Posted by: Richie Bernardo

1. Main Findings
2. Ask the Experts
3. Methodology

Main Findings

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Ask the Experts < >

• Michael R. Burcham Senior Lecturer of Entrepreneurship in the Owen Graduate School of Management at Vanderbilt University
• Chuck Sacco Assistant Dean of Strategic Initiatives in the Charles D. Close School of Entrepreneurship, and Director of the Baiada Institute for Entrepreneurship at Drexel University
• Lisa Gundry Professor of Management & Entrepreneurship, and Director of the Center for Creativity & Innovation at DePaul University, Driehaus School of Business
• Steven W. Bradley Associate Professor of Entrepreneurship in the Hankamer School of Business, and Faculty Director of the Baugh Center for Entrepreneurship at Baylor University
• Johannes Moenius The William R. and S. Sue Johnson Endowed Chair of Spatial Economic Analysis and Regional Planning, and Director of the Institute for Spatial Economic Analysis in the School of Business at University of Redlands
• Randy Berridge President of the Florida High Tech Corridor Council
• Dave Mawhinney Co-Founder and Director of the Center for Innovation and Entrepreneurship, at the Carnegie Mellon University, Tepper School of Business
• Tony Wasserman Professor of Software Management Practice, and Executive Director of the Center for Open Source Investigation at Carnegie Mellon University
• Shawn M. Clark Clinical Professor of Innovation and Entrepreneurship in the Smeal College of Business at Pennsylvania State University
• Ted D. Zoller Director of the Center for Entrepreneurial Studies and T.W. Lewis Associate Professor in the Kenan-Flagler Business School at University of North Carolina at Chapel Hill
• Trayan Kushev Assistant Professor of Entrepreneurship, Management & Human Resources in the College of Business Administration at California State Polytechnic University, Pomona
• Gregory Crawford Vice President, Associate Provost and Professor of Physics at University of Notre Dame
• Birton J. Cowden Associate Director of the Berthiaume Center for Entrepreneurship in the Isenberg School of Management at University of Massachusetts Amherst
• Kati Suominen Assistant Adjunct Professor in the Anderson School of Management at University of California, Los Angeles, and Adjunct Fellow at the Center for Strategic and International Studies
• Dima Leshchinskii Assistant Professor of Finance at Menlo College
• Alexandra Kostakis Assistant Professor of Entrepreneurial Practice in the Martin J. Whitman School of Management at Syracuse University
• Erick Mueller Senior Instructor and Director of Entrepreneurial Initiatives in the Deming Center for Entrepreneurship at University of Colorado
• Moriah Meyskens Clinical Professor of Management at University of San Diego School of Business Administration
• John Danner Senior Fellow in the Lester Center for Entrepreneurship at University of California, Berkeley
• James Stapleton Entrepreneur, Customer Development Expert, Digital Marketer, Nationally Recognized Startup Coach, and Associate Professor of Entrepreneurship at Southeast Missouri State University
• Brian Hollar Assistant Professor of Accounting, Economics & Finance at Marymount University
• John Bennett Assistant Professor of Management in the Donald R. Tapia School of Business at Saint Leo University
• Mercedes Delgado Visiting Associate Professor of Technological Innovation, Entrepreneurship, and Strategic Management at the MIT Sloan School of Management
• Briana Sell Stenard Assistant Professor of Management and Entrepreneurship in the Stetson School of Business and Economics at Mercer University
• Yas Motoyama Director of Research and Policy at Ewing Marion Kauffman Foundation
• Thomas N. Duening El Pomar Chair for Business & Entrepreneurship, and Director of the Center for Entrepreneurship at University of Colorado Colorado Springs
• Bruce McDaniel Professor of Economics and Sam M. Walton Fellow at the University of Northern Colorado

Michael R. Burcham Senior Lecturer of Entrepreneurship in the Owen Graduate School of Management at Vanderbilt University What are the pros and cons of starting a business in a small city? Pros:

1. You likely know your know your partners and customers (assuming you’re using local legal counsel, etc.);
2. Smaller communities tend to be very supportive of one another - even in business;
3. Costs are typically lower.

Cons:

1. Challenges with technology - broadband, etc.;
2. Logistics and transportation - access to airport, etc.;
3. Size of a talented workforce is often a challenge - especially if you need programmers, engineers, etc.;
4. Access to capital - funders (investment firms) tend to be in larger cities and want their investments near them

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? The startups that tend to do better in smaller communities:

1. Agricultural businesses;
2. Light manufacturing;
3. Service businesses (rely on people more than technology).

What tips do you have for an entrepreneur starting a business in a small city?

1. Be sure the workforce you need is really there;
2. Confirm that the broadband, logistics and transportation needs are addressed;
3. Consider whether you will need to recruit folks to move there - if so, what is the quality of life, schools, crime, poverty, etc.;
4. Is this a “welcoming” or “closed” community - often smaller communities are small because they choose to be - and aren’t embracing of outsiders.

