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TheStreet Open House

How Small Towns Can Grow Small Businesses

CHICAGO (MainStreet) -- There are plenty of positives to being a small business in a large pond. Start-ups that launch in or near big cities can market themselves to millions of potential customers, join networks of like-minded business owners and take advantage of training and mentoring programs run by local community colleges and professional associations.  

A business that starts up in rural America, on the other hand, would seem to face larger hurdles to success. They don't have access to the same kind of customer base, for one thing, and they have far fewer opportunities for peer-to-peer camaraderie.  

But that doesn't mean the large stretch of the United States between the East and West coasts lacks entrepreneurial drive. In fact, a study commissioned by the Small Business Administration in 2008 (pre-downturn) found that rates of business openings and closings were nearly the same for rural, suburban and urban areas.  

In summary: Americans who live away from urban centers are just as likely to start businesses as their big-city counterparts.    

But they've been just as hard-hit by the slowdown in the U.S. economy. And when it comes to getting a helping hand, rural small-business owners are often overlooked, as programs such as Goldman Sachs' (GS) 10,000 Small Businesses focus their outreach in major cities.  

Across the country, though, nonprofits and community groups are promoting rural entrepreneurship through a variety of programs. Last week, the U.S. Department of Agriculture announced grants to 41 organizations for job training and business development in rural areas. The Iowa Economic Development Authority got $200,000 to help restore and revitalize downtown commercial districts in small towns; another $200,000 grant went to a California group to provide training for Native American tribes interested in developing forest-related businesses.  

One model of development, known as Enterprise Facilitation, has been tested in a few different states that have been losing population in rural counties. The collaborative, community-based program harkens back to the pioneer-era spirit of barn raising: a single person can start a business, but it will grow and prosper only by drawing on the skills and effort of a supportive group.  

In the Enterprise Facilitation system, a staff facilitator gives confidential, free mentoring to anyone interested in starting their own business; a board of local business leaders also meets monthly to offer their own assistance, whether it's an introduction to a supplier or advice on getting financing.  

The Enterprise Facilitation model can deliver impressive results. Between 2003 and 2011, the Northeast Kansas Enterprise Facilitation group helped 52 businesses get off the ground and helped in the expansion of 17 more. The Southeast Enterprise Facilitation Project in South Dakota has helped 56 businesses open since it began in 2003. (Encouragingly enough, the number of businesses has grown each year, despite the economic circumstances.)  

The nonprofit Center for Rural Affairs, based in Nebraska, has been at the forefront of rural economic development issues. Although much of its work has been focused on farming, the center's staff has also advocates for more microlending to rural entrepreneurs and has lobbied for changes in various Congressional farm bills to help fund business-related projects. One of its programs, the Rural Enterprise Assistance Project provides advice, management training and microloans to Nebraska-based businesses with five or fewer employees.  

Initiatives that focus on the economic development of a whole town or county can also be an important way to drive rural entrepreneurship. Such programs have been especially successful in the tourism sector. While a small town may not be able to attract visitors to its single covered bridge, a regional collaboration that promotes a covered-bridge driving tour can draw visitors from other states. Those visitors spend money on meals, bed-and-breakfasts and souvenirs, supporting businesses that couldn't turn a profit if they were based solely on their local customer base.  

People who choose to live in the country may value the wide-open vistas and uncrowded roads. But they also know the value of community. Local support and collaboration is small-town America's secret weapon when it comes to business creation. Now it's time to get the word out that entrepreneurship can thrive beyond the country's big urban centers.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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