Introduction: Successful Rural Businesses
What makes a rural business successful? Are there peculiar characteristics of the rural economy that give it competitive advantages as compared to businesses based in urban areas? Or do rural businesses thrive in spite of their relative distance to markets? Many businesses, particularly the sole proprietorships frequently found in rural areas, appear to have come to their current locations more through accident than design. Yet it is clear that in today's economy, inefficient businesses cannot survive for long. Therefore, one must conclude that some characteristics of rural areas make these businesses viable on the world market. Business survival depends crucially on the following elements:
Information. The business must be able to correctly identify markets for its product, the status of competition, appropriate technology, and manage its assets. Rural areas create special challenges for businesses in information access. With the changes in information technology, barriers to good information in rural areas are dropping rapidly, but many transactions still depend on face-to-face interactions.
Capital. Businesses need cash to purchase new capacity, maintain inventory, and pay employees during times when sales are low. Economists refer to this as capital. Business start-ups and growing businesses have particular issues related to capital. They do not have established lines of credit. Urban areas tend to have more specialized financial personnel, either working for banks or venture capitalists, who are able to assess a new or growing business's ability to pay debt or provide a healthy return to investors. In rural areas, the low volume of this type of financial need translates into fewer institutions able to assess new