What can local authorities do to encourage entrepreneurial activity in their small city? A small city needs to do an assessment of their assets, behaviors and environment to gauge if they can attract startups and entrepreneurs. Startups and entrepreneurs are attracted to cities and town that focus on these areas: Tolerance: Is everyone welcome? Diversity, acceptance of race, ethnicity, religion, sexual orientation. Creative people are drawn to other creative souls - and require a more progressively minded city to thrive. Technology: Is there good broadband? Talent: Is there a technical school or community college nearby that offers courses in programming, etc.? Is there a talent pool? Topography - focus on the arts, on safety, the environment: Is this an interesting place - with visual arts / artists? Is it a safe city? Is it clean? Does it have a “vibe” that attracts talent: coffee shops, sidewalks, music, green space, etc.? Chuck Sacco Assistant Dean of Strategic Initiatives in the Charles D. Close School of Entrepreneurship, and Director of the Baiada Institute for Entrepreneurship at Drexel University What are the pros and cons of starting a business in a small city? A big advantage of starting a business in a small city is that you can more easily learn about and access the resources that are available to you from private and public sources. In a small city, it will be easier to get to know the best service providers such as lawyers, your banker may likely be someone you know, and you can more easily create a name for yourself (and hopefully get some good local press). Your cost of living will also be substantially lower than a larger city which will be very helpful to your early cash flow. There are some significant disadvantages however. These include a lack of a strong entrepreneurial support network, limited financial assistance resources and potential difficulty in finding skilled co-founders or key employees. Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? Startups of all types can get launched in smaller cities today because of technology accessibility. An entrepreneur doesn’t anymore need to be locked into the traditional local business startup such as a restaurant or a retail shop. For example, a small city entrepreneur could launch a niche e-commerce site focused on products the city is known for and then expand nationally using search and social media marketing. Anyone can start a technology-related business anywhere and small cities are a great place to get started. What tips do you have for an entrepreneur starting a business in a small city? It’s important to leverage the history, geography and culture of a small city. This is especially true if you are trying to launch a product or service that the city is known for and has a great reputation. It’s also important to build your “virtual network” which means that you leverage technology to build your network outside of your region. You can join this by joining online groups and forums, hosting virtual chat sessions and, of course, having a great web presence. What can local authorities do to encourage entrepreneurial activity in their small city? The public sector should consider policies that encourage entrepreneurs to make their home in their city as opposed to going elsewhere. For example, I have seen small cities very actively involved in supporting the development of co-working spaces (where entrepreneurs can work on a part-time or as-needed basis). Cities should also consider creating a website that promotes entrepreneurial activity and highlights the resources available to local entrepreneurs. Lisa Gundry Professor of Management & Entrepreneurship, and Director of the Center for Creativity & Innovation at DePaul University, Driehaus School of Business What are the pros and cons of starting a business in a small city? Launching a business is a significant undertaking, and relies on many attributes, including personal commitment, tremendous effort and the ability to connect with individuals and other businesses to develop customers and acquire resources. Among the many benefits of residing in a small city are the opportunities to meet and get to know more people in the business community and to build lasting relationships. It's not necessarily the large size of a network that matters most, but the depth of relationships that business owners are able to develop within a smaller pool. Additionally, small cities are easier to navigate. However, a small city may have a limited number of clients/customers, or potential employees, within its geographical area. This may be more relevant to businesses that do not sell products or services online. Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? Success depends more on how well the entrepreneur understands the needs of customers and responds to them innovatively than on starting a specific type of business. Developing a strong customer base can be done in any location. Moreover, technology has enabled many businesses to operate anywhere, conducting business around the world from any size city. What tips do you have for an entrepreneur starting a business in a small city? Cultivate relationships. Join organizations and get involved in your chamber of commerce, local small business groups and community events. This is a great way to get to know people in your city, to find potential customers and to form potential partnerships with individuals and other businesses that can be vital to growth. What can local authorities do to encourage entrepreneurial activity in their small city? Supporting the formation of business networks and alliances with nearby community colleges and universities for help in business planning are good steps to take. Assisting entrepreneurs as they navigate the start-up process, including fundamentals such as the licensing process, local regulations and how to find help getting started, are all key ways that city leaders and authorities can stimulate entrepreneurship in their city. Steven W. Bradley Associate Professor of Entrepreneurship in the Hankamer School of Business, and Faculty Director of the Baugh Center for Entrepreneurship at Baylor University What are the pros and cons of starting a business in a small city? The pros of starting a business in a small city are lower entry costs, easier assessment of market competition and the personal benefits of reduced living costs, often better/safer schools, and reduced traffic congestion. The cons are a limited market size if selling locally, finding qualified employees and proximity to suppliers. Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? Smaller cities can offer opportunities in retail and service businesses for start-up entrepreneurs because there may not be the economies of scale to attract competition from larger retailers. Ultimately, the opportunities available are still determined by the city demographics, location and growth. For example, Waco, Texas is along the Interstate 35 corridor between Dallas and Austin. Waco also has Baylor University, a community and a technical college for a labor pool. The diversity of the area and its location creates a need for a greater variety of retailers at the high and low end of the market that meet the needs of students and local community. The lower costs and availability of land has attracted companies like the SpaceX testing facility that could never be located in an urban area. This has brought many new highly skilled jobs to the area that spills over into greater needs for retail businesses and services. What tips do you have for an entrepreneur starting a business in a small city? Do your homework and pay attention to the city demographics, location and growth. The biggest mistake entrepreneurs make is confusing their passion say, for opening a bakery, with market need. Is the small city growing and located near an urban area? Is the city in a rural area with slower growth? I would pay attention to whether the population tends to buy locally or drive to more metropolitan areas. Even in rural areas, the internet also provides potential competition for products you might sell. What can local authorities do to encourage entrepreneurial activity in their small city? Small cities should keep taxes and regulation lower than nearby urban areas to attract businesses. According to the NFIB, these are the top two concerns of small business owners. Waco has had the good fortune of having “Fixer Upper,” one of the most popular shows on HGTV filmed in Waco. When the show’s stars, Chip and Joanna Gaines, wanted to expand their company facilities in downtown Waco to an abandoned granary with silos, the city was flexible in their permitting, allowing them to keep the older silos as a landmark in the downtown area. Visitors are now coming to Waco from across the country creating opportunities for other businesses to develop nearby. Cities can build off of their strengths – location, cost, amenities and currently successful companies to attract other businesses. Our research has not found that business parks or incubators are particularly effective strategies for development. Johannes Moenius The William R. and S. Sue Johnson Endowed Chair of Spatial Economic Analysis and Regional Planning, and Director of the Institute for Spatial Economic Analysis in the School of Business at University of Redlands What are the pros and cons of starting a business in a small city? First, I think what the pros and cons are really depends on the type of business you intend to start. So here are some general notions: Pros:

• sense of community: easy access to authorities, smaller circles, tightly knit networks;
• short distances;
• lower costs (e.g., rentals);
• simple competitor analysis;
• finding local customers.

Cons:

