, higher operating costs, and higher taxes. Your dollar revenue could be higher, but your profitability might suffer. The higher your cost line, the lower your profits. Ultimately, to be profitable, you need to run a lean operation. The largest expenses for operating a business in the United States are business insurance, taxes, labor costs, inventory, land/office space, and advertising. All of these costs are lower when you operate in a rural area.
Large companies like Salesforce, Lockheed Martin, and Amazon have all partially relocated their operations to smaller towns. It’s not just big companies that are going rural. According to the 2016 Small Business Credit Survey, a study conducted by twelve federal reserve banks that surveyed 10 303 small businesses (with less than 500 employees), rural small to medium sized businesses tended to be more profitable, with longer survival rates, and an easier time getting financing for scaling operations. In many ways, rural business outperformed urban companies of similar size. They were more likely to be profitable and more likely to break even than their urban counterparts.
With the onset of digitalization and the rapid growth of online businesses, labor force location seems to be less of a factor than ever. Telecommuting and remote work allows rural workers to pursue opportunities far outside of their traditional commuting zone. There is still work being done to ensure that all of rural America has access to broadband internet, and though changes are being made it is still too slow for some communities to benefit from the shifting patterns of employment and new digital industries that need employees.
However, progress is being made, and the rich cultural connection and American history tied to rural areas means that many people are committed to keeping rural America going and helping its businesses to flourish. When it comes to thriving business and economic development, keep your eye on what’s happening in rural America, towns just like Mexia, Texas have a role to play in America’s future economic prosperity.
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Alexandra Pasternak-Jackson
CEO
alexandra@amcham.fi
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