In the wake of the pandemic, new solutions are needed to help bolster entrepreneurship in rural areas and prevent further economic decline. Data from the USDA-ERS shows that average employment rates across rural communities with populations of less than 50,000 have stayed below the levels seen prior to the 2008 Financial Crisis. Between 2008 and 2017, the employment rate has remained 2% lower than it was in 2007. As of August 2020, there were 800,000 fewer jobs in rural America than in 2019.
Rural America has traditionally been a leader in entrepreneurship, with consistently higher rates of self-employment than cities and suburbs. However, the overall rates of entrepreneurship in rural counties have not increased as swiftly since the 2008 recession compared to more densely populated areas. A lack of access to talent, capital, and networks have stunted the growth of rural entrepreneurship.
As rural leaders look to address these challenges, traditional economic development strategies such as incentives to attract businesses may not be sufficient. Few policymakers realize that traditional efforts to recruit large businesses to rural areas often come at a high cost and fail to produce the desired results. Locally owned businesses, in contrast to satellite offices or factories, generate value in the community as they source most of their staff, goods, and services from the people and businesses closest to them. According to one study by Civic Economics, local retailers return 52 percent of their profits to their community, compared to just 14 percent by national chain retailers. Local restaurants returned 79 percent of their revenue locally, compared to just 30 percent for chain eateries.
Talent Acquisition Case Study: Jenny & Al Doan, Missouri Star Quilt Co.
The Doan family started Missouri Star Quilt Co. after they lost most of their retirement savings in the 2008 market crash. They started in their hometown of Hamilton, Missouri, a small town with a population of only 1,500. Realizing brick and mortar would not generate enough revenue, the family switched to e-commerce by selling pre-cut pieces of complementary fabric to make it easy for anyone to make a good-looking quilt. As their operations grew to employ over 400 people, 80 percent of them based in Hamilton, finding talent has become a constant struggle. “I spend a lot of my time recruiting. We also have a severe shortage in temp labor, so we have to employ every high schooler in the area.” says Alan Doan. While finding talent is difficult, rural entrepreneurs reported that retaining talent is easier. Entrepreneurs provide highly skilled people who are looking to move back home with opportunities to do so and retain their career paths. Others entice workers by removing the commute time and having them work locally instead of in a city an hour away. The Doan family intends to stay in Hamilton for at least the next 15 years, “It’s small, simple, good people. Without the town, we’re just another warehouse on the internet.”
Accessing Capital Case Study: Jonathan Webb, AppHarvest
Jonathan Webb founded agtech company AppHarvest to make food production more sustainable and bring jobs to Appalachia. Being brought up in Lexington, Kentucky, Webb knew the Appalachian region had a strategic advantage in its central location in the U.S. “Coal was successful because 70 percent of the United States is within a day’s drive of Appalachia,” says Webb. Utilizing this knowledge he could deliver sustainably grown food to the East Coast, Midwest, and Southeast quickly and inexpensively. Despite the viability of his agtech, finding investors was still a challenge. “I forced myself into rooms, snuck into office buildings, anything to make connections,” Webb recalls. He had to go beyond the local network of his headquarters in Herald, Kentucky to receive funding. This process was aided by the support of the mayor and state representatives. To ensure that AppHarvest continued receiving support outside of the local network, Jonathan Webb joined the Endeavor network in 2019. Since then, AppHarvest has since gone public with an initial market value of roughly $1 billion and created 300 permanent jobs.
Network Building Case Study: Shelly & Mark Wilson, Chime Solutions
Shelly and Mark Wilson founded Chime Solutions in their home state of Georgia with the desire to create opportunities in their local community. Their main challenge was finding networks to reach talent. A challenge that local officials have been found to be extremely valuable in addressing. Interview data from Endeavor Insight shows that entrepreneurs in rural areas have more immediate access to local decision makers compared to urban counterparts. They are more likely to receive invitations to individual or small group meetings with their mayor or city council members to discuss entrepreneurship. Shelly Wilson attributes a lot of the business’ success to their location and within six months they had already scaled to over 50 employees. “We came to create jobs. Being outside the urban area has allowed us to pull from a completely different workforce.” Chime Solutions now employs nearly 1,000 people with operations expanding to Texas and North Carolina.
Supporting Florida’s Rural Entrepreneurs
The case studies above showcase entrepreneurs reaching out to networks beyond their local communities to grow their businesses within those same communities. Instead of waiting for local entrepreneurs to reach out to external networks, entrepreneurial support organizations should build connections with local and state officials to make the network building process more efficient. This streamlines access to talent and capital by having a network of educational institutions and investor groups ready to support entrepreneurs that are often isolated due to the relatively small size of local networks. In the same vein, entrepreneurs can connect with mentors that they otherwise would not have access to. In fact, Endeavor Insight findings show that rural founders who scaled their companies to 50 or more employees were 80 percent more likely to have mentors who were successful entrepreneurs themselves. According to the Rural Health Information Hub, approximately 2 million people or 10% of Florida’s population is considered rural. By making an active effort to find and support these entrepreneurs, support organizations in Florida can minimize or circumvent these three key barriers for successful rural entrepreneurship.
Research for this blog post can be found on Endeavor’s Insight Report, “Rural Entrepreneurship in the United States”. Additional reporting provided by Endeavor staff member Eric Marroquin.