• harder access to specialized labor, specialized services, and specialized networks;
• potentially smaller market size (e.g., for local services) than in a large city;
• finding the right support network for what you plan to do;
• access to venture capital.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? Smaller cities, generally, have all the infrastructure needed to set up a standard business, such as a retail store or restaurant, and many of the pros that I listed under your previous question play in favor of standard businesses in small cities. So you may think that a tech startup can only do well in a larger city. I'm not quite sure about that - I think it really depends. For example, in our own endeavors we work a lot with geographic information systems (GIS). We chose to go down this route since the most prominent supplier of GIS software (ESRI) happens to share a ZIP Code with us. As a result, we get all the specific technical input we need. Another example is the Coachella Valley, way outside of big cities in the high desert in Southern California: they have an active entrepreneurial community which was able to attract middle tech and high tech companies thanks to a highly active nonprofit economic development organization, the Coachella Valley Economic Partnership (CVEP). What tips do you have for an entrepreneur starting a business in a small city? Do something that stirs your soul, not only something that makes money. Get connected, find out who the key players are that are relevant for your endeavor and can help you along. For tech startups, make sure that all the resources that you need are available within your reach. Use the Internet to extend your reach — for example, the right web developer for you may not necessarily need to be within driving distance. Find a lawyer who has experience with startups – go talk to her from day one. What can local authorities do to encourage entrepreneurial activity in their small city? Get involved into the networks of the local business / entrepreneurial community. Listen to their needs, find out about the biggest hindrances. Find out who your peers are — at our institute we help small economic agglomerations identify their peers and understand what their strengths as an economic region are, relative to their peers. Allow for flexibility in terms of where companies can open businesses: our own research has shown that small economic agglomerations with high location flexibility had substantially higher job growth than those without. Randy Berridge President of the Florida High Tech Corridor Council What are the pros and cons of starting a business in a small city? In today’s economy, it is hardly a matter of whether you are in a small or large community.  Thanks to services like the Florida Virtual Entrepreneur Center for instance, our region’s entrepreneurs are building thriving businesses in towns as small as Debary and Plant City and as large as Tampa and Orlando. The Virtual Entrepreneur Center gives the access to a wealth of tools, information resources and a social media platform just for entrepreneurs that makes place less important than personal drive, curiosity and commitment. Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? We’ve long held that he who wins at workforce development wins at economic development, so the most important factor – especially for tech companies – is the availability of knowledgeable workers. Across the Florida High Tech Corridor, we’re fortunate that Florida’s outstanding universities and one of the nation’s most sophisticated state and community college systems provide education and career training easily accessible throughout the region. What tips do you have for an entrepreneur starting a business in a small city? Connect with other entrepreneurs and look to your colleges and universities for insight, guidance and partnerships. For instance, The Corridor’s signature initiative – our Matching Grants Research Program – has helped hundreds of companies large and small with applied research assistance that for many is equivalent to having an angel investor at their back. What can local authorities do to encourage entrepreneurial activity in their small city? Our experience with incubator programs in partnership with city and county governments across our 23-county region has been tremendously successful.  In our case, the three universities that created The Corridor initiative – the University of Central Florida, the University of South Florida and the University of Florida – operate some of the most highly-regarded incubator networks in the country… providing nurturing environments on their campuses, as well as satellite facilities in cities, large and small, across the region. Dave Mawhinney Co-Founder and Director of the Center for Innovation and Entrepreneurship, at the Carnegie Mellon University, Tepper School of Business What are the pros and cons of starting a business in a small city? We always say, "Pittsburgh has the feel of a small city with the amenities of a major league city - great arts, universities, major league sports, but most important - a reasonable cost of living." Building tech teams in Pittsburgh is much more affordable and the team members are much more loyal than in places like Silicon Valley and New York. We still have the challenge of having enough capital. Our best companies always get funded, but very promising companies, that still have some risk reduction ahead of them, sometimes struggle to raise capital. This is not the case in Silicon Valley. Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? Pittsburgh is very good at companies solving problems that need deep technical solutions. We are the best robotics ecosystem on the planet with successful companies like 4Moms (consumer robots for infants), Blue Belt Technologies (surgical robots) and Aesynt (pharmacy robots). Uber, Google, Disney and Apple have all set up shop in Pittsburgh because of access to the amazing talent at Carnegie Mellon. This has contributed to an ecosystem that is attracting the highest rate of talent under 30 years old in the nation, per capita. This, in turn, leads to a vibrant opportunity for small retail businesses - Pittsburgh is now lauded for having a great restaurant scene in developing neighborhoods like East Liberty and Lawrenceville. What tips do you have for an entrepreneur starting a business in a small city? It all starts with the customer - she/he is Queen/King! Pittsburgh is a very supportive startup ecosystem. Entrepreneurs should network and give back to the community. That will lead to great introductions to both customers and investors. Carnegie Mellon has an international network of entrepreneurs and we encourage our alumni to be customers, suppliers, mentors and investors in each other’s businesses. What can local authorities do to encourage entrepreneurial activity in their small city? Our universities are very supportive of startups - Carnegie Mellon spins out between 30 and 40 startups each year. The state of Pennsylvania has a great seed investment program called the Ben Franklin Technology Partners. In Pittsburgh, they are called Innovation Works and have two world-ranked accelerators - AlphaLab (for software) and AlphaLab Gear (for physical products). Pittsburgh's foundation community - McCune, Hillman, Mellon and Heinz Foundations - have all supported economic development and our transition from Steeltown, USA to a diversified economy based on innovation. We are very fortunate that all corners of the community in Pittsburgh pitch-in to support the startup community. Tony Wasserman Professor of Software Management Practice, and Executive Director of the Center for Open Source Investigation at Carnegie Mellon University What tips do you have for an entrepreneur starting a business in a small city? 1) Be clear about what you are trying to accomplish and understand your target customer. Are you trying to address a worldwide audience of young men with a mobile app that can be accessed from anywhere? Or are you trying to attract "soccer moms", i.e., female parents of school-age children, to shop in your physical storefront? Obviously, these two cases require rather different skills for the entrepreneur and his or her team. 2) Before you do much of anything, do a self-assessment to see if you have the available time, resources, and the entrepreneurial qualities that are needed to build a successful business. Many people underestimate how much effort is needed to be successful, the amount of money they will need to get started, the cooperation of family members, and the selling skills needed to acquire customers. Starting a business isn't for everyone, and many businesses fail because the founder doesn't have the right temperament for a business that can be a 24/7 commitment or lacks the financial resources needed to start and grow the business. Startups are often very stressful for personal relationships, and the founder's family must be supportive of the idea. 3) In a small town, it may be difficult to hire employees with the skills that are needed, and it may also be difficult to recruit people from elsewhere to fill key positions. Having to dismiss people is extremely hard, especially in a setting where everyone knows everyone else. At the same time, you can't settle for hiring someone just because he or she is a friend. Those situations do not end well, either for the business or the personal relationship. 4) Spend extra time to understand the "pain points" of your potential customers. That means getting out of your home or office and talking to people. Maybe you think that your city could use a vegan restaurant or a service to help the city's seniors learn modern technology. Don't just go on a hunch, but go out and interview people without getting too specific about your idea. Then you will see if there may be some demand for a product or service based on your idea. In general, you can't force your idea on people (though we can make an exception for Steve Jobs). 5) Spend time thinking about the market for your product. How big is the market in terms of the number of potential customers? If you are entering an existing market, who are the current and likely future competitors? As an example, ask yourself if your city needs a fourth mid-priced Thai restaurant. Check out the competition. If you are considering a retail business, make sure to include online businesses, which are grabbing increasing market share in almost every product category through low prices and rapid order fulfillment. There's a reason why bookstores have almost disappeared. 