By Jennifer Wakeman, CEcD, executive director, DRIVE Economic Development Entity
Small businesses play a vital role in shaping the economic and social fabric of rural communities. Measuring their true impact can be a challenge. Typical metrics such as job creation or capital investment don’t tell the full story. What my colleagues from the National Rural Economic Developers Association (NREDA) and I know is that small businesses are the lifeblood of our economies.
We’ve all seen news stories about the decimation of a rural community when a single large employer faces a downturn. Homes are lost, livelihoods vanish, and families must uproot in search of a new opportunity. Contrast that with local economies that are comprised of many small businesses. Diversification of the employer base creates resilient economies that are equipped to weather the storm in a single industry sector. Further, small businesses often adapt faster than very large employers, making them important to rural communities in times of economic uncertainty and disruption.
Across the United States, small businesses account for nearly half of private-sector jobs and employ more than 60 million Americans. In rural communities specifically, their impact is even greater. Small businesses represent more than half of employment outside metropolitan areas and operate the vast majority of establishments in rural counties. By hiring locally, these businesses circulate wages within the community, supporting households and reducing unemployment.
Beyond job creation, small businesses play a crucial role in sustaining local economies through what economists call the multiplier effect. When residents spend money at locally owned businesses, a larger portion of that revenue stays within the community. Local entrepreneurs often purchase supplies from nearby vendors, hire local contractors and use community banks for financing. This circulation of capital strengthens the economic base of rural towns and encourages further development. In contrast, profits from large national chains are more likely to leave the region and return to corporate headquarters.
Another important impact of small businesses is their role in fostering entrepreneurship and innovation. Rural entrepreneurs frequently identify unique local needs and develop businesses tailored to their communities. For example, a rural town might support a small equipment repair shop, a specialty food producer, or a tourism-based enterprise built around local natural amenities. These businesses create opportunities for residents to build wealth and remain in their communities rather than relocating to urban areas for employment. In many cases, successful small businesses become anchors of local development, attracting visitors and encouraging additional investment.
Small businesses also strengthen the social fabric of rural communities. Local shops, restaurants, and service providers often serve as informal gathering places where residents interact and maintain community ties. Owners are often leaders who serve on non-profit boards, sponsor youth sports, and support the arts and cultural events which improve the quality of life in their communities. It is small business that creates vibrant downtowns, a hallmark of rural America.
While rural economies continue to evolve, the success of small businesses will remain central to sustaining dynamic and resilient communities across the country. NREDA is the primary forum for rural economic developers who want to stay ahead of the curve. Our nationwide network provides education, insight, and solutions that have been tried and tested in the small towns we represent. It takes all of us—business owners, broadband providers, infrastructure partners, resource providers and elected officials—to support and grow the rural communities we call home.