Data from the last population census, held in 2000, showed that just under a fifth of the people in the U.S.
(slightly over 55 million people) lived in rural areas defined as areas outside urbanized places—counties with a population of 50,000 or fewer—and the suburbs, if any, that surround them. Thus “rural,” in the official definition, which is set by the U.S. Office of Management and Budget, means small towns and the countryside beyond these. Consequently, rural businesses are all those located in small towns and along the highways of the country well outside the metro centers.
Until 1920, a cross-over year, more people lived in rural areas than in cities. For city dwellers fighting commutes, bureaucracy, crowding, decay and bigness, life out on the farm or in small towns carries an aura of romance and of nostalgia. Traditional American value systems were shaped by our rural past and are in the process of transformation. In reflection of public sentiment, substantial efforts continue to be made by the federal and state governments to preserve the family farm and to foster life in rural areas by various support programs. For these reasons, perhaps, a certain sentimental flavor attaches to rural business activity—which happens not to be shared by the people actually engaged in such activities. For them the old adage still applies: business is business.
Rural business, in other words, encompasses exactly the same types of activities as business in general, although there are some important differences. Rural areas are the location of agricultural and mining activities— despite the very rare oil well still pumping in a big city here and there and the occasional suburban orchards. These two activities in 2005, measured by value added, represented 3 percent of Gross Domestic Product and 2 percent of total full-time employment. Agriculture, in this context, includes forestry, animal husbandry, and fishing—and, in addition to the output and employment already mentioned often also employ additional people in first-stage processing in rural settings. Mining includes, along with metals and minerals, oil and gas extraction, including some refining and certain transportation services located in rural areas such as pipeline compressor and pumping stations.
The distribution of farming products has also produced a unique form of institution, the farmers’ cooperative. The most recent data on this institutional form, from the U.S. Department of Agriculture (USDA), indicates that 3,086 cooperatives were in operation in 2003, made up of 2.8 million members (a number greater than farms in operation), employing 165,000 full time and 62,000 part time workers.
In addition to the important sectors of agriculture and mining—which are more or less monopolized by rural areas, employ a lot of people, and together represent a large number of small businesses—rural areas also have a high share of tourism. Rural areas house travel service businesses in large number. Found in rural areas are most ski resorts, all dude ranches. Rural hospitality businesses attract hunting and fishing enthusiasts, hold snowmobile, bicycle, and other races, and operate many small hotels, restaurants, and bars.
Finally, rural areas also have every other type of activity present in major cities except those most specialized (like stock exchanges, research hospitals, etc.), including manufacturing operations of the most sophisticated character.
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In the U.S. as a whole, total company counts indicate that roughly 98 percent of 5.8 million companies, not counting farms, were small business. The same proportion must hold for rural businesses as well. No data breaking down businesses by rural or urban locations are available, but assuming that small businesses are distributed based on population, about 1.1 million small businesses operate in rural areas, including small towns.
In 2004, using data from USDA, published in the Statistical Abstract of the United States, some 2.1 million farms were also operating in the United States. Of these, 84 percent were farms under 500 acres—thus, in terms of business size, they were small farms. Given these estimates, small commercial operations appear to be more numerous in rural areas than in urban areas.
Small Business Influx Demographic trends show that population growth has been highest in suburban areas (1.57 percent a year, 1970 to 2000) and lowest in central cities (0.57 percent), rural areas (with a growth of 0.83 percent a year) lag metro areas as a whole (1.16 percent).
There is, however, a contrarian flow of small business enterprise out of cities and suburbs to rural places as individuals fed up with corporate life migrate out of congestion into the countryside. The evidence for this is anecdotal but apparently real. This shift is driven, in part, by corporate downsizing that provides an impulse to many to establish their own businesses. The Internet is another contributing factor because it enables people to set up many of those new businesses wherever they’d like.
For a service business that uses the Internet to communicate and coordinate with suppliers and customers, location of its physical premises is a matter of less concern than for a goods producing business. Many small businesses that exit the urban arena physically still service clients in the cities. Also influential in this shift towards rural areas has been the plethora of government programs that offer financial support to those willing to set up businesses in rural areas. These programs are part of efforts to foster rural development.
Government Subsidies In Fiscal Year 2005, for instance, the USDA oversaw the distribution of $821 million in support of 12,000 businesses. These funds either created or saved nearly 74,000 jobs. Eight major programs were supported and of these the one that impacted the greatest number of companies, nearly 11,000, was one offering rural business enterprise grants intended to start things up. Other categories were loan guarantees, opportunity grants, relending programs, development loans, development grants, renewal energy loans, and renewal energy grants.
Trends emerging in the mid-2000s suggest that the environment for business in rural areas will at least continue to be favorable and likely improve for four reasons: 1) rising energy costs will increase renewable energy initiatives; 2) Internet-based communications are making working from remote locations ever easier; 3) continued outsourcing activities will favor dispersal of professional work from dense urban centers; and 4) security issues may result in relocation of activities to rural areas where they will require new services. The individual or couple pondering a future in the country—or a small business thinking of relocation to or expanding in rural areas— will thus have opportunities to ponder. And the means may be there, using government help, to get start-up capital as well.