6) Beyond that, think about PEST and SWOT. PEST (Political, Economic, Social, Technical) analysis looks at the broad forces affecting businesses in general. If your city is in a financially depressed area, fewer people will have resources for additional spending. If the overall economy is getting worse, you must factor that into your planning. For example, it may be harder to get financing for your business. Technical forces often lead to creative disruption where a product category changes quickly because of technical advances -- think, for example, about the impact of Netflix video streaming on traditional video stores. Sayonara, Blockbuster. SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis asks you to look objectively at your potential business. Can you mitigate the potential threats and offset the weaknesses? Do you have significant strengths and a worthwhile business opportunity? If the weaknesses outweigh the strengths, which is often the case for small startups, what is needed to overcome those weaknesses? Maybe it's an innovative product, maybe it's an effective marketing campaign. Addressing these 6 categories may seem like a lot of work. Indeed, it *is* a lot of work, but it's nothing compared to the amount of work needed to create and grow the business and it's a good way to rule out business ideas that are unlikely to succeed. In many situations, this analytic process leads to an adjustment to the original idea, something that is very common in many of today's high tech startups around the world. There are many online resources to help an entrepreneur work through this process, in addition to many local groups in big cities and small, where entrepreneurs can meet with one another to share experiences and ideas. Shawn M. Clark Clinical Professor of Innovation and Entrepreneurship in the Smeal College of Business at Pennsylvania State University What are the pros and cons of starting a business in a small city? Pros: Many small cities are hungry for business development to promote economic development and rebound from serious economic decline. The state of Pennsylvania, for example, has a long history of economic prosperity based on the former successes of old industries such as steel manufacturing, coal production, lumber, and railroad transportation. These industries have faded in recent years, so many small communities are turning to new ventures in business in hopes of restoring some level of economic prosperity. The social networks associated with a small city tend to be tightly coupled, trust-based, and familiar to local entrepreneurs, enabling them to navigate, form relationships, and find the human resources they need to be successful in a new business venture. Cons: A startup business may lack the critical mass for some customer segments in a small town, if the new product or service of a startup is tied to geographic location. This, of course, would not be true for cloud-based technology solutions and other business models operating independently of physical location. Small cities tend to have highly cohesive, and, in some cases, entrenched city councils that may push back on investments and entrepreneurial activities that change the status quo. It may be more challenging to attract angel and venture capital investment if you are entrepreneur based in a small town. Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? Successful entrepreneurs learn how to capitalize on the distinctive features and capabilities of the small communities to which they belong, in order to attract customers. If the city is home to natural wonders, such as canyons, rivers, and streams for fishing, rafting, and water sports, then new ventures may be shaped around those resources. Other entrepreneurs may wish to capitalize on the historical value of their community and attract tourists to that place to explore the past. Museums fill this role. Also, small town may foster cooperation and collaboration among artists, technologists, and others to form small businesses that specialize. What tips do you have for an entrepreneur starting a business in a small city? In my opinion, entrepreneurs starting a business in a small city should seek to build bridges between the old and the new. For example, I spoke with a young student entrepreneur at my university last night who is partnering with an established businessman, living in a small city, to launch a new clothing store for young people. The student brings fresh ideas, tech savviness, and a sense of fashion to the new venture. His partner, on the other hand, brings maturity, experience, an understanding of business fundamentals, is offering real estate in city, and is well connected to individuals on the city council. Each person in the partnership has a strength the other needs. What can local authorities do to encourage entrepreneurial activity in their small city? Provide seed funding to local entrepreneurs. Even small grants of a few thousand dollars can boost the success of an emerging business. Provide regular social events to build a sense of community among entrepreneurs, thus allowing people to learn from each other and support one another along the path of entrepreneurship. These events also become the organic soup where new ventures can begin to take shape. Ideally, you would want people with ideas, management experience, money to invest, legal experience, and an entrepreneurial spirit, to mix in the same space. Chance meetings of the right people, at the right time, can lead to multi-million dollar businesses. Find ways to teach business leaders, politicians, community leaders, and potential entrepreneurs the basic principles of business strategy, which stresses the importance of competitive advantage, innovation, distinctive competence, differentiation, and business model basics. Offering a short, intensive bootcamp on the business model canvas framework would do wonders for small cities seeking to become more entrepreneurial. The business model canvas teaches entrepreneurs the importance of value propositions, customer segmentation, customer relationships, revenue streams, cost structures, and so forth. Ted D. Zoller Director of the Center for Entrepreneurial Studies and T.W. Lewis Associate Professor in the Kenan-Flagler Business School at University of North Carolina at Chapel Hill What are the pros and cons of starting a business in a small city? While the resources of a large metropolitan area offers benefits in capital and talent availability, smaller ecosystems are more cohesive, allowing access to expertise and mentorship from the entrepreneurial network that are more focused on the ventures that are emerging. Smaller communities engender more commitment in building an environment of mutual support that encourages learning. Larger ecosystems often are challenged by competitive labor rates making the startup costs higher, while the cost of startup is considerably lower in emerging regions. Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? There is a general misperception that venture capital availability is the core reason why some regions succeed and other fail in developing a high-performance entrepreneurial ecosystem. While VC often dominates high-growth, technology-based ventures, your typical entrepreneurial venture is not capitalized by venture capital. These ventures rely on angel, strategic or conventional financing. So while venture capital is concentrated primarily on the West Coast and in the Northeast, other entrepreneurial hotspots nationally have proven themselves most capable of developing productive entrepreneurial ecosystems. These include both bricks and mortar and growth ventures alike, both taking advantage of the emergence of the web as a source of advantage. And for this reason, entrepreneurship is becoming democratized throughout the US, and now funding is following this trend. Where there is a good deal, there will always be funding. What tips do you have for an entrepreneur starting a business in a small city? Socialize your venture with the serial entrepreneurs, angel investors and business leaders of your region and actively enlist their mentorship and support. Leverage their expertise and experience to access assistance and capital both locally and connections they have in major markets. Do not hesitate to raise funding outside of your region. What can local authorities do to encourage entrepreneurial activity in their small city? First, celebrate local successful entrepreneurs and bring your entrepreneurial talent together. Second, build competitive concept testing and prototyping grant programs to encourage and support local startups. Third, actively encourage the development of angel groups and b2b networking groups to build your regional entrepreneurial network. Fourth, support and encourage connections to regional co-working and accelerator programs to build a cohesive entrepreneurial community supported with flexible and affordable real estate. Fifth, engage with local large businesses to encourage them to work actively with entrepreneurs in partnership and as channel partners. Sixth, engage your serial entrepreneurial talent and ask them to mentor emerging entrepreneurs and encourage b2b linkages both inside and outside of the region. Trayan Kushev Assistant Professor of Entrepreneurship, Management & Human Resources in the College of Business Administration at California State Polytechnic University, Pomona What are the pros and cons of starting a business in a small city? An essential pro to starting a business in a small town is that it is usually much less costly to do so. Another pro is that the venture may have a higher profile within the small town community which could help it attract the most qualified employees and secure incentives from the local government. Some of the cons, that may not apply to businesses in all industries, are that: 1) there might be limited access to resources that can help the business; 2) finding qualified employees and attracting and retaining them might be more challenging; 3) the growth potential of a business may be capped. Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? I could not say this with certainty. We need more research to establish this. On the one hand, if a business has a strong value proposition, it might benefit from the “small town culture” as word of mouth may travel faster in a small town. On the other hand, however, the size of the customer base in a small town may be too small. What tips do you have for an entrepreneur starting a business in a small city?

