There are several factors and advantages linked to both rural and urban enterprises. Suppose you’re curious about what those are. The below brief guide details how rural and urban businesses differ and whether one is likely to prevail over the other.
Rural and Urban Landscape
To qualify as a rural business, the company must reside in a town with 50,000 or fewer inhabitants.
Rural areas occupy 97% of US soil, and rural businesses glaze the map sparsely. In contrast, urban companies are concentrated in big cities like New York and Los Angeles.
Due to a large and varied labour pool and a wealth of customers to sell products and services, it’s assumed businesses in urban areas are destined for success.
However, it’s essential to remember that urban businesses also face challenges due to their location, such as higher taxes and competition.
Business Growth Rate
Research reveals that rural businesses grow slower than urban companies, yet they are often more profitable in the long run.
For instance, urban companies may reportedly generate slightly more revenue than rural companies. But, they have higher overheads to pay for, such as office space.
Thus, an urban company’s profitability is often lower. And it will take more time for an urban startup to break even compared to a new rural company.
Access to Finance
Some entrepreneurs need to borrow affordable capital to build their businesses.
Surveys show urban companies are more likely to secure business loans than urban businesses. This is something finance and accounting senior consultant Mark Lumsdon Taylor can divulge further on.
SBCS revealed rural businesses were unlikely to face financial issues such as debt payments, buying inventory, and a general shortage of funds.
But rural companies that did apply for finance were more likely to be approved than urban businesses.
Here are a few reasons why;
- Small banks in rural areas have more freedom than large city banks to lend money.
- Rural establishments have better credit scores.
- The slow growth rate of rural businesses means banks have a predictable view of the businesses’ income and expenses for the foreseeable.
Typically businesses located in urban areas offer professional services such as legal and medical services.
In turn, these businesses have to use a significant portion of their revenue to pay for expenses such as high wages and liability insurance.
On the other hand, rural businesses often have fewer costs as most surveyed companies operate in industries with lower expenses, such as retail.
The information throughout this post indicates that rural businesses have slightly more advantages and optimistic expectations than urban businesses. But it’s important to note; small rural companies face challenges too.
For instance, finding talent in rural settings is difficult because there’s a smaller pool of candidates to choose from.
In addition, due to lower revenue, growing the business takes a long time; thus, accomplishing business goals is much more challenging.
Plus, with fewer companies providing similar services or products in a rural setting, finding other business owners, mentors to create connections with is challenging.
In conclusion, considering where to place a business on the map is crucial. But it’s not the only indicator that determines a business’s success.
An entrepreneur’s creativity and perseverance to overcome obstacles associated with urban or rural settings are just as important.