Declining Entrepreneurship in Rural Areas Exacerbates Inequity Between Rural and Urban Economies

CAMEO released an analysis of rural economic development efforts and recommendations for building strong rural small business economies

More small businesses are closing than opening in rural areas, widening the economic gap between our country’s rural and urban areas. That is according to a report released today by CAMEO. The report, the Local Entrepreneurial Ecosystem Toolkit, analyzes the problem and prescribes strategies to build ecosystems that support small business creation.

The report found that in rural communities, small businesses can account for up to 95% of all businesses. However, the policy and advocacy organization Economic Innovation Group says the business startup rate is a full percentage point lower than the closure rate in those areas. Furthermore, employment growth in metropolitan areas has been nearly three times that of rural employment growth since the Great Recession.

America’s 30 million small businesses create jobs and economic vitality in their communities. They account for 99.7% of all employer firms, create 64% of net new jobs, and employ nearly half of all working people. They also account for 46% of all private-sector output. The decline in entrepreneurial activity and inequitable job creation are exacerbating economic inequality between rural and urban areas.

Traditional economic development tools aren’t providing the opportunities needed for rural communities to keep pace with their urban counterparts. Rural policymakers need new approaches to create the conditions that support the formation of new small businesses. These which are key to their communities’ economic success and sustainability.

Heidi Pickman, VP of Programs & Policy

A business ecosystem that works

Javier Zamora, owner of JSM Organics in Watsonville, Calif., is a prime example of an entrepreneur who benefited from a strong small business ecosystem. Such an ecosystem provides access to capital, education, and other resources, allowing Javier to receive funding and find land for his farm through California FarmLink. He also benefited from business advising from Agriculture and Land-Based Training Association (ALBA) and Kitchen Table Advisors. 

“FarmLink staff have been really good supporters and key to my success,” said Zamora. “ALBA gave me so many tools.  Different government agencies would come out and tell us about their programs. All those have become part of my network,” Zamora said. 

The report outlines strategies to develop strong local entrepreneurial ecosystems. These will ensure that entrepreneurs have access to business and management skills training, small-dollar loans, and access to markets. They also champion policies that support entrepreneurship, otherwise known as the five Cs – Coaching, Capital, Connections, Culture, and Climate. Steps to building such an ecosystem include: 

  • Assessing a region’s existing training and capital resources
  • Recruiting successful business owners to mentor start-ups
  • Partnering with banks and other lenders to make affordable loan products accessible
  • Ensuring broadband is strong and easily available—through subsidization if necessary

If rural economic development efforts support a healthy local entrepreneurial ecosystem, the result will be a strong and diversified infrastructure of many small, locally-owned businesses. This will be a major source of job creation, economic stability, and community success.

Heidi Pickman