1. Find your business model prior to launching. The business model canvas is a useful tool that can help with that.
2. Know your customers - perhaps due to the small town culture, customers may be set in their ways and beliefs and may be reluctant to try products/services that get them out of their comfort zone.
3. Study the local regulations.

What can local authorities do to encourage entrepreneurial activity in their small city?

1. Incentives, incentives, incentives.
2. Create an entrepreneurial culture through networking, workshops, events, etc.

Gregory Crawford Vice President, Associate Provost and Professor of Physics at University of Notre Dame What are the pros and cons of starting a business in a small city? Because there are far fewer startups in smaller cities, the entrepreneur can receive a lot of attention and support while experiencing the satisfaction of making a significant contribution to their community. Community leaders really want small companies to be successful. Those companies are really the big fish in a small pond – your success can be much more impactful in a small city. If you grow the company to, say, 50 or more employees, your neighbors will be deeply grateful – in a big city, such growth would hardly attract attention. On the other hand, a small city, no matter how enthusiastic and helpful, might lack the ecosystem that big cities enjoy. There may be fewer opportunities for funding and entrepreneurial support services such as accountants, lawyers, etc. As the small company grows, you may have less of a talent pool to meet the more sophisticated requirements, so you must find ways to recruit top talent by selling the city’s benefits – top schools for children, low cost of living, high quality of living, supportive community, etc. Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? There’s no one-size-fits-all – different small cities may have very different resources to offer. The Internet provides ways to communicate today with customers, vendors, etc. so those communications are no obstacle. Some small cities may have a rich tradition in manufacturing and machining, and that infrastructure could be very important to some startups. Some small cities are driven by a local college or university whose strengths could be leveraged in business, sciences, engineering, art, humanities, etc. Some small cities could be important historical or political centers that can provide valuable resources and markets to certain startups. What tips do you have for an entrepreneur starting a business in a small city? I would suggest any new entrepreneur spend some time in a very innovative city, even if only a few months. Silicon Valley, Route 128 near Boston, and Austin, Texas, are leading entrepreneurial "hotspots" in the United States. Not everything in those environments can be adapted to a small city, but any entrepreneur can benefit from learning the mindset of successful entrepreneurs – confidence in their ideas, optimism, conviction that failure is a step to success, and passion. Even though the small city may lack the ecosystem, or aspects of the ecosystem like bigger cities enjoy, those entrepreneurial qualities form a culture that is critical for attracting more entrepreneurs and achieving more success. What can local authorities do to encourage entrepreneurial activity in their small city? Local authorities can embrace the virtues that attract entrepreneurs such as passion, optimism, helpfulness, collaboration, and openness. They can tout the successes of their startups, reward startups with resources, and especially provide the encouragement so important for an entrepreneur’s optimism and perseverance. Creative, talented, and innovative people might choose to go anywhere – when they find a culture of support, engagement, and opportunities for meaningful, satisfying impact, they want to establish themselves in such a place. Local authorities might also leverage the community feel and lower cost of living to attract more entrepreneurs to the area. Birton J. Cowden Associate Director of the Berthiaume Center for Entrepreneurship in the Isenberg School of Management at University of Massachusetts Amherst What are the pros and cons of starting a business in a small city? Pros of starting a business in a small city:

1. You are special. There isn't a million of you trying to get into a major city.
2. You can lead the ecosystem. By being one of the few, you have a loader voice for the ecosystem and can drive change.
3. Quality of life. You and your employees can enjoy the lower costs for living and working.

Cons of starting a business in a small city:

1. Volume is lower. Less people potentially means lower volume of sales.
2. Gaps in ecosystem. The entrepreneurial ecosystem may not be fully developed, so there may be gaps in the ecosystem, like investment sources.
3. Lack of infrastructure. Similarly to the above, there may be infrastructural issues, like internet speeds.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? No. The answer to this depends on the focus and strength of the local ecosystem. Many tech startups don't originate in Silicon Valley; Silicon Valley is just good at importing them there when they are investible. So, the answer lies in the strengths of the local environment. For instance, many college towns are seeing a growth in tech startups, while other towns are finding success with the arts. You always need to know you market, but you also have to have an eye on the larger entrepreneurial ecosystem. Even if you don't have a business directly aligned with tech, this allows entrepreneurs to add value as an ancillary provider. For example, I would bet that you will not find a failing brew-pub that is located within walking distance to where the startups are. What tips do you have for an entrepreneur starting a business in a small city? There are many, but in general, know the entrepreneurial ecosystem you are about to enter. What are its strengths and weaknesses? Who are the leaders? How do you become a leader and help shape it? Along with knowing your target customer and what value you are adding to them, knowing what value you play in the local scene will aid in your success. What can local authorities do to encourage entrepreneurial activity in their small city? The number one rule when building an entrepreneurial ecosystem is that it must be led by the entrepreneurs. So, local authorities need to provide a platform that incentivizes startups, look to its top entrepreneurs as the leaders, and then do their best to keep up to allow the entrepreneurs to thrive. Kati Suominen Assistant Adjunct Professor in the Anderson School of Management at University of California, Los Angeles, and Adjunct Fellow at the Center for Strategic and International Studies What tips do you have for an entrepreneur starting a business in a small city? Research compelling shows that when digitized and taking advantage of the Internet to sell their products and services, small businesses can be global businesses regardless of their location. For a small business in a small city, it is essential to get online to sell and be smart about leveraging the web - companies that have a strong online sales strategy dramatically increase their odds of being discovered by buyers from their respective national markets and from international customers. Companies that are heavy web users are found to be 50% likelier to sell internationally than companies that do not take advantage of the web. These companies are also in a far better position to use the web to shop around for the best deal, when purchasing services and supplies for themselves. In today's global digital economy, mobile phones, tablets and laptops bring the market to a small business with a compelling offering and smart online strategy regardless of its location: the edge conferred by location in major cities is eroding. Dima Leshchinskii Assistant Professor of Finance at Menlo College What are the pros and cons of starting a business in a small city? Pros: Advantages of starting a business in a small city come from the nature of business communities in these cities and local markets. There is less competition, especially from copycats; it is easier to become a dominant player in a local market, where success is often based on interpersonal relationship and links to the community. Also, sometimes it is easier to get financing from local banks, because they know you. Local government will often be eager to provide tax incentives. And low costs can be an advantage, too. Cons: Possible roadblocks for entrepreneurial starts ups in small cities are the lack of necessary infrastructure and services; not very easy to scale up business, if it requires physical assets and human capital; difficulties in accessing a talent pool – it is limited, if there are no universities nearby. Also, living in a small city might not be attractive for employees (e.g., many millennials want to live in large cities like New York, Chicago, San Francisco). Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? In my opinion, businesses that are appealing to a broad spectrum of customers ("average Joe and Jane") will have better chances for success than other businesses. Mass market retail stores and restaurants will have enough customers in small cities to survive, while niche business might not have a big enough market to survive. And tech startups might have problems with the employees talent pool. What tips do you have for an entrepreneur starting a business in a small city? Know your neighbors, know their needs. What services/products they miss that your business could deliver? So far I ignored the impact of tourism on the success of start-up businesses. Sometimes, businesses in small cities can benefit from the uniqueness of their location. Look around your city - are there any landmarks, natural attractions that can be made important asset of your business? What can local authorities do to encourage entrepreneurial activity in their small city? Provide tax and other incentives for newcomers. Educate people, organize forums and other outlets where local entrepreneurs can discuss ideas and learn from each other. Alexandra Kostakis Assistant Professor of Entrepreneurial Practice in the Martin J. Whitman School of Management at Syracuse University What are the pros and cons of starting a business in a small city? Pros:

• Easy to network;
• Lower operating expenses;
• Lower taxes;
• Quality of life.

Cons:

• Smaller market (depending on what your business is);
• Possibly limited capital funds to start businesses;
• Maybe lack of support;
• Access to specialized workforce.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? I believe that there are the traditional small businesses that do great in small cities. These are all based on the needs of the market. Types of businesses that will always be needed are construction, day care, restaurants, auto repair, boutiques, hair salons, etc. If an entrepreneur is able to identify a need, provide value and differentiate themselves from the competition in some way, they can create a successful business. The world has become a smaller place and technology, especially the internet, has made a lot of things possible. Small cities are home to businesses that you wouldn’t even think should be there. With that being said, certain high tech start-ups need access to resources that might not be available in small cities. They might need to be close to suppliers, their market, have access to a specialized workforce or research facilities. What tips do you have for an entrepreneur starting a business in a small city?

• Every city has an SBA office. An entrepreneur should definitely visit the office and start developing a relationship with SBA representatives. There are so many resources that they have available and should be explored.
• Visit the local chamber of commerce or business development office. Again, this is another way to network and get your name out.
• Does your small city have a university or college? Visit the business school and develop a relationship with the people there.
• Find a mentor that is/was in the same industry you are.
• Develop relationships with your BAIL team: Banker, Accountant, Insurance Agent and Lawyer.
• Attend networking functions put on by various organizations.

What can local authorities do to encourage entrepreneurial activity in their small city?

• Create centers or incubators where entrepreneurs can go to access resources and network with fellow entrepreneurs.
• Provide tax incentive or breaks for start-ups.
• Develop a network of investors where start-ups can go to access capital.
• Look at what the local resources are and maybe try to attract certain kinds of entrepreneurs or businesses. They then can create a competitive advantage for attracting those types of businesses.

Erick Mueller Senior Instructor and Director of Entrepreneurial Initiatives in the Deming Center for Entrepreneurship at University of Colorado What are the pros and cons of starting a business in a small city? Pros:

1. The community support. For example, in Boulder, there’s a real mentality of “high tide raises all boats” and we support each other from start-up to exit. For example, when I first moved to Colorado 20+ years ago and started a venture, a fellow entrepreneur gave me his HR manual and said “here ‘ya go, use this!”. That would’ve cost me thousands of dollars and tons of time to develop.
2. Access to expertise. Successful CEOs and Founders are much more accessible to take out for coffee and learn best practices or ask for advice.
3. Fun! It’s a more enjoyable journey when you feel like you’re a part of a community cohort building businesses and supporting each other.

Cons:

1. Less access to capital. I would assume there’s a direct correlation between population of a city and access to startup or growth capital. We certainly have access to capital in Boulder, but not at the depth of Silicon or RTE 128 or Austin.
2. Less access to talent. At times, it’s a battle to find good talent. Not always, but at times.
3. Less options for office space. This is probably a personal challenge, but as our company manufactures, it’s been tough to find the right office space. Most space in this area is set-up for software companies and professional services, not manufacturing.

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

1. For sure. A key foundation to the success of any venture is the business environment and culture of the city you’re located in. For example, Boulder has such amazing talent for tech companies that this type of business should be more successful here. There’s the talent and know-how and excitement within the community to cultivate this kind of business.
2. Destination businesses. A retailer relying on standard foot traffic in a smaller city would probably have challenges. There’s just not enough people! However, if you create a compelling reason for people to visit, you may do pretty well in a smaller city. Not sure if you’ve heard of Wall Drug? It’s a store in the middle of South Dakota. They’ve created a reason to visit (a destination) and have been very successful.

What tips do you have for an entrepreneur starting a business in a small city?

1. Get to know the experts. Every small city has successful entrepreneurs. Buy a few dozen cups of coffee and get networked into the community.
2. Understand the culture. Each city has a unique culture that will support a business in different ways. For example, Boulder’s culture is based off “high tide raises all boats”. Understand this mentality and don’t hesitate to ask for help from community entrepreneurs, service providers and government officials.
3. Connect with the local college or university. They can be a great resource of employees as you build your team.

What can local authorities do to encourage entrepreneurial activity in their small city?

1. Get out of the way! But seriously, local authorities can seed the conversation around entrepreneurship and provide resources for legal, accounting and other areas. But once the entrepreneurial ecosystem is seeded and gaining momentum, I think it’s best to get out of the way and empower entrepreneurs to do what they do best – create!
2. Seed and cultivate the conversation. For example, I’ve conducted a few Entrepreneurial Bootcamps in the town of Buena Vista, CO. BV has a population of around 2,500 people. These bootcamps have elevated the conversation around entrepreneurship and have spurred others to explore the possibility of starting a business. I’ve seen amazing growth in entrepreneurship over the past two years, perhaps from these bootcamps, but mostly from the local entrepreneurs and their commitment to staying in BV and helping to create an entrepreneurial ecosystem.
3. Help create a marquee event. As SXSW has elevated Austin’s entrepreneurial activity, so can a small city do for their community. Find something unique and compelling to attract people to visit and be a part of something special.

Moriah Meyskens Clinical Professor of Management at University of San Diego School of Business Administration What are the pros and cons of starting a business in a small city? Pros - Larger market and more niches that different types of businesses could cater to. Cons - Market smaller and potentially might not be interested in certain products; less access to alternative sources of financing. What tips do you have for an entrepreneur starting a business in a small city? No matter where you start a business, an entrepreneur should be sure to conduct the proper market research prior to investing a lot of resources into starting a business. Entrepreneurs should utilize some of the methods in human centered design or lean start-up to get customer feedback on their ideas, before they invest resources in their business. Just by talking to potential customers about their problems might lead to valuable suggestions and changes in the idea that better address the needs of a particular market. At the same time, costly mistakes can be avoided if prior research is conducted. Entrepreneurs should also get involved in local entrepreneurs ecosystems or networks and contact their local small business development center for advice. What can local authorities do to encourage entrepreneurial activity in their small city? Local authorities can help create ecosystems for entrepreneurs. They can support local small business development centers, alternative lenders and alternative working spaces. They can create opportunities for different players in this ecosystem to get together and network. John Danner Senior Fellow in the Lester Center for Entrepreneurship at University of California, Berkeley What are the pros and cons of starting a business in a small city? In an era of widespread connectivity and easy access to resources almost without regard to location, the balance between these pros and cons is shifting significantly – especially for firms that can rely on the web to conduct business. With crowdfunding sites like IndieGoGo and Kickstarter, startup ideas anywhere can find startup funding everywhere. Collaboration tools like Slack, Basecamp and Box, combined with communication resources like Skype and GoToMeeting, make organizing and running virtual teams not only possible, but efficient and affordable. And virtually any business can expand its customer base by selling its services and products on the web, including those whose distribution department happens to be a FedEx or UPS truck. So, technology has reduced the disadvantages smaller communities have faced as business launchpads, and in some cases tilted things in their favor – especially for entrepreneurs and workers who prefer the smaller town lifestyle. But size, location and economic vitality still matter for many other businesses that rely on face-to-face, in-person interactions – think dry cleaners, restaurants and small retail shops. Others may require adequate pools of trained or trainable employees nearby to run their factories, staff their warehouses or handle customers elsewhere. And many businesses thrive only when they are part of a diverse, dynamic culture where ideas and people can mix easily, and where solid education, housing and healthcare resources are available. Smaller cities who are creative about rethinking and packaging what their particular location, environment, economy and culture can offer particular kinds of businesses, will continue to be settings where many people want to live, raise families and launch startups. It’s not the size but the sizzle that matters. After all, Florence became the commercial and cultural epicenter of the Renaissance with a population of roughly 60,000 – about the same size as Missoula, Lodi, Dubuque, Biloxi or Taunton today. But it fostered a magnetic culture of ideas and innovation that powered wealth and reputation that transcended its size. What tips do you have for an entrepreneur starting a business in a small city? Just because you may start up in a small setting, think big. Consider how you might use some of the expanding smorgasbord of web-enabled resources to “punch heavier than your weight.” Finding and building a team of dedicated colleagues, designing a brand or logo or website, prototyping a product or business model, raising money, scoping out suppliers and actually reaching potential buyers to test and buy your offerings – all these and other tasks can now be done or streamlined at very low cost through the internet. Imagine how you can grow your business beyond the boundaries of your location. If you’re starting a restaurant, maybe there’s a take-home opportunity for you to sell your food during off-hours, or a mail order business if you have a distinctive, tasty product. If your business genuinely reflects a local culture or tradition, think how you can reach out to others who came from and still identify with those features. Figure out how you can convert your early customers into real ambassadors for your business across their networks. Decide what’s going to be your particular company’s culture and start creating that with your very first hire – it may well be your best recruiting and marketing tool down the road. While you’re thinking big, act lean. Before you commit big resources, make sure you’ve gone out and talked with potential customers and listen carefully to how they react to what you’re proposing. Be prepared to modify what it takes to hook them – whether that’s design, features, price or even the name itself. In other words, don't fall too much in love with your early plans and dreams without talking with the one group whose support you will need to realize them, your prospective users and buyers. And get on the phone, email and web to find other entrepreneurs doing something similar. Find out what's worked for them and what hasn't. You're likely to find kindred spirits willing to share their hard-earned insights to help out another entrepreneur in the making. Finally, get friendly with failure. Not because you seek it, but because your business' stumbles and screw-ups will offer you a uniquely valuable strategic resource to fix what needs to be fixed to achieve the success you're after. The sooner you can learn from your own mistakes, the harder it will be for your competitor to do that instead. What can local authorities do to encourage entrepreneurial activity in their small city? Think imaginatively about what resources your community could put in play to increase the odds of local startup success. Entrepreneurship has been defined as pursuing opportunity beyond the resources you control. But it's also about rethinking what resources you actually do have within your control. Perhaps your community can become the easiest, fastest and cheapest place for particular types of businesses to get started. You might streamline the permitting process, connect startup entrepreneurs with local retirees willing to offer experienced business advice or nearby courses on key topics. You could organize a local startup co-op to aggregate buying power in order to lower some of the costs entrepreneurs face in equipping their businesses; or sponsor a series of Skype-enabled workshops connecting your startups with their counterparts elsewhere. Whatever you do, pay attention to how you can create a more entrepreneurially friendly environment in your community. This involves creative collisions - of ideas, people and resources. Make yours a place where new ideas can take root, where people with aspirations of launching their own business can mix with other people who have the financial, space, talent or other resources they need, and - above all - where entrepreneurs feel they belong to a community whose future they are helping build. James Stapleton Entrepreneur, Customer Development Expert, Digital Marketer, Nationally Recognized Startup Coach, and Associate Professor of Entrepreneurship at Southeast Missouri State University What are the pros and cons of starting a business in a small city? The obvious disadvantage of starting a business in a small city, especially technology based businesses, is the lack of density. However, I apply Malcom Gladwell's metathesis from David and Goliath - conventional wisdom fails to see the advantage of being a big fish in a small pond. Being one of a few startups in a small city can provide founders attention and access to considerable resources that is sometimes difficult to achieve in larger entrepreneurial eco-systems with considerable competition for the spotlight. Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? In general, smaller cities are industry agnostic in terms of their capacity to support startups or small businesses. However, smaller cities vary greatly in terms of their capacity to support specific businesses. What tips do you have for an entrepreneur starting a business in a small city? Apply the person-environment fit model. Every new business has specific needs and an optimal operating environment. Every small city has a specific culture and capacity to support businesses. The key for founders is to find a small city with the best fit. And access to talent is a very important component of that alignment. What can local authorities do to encourage entrepreneurial activity in their small city? From my experience, tech-based startups require three basic things: good ideas built around real problems with real customers seeking solutions; leadership to execute effectively in considerable uncertainty, which often includes support from experts and mentors; funding - access to funding in each stage of the startups life cycle at reasonable costs. Research is conclusive that bottom-up approaches are a key, where entrepreneurs and a community approach to engage and connect them is priority one. Brian Hollar Assistant Professor of Accounting, Economics & Finance at Marymount University What are the pros and cons of starting a business in a small city? Starting a business has its unique set of challenges and benefits starting in a smaller city. Benefits include a lower costs of living, shorter commuting time, cheaper land and rental spaces (if that’s important to your business), potentially lower costs of labor, and less zoning regulations for construction. Challenges include potential difficulty attracting talented workers, more difficulty traveling to other cities, increased transportation costs (in terms of time and money) for supplies and products, greater difficulty interacting personally with others in your profession and/or industry, and a smaller population base from which to hire potential workers. Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? By definition, entrepreneurship is about recognizing and acting upon opportunities not evident to other people. This can potentially occur in any environment as each area has its own unique set of opportunities. I don’t think there are any set rules for identifying the best opportunities. If there were, anyone could become an entrepreneur. Factors include who you know in the area, your ability to identify and target a specific market if you expect local customers, knowledge of specific advantages for a region for producing a certain good, local networks (such as if there is a nearby university or other businesses), etc. Generally speaking, businesses that require lots of land or a small, local customer base might have a better chance of success in a smaller city. What tips do you have for an entrepreneur starting a business in a small city? Consider your business climate and objectives carefully. Make sure you have both a sufficient customer base (if you’re relying on local customers) to become profitable and think deeply about your long-term opportunities and challenges for growing your business if you are successful. Recruiting may prove to be particularly challenging, with many college graduates now preferring to move to larger cities rather than smaller cities or towns. What can local authorities do to encourage entrepreneurial activity in their small city? Avoid the temptation for giving tax perks to new businesses in the area. While this may encourage short-term relocation of some business to the area, this, in effect, passes on some of the costs of new business to local residents. This raises local tax rates, making it a less desirable area in the long-run. Keeping zoning laws to a minimum to allow for business growth, focusing on crime prevention, and providing public goods such as public parks, good libraries, well maintained infrastructure, and high quality schools are key to making it attractive for new businesses to move into a given area. John Bennett Assistant Professor of Management in the Donald R. Tapia School of Business at Saint Leo University What are the pros and cons of starting a business in a small city? An entrepreneur starting up a small business in a small city will have to do what any other business in any environment must do in assessing its present and future situation. The small business must analyze the small city business environment and industry conditions as well as the organization’s financial and competitive capabilities. The small business must have a vision of where it wants to go in the small city while creating an action plan for going in that direction, staking out a market position, attracting customers, achieving target financial, and market performance, and getting the organization to implement and execute a seamless strategy. With that said, there are certain pros and cons to starting a small business in small city… Smaller cities may potentially have a small town feel and thriving communities which can be beneficial for business. Small cities may have close knit communities and folky neighborhoods, which provide an opportunity for the entrepreneur to create and develop strong business relationships and social networks which in turn may provide increased opportunities and better accessibility to valuable resources. This, in turn, can lead the small business entrepreneur to strengthen the firm’s bargaining position with local suppliers, distributor, and other entities in the value chain. Once the small business becomes integrated into the social fabric of the small city and well known for the value it provides to local customers and its competitive advantage, it will have high brand recognition by the local populace. Another result can be actions taken to strengthen competitiveness through acquiring or merging with other companies, forming strategic alliances and collaborative partnerships which can potentially be more conducive in small city environment. Small business possesses a natural advantage of being closer to employees and customers so they can gather feedback to improve strategy and planning better. This can be more easily accomplished in small city environment where people are friendly and more likely to provide information more readily. Small cities will also tend to have less red tape (or bureaucracy) making it easier to startup, there will be less regulations burdening small business, and there are usually less taxes to pay. All of this adds up in a good way and means that small city entrepreneurs will have less of a burden for doing business as opposed to operating in a big city environment which will be more severe in these areas. A positive outcome for having less of a burden for small city entrepreneurs may also result in making it easier for them to enter into new product initiatives and geographic markets or to exit existing ones. This holds true for small cities in states which have been known to be friendlier states for starting a business from the standpoint of regulations, taxes, general ease of startup, and, of course, economic growth. Small business in a small city may have an advantage of speed which is multiplied due to lesser restrictions as aforementioned. The cost of living and business operations are lower in smaller cities thus the small business may have higher revenue due to lower operating and overhead costs. As a result, the organization can take actions to gain sales and market share with lower prices based on lower costs. This can also lead to the organization taking actions which can help gain sales and market share through further diversification of features focused on performance, more appealing design, better quality, better customer service, wider product selection, or other strategic actions. Smaller cities within the vicinity of a large metropolitan city will be able to take advantage of its resources such as commuters who spend their money in the small city where they live, valuable and useful amenities from the big city, accessibility human, financial, and technological resources not commonly found in small cities, and effective transportation and communication infrastructure. This also means that small cities may lack certain resources in the area of human, financial, and technical resources, thus big cities will have the advantage as far as resources are concerned. Smaller population in small cities will also mean a smaller market. This may be important, especially if the small city has many competitors in a particular market further slicing up the market share pie into thinner slices. This means that with an abundance of competitors in a particular industry, prices could be driven down. This is both good and bad: it’s good - because it shows a profitable market exists and it’s bad - because competition will be fierce. Another likely situation the small city entrepreneurs can find themselves in a small city environment is when there is no competition, meaning they will be a first mover for their industry in that particular small city, which can have tremendous benefits for local brand recognition. Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? The type of small business that thrives will depend heavily on factors mentioned prior such as business environment, industry conditions, and financial and competitive capabilities. However, regardless of these factors, every small business must create and implement a competitive advantage which could mean they: provide better efficiency as the low cost leader in their respective industry, effectively out compete rivals on differentiating features, offer the lowest or best prices for differentiated goods, or focus on better serving a niche market’s needs. The key to making competitive advantage sustainable is through creating a brand by developing expertise and competitive capabilities, despite the competition’s persistent and best efforts to match or surpass it. The small business must create a strategic framework which provides: a prescription for doing business, a road map to a competitive advantage, a game plan for pleasing customers, and formula for attaining long term standout marketplace performance. If the small business has good strategy coupled with good implementation, then there is a high likelihood that it will also have good management. Regardless of the type of small business in a small city, the organization will need a winning strategy, thus it must pass three tests:

• The Fit Test - Does the strategy exhibit dynamic fit with the external and internal aspects of the firm’s overall situation?
• The Competitive Advantage Test - Can the strategy help the firm achieve a significant and sustainable competitive advantage?
• The Performance Test - Can the strategy produce good performance as measured by the firm’s profitability, financial and competitive strengths, and market standing?

If you can answer yes to all of these questions, the small business may have a winning strategy in the small city. What tips do you have for an entrepreneur starting a business in a small city? Conduct a feasibility analysis for the business idea and future business initiatives to ensure that they are doable, create a viable business model which outlines the business’s customer value proposition and its profits, create a business plan to organize your thoughts and guide your actions (of course, the business plan is an ongoing work in progress which will have several natural revisions), and create a 3-year strategic plan which will give you long term plans for the future. Listen to your customers and employees - the best ideas for the business may come from them. Remember that a business’s strategy tends to evolve over time because of the changing circumstances and ongoing efforts you must implement in order to improve the business. The vision of the founder will influence the organizational culture, code of ethics, and character of the business for years to come. Entrepreneurs are doers; never forget this. You are better off being a decisive decision maker than losing out on opportunity. Make educated and calculated decisions, not reckless ones. Don’t be afraid to make a mistake but when it does happen shake it off and take it as a learning experience to make needed improvements. To know business, you must be in business; as you become more experienced you will quickly know or find out what is working well for the business and what is not. From there you can make necessary adjustments to keep the business on track. A business, even in a small city, needs a strategy specifically focused on the actions the business will take to: improve financial performance, strengthen its competitive position, and gain a sustainable competitive advantage over its market rivals. A business will need to create a competitive advantage out of core competency in order to create a business process, product or service which is not easily replicable by competitors. Consider doing what the competition does not do or even doing it in a way that is better for the customer, doing things in ways that set the business apart from its competition while doing them in ways that attract customers. Be resourceful and seek out counsel. Meet with a business advisor at your local area Small Business Development Center to get advice or help with business planning (business consulting advice is free and paid by your tax dollars). There are also business incubators and hatcheries which exist in most regions to provide entrepreneurs with innovative businesses with necessary support to flourish. If your business is innovative enough, you may qualify for support in a business incubator or hatchery. There are also private incubators which do the same but will sometime require the small business to provide something back in return, which could range from revenue to stock shares. There are also nonprofit organizations and credit union banks which are providing capital funding for startups in some states which can provide terms which are much gentler on the small city entrepreneur then those from large commercial banks. Crowdsourcing websites have also become a popular source of gaining capital for small business. Currently there are many popular crowdsourcing platforms which exist. The likelihood of obtaining venture capital support has been over inflated by Hollywood television shows and is divorced from reality. The truth is less than one percent of all entrepreneurs ever receive venture capital support. Nonetheless, if you think this might be the route you want to take, it does not hurt to give it a try. If you are in small city closer to a big city, this is likely where you will find venture capital firms. Lastly, do an online search or get advice from your advisement board of local entrepreneurship, training and mentoring programs which may exist in your region. You may be surprised to find out one or a number of them exists, which cover the small city in the region you are in. There are many great entrepreneurship programs which continue to grow in number every year, there are especially very good ones which exist for high technology, healthcare, engineering, computer science, veterans, women, and rural area entrepreneurship. Additionally, assemble an advisory board of local area experts who can provide you with valuable advice. This advisory board can consist of CPAs, business attorneys, business professors, industry consultants, and other professionals with valuable expertise and insight. What can local authorities do to encourage entrepreneurial activity in their small city? Research and implement best practices which have been proven to encourage entrepreneurial activity in the small city. Provide incentives, recruit, market and advertise the small cities’ natural strengths and don’t be shy about it. Make it well known what the small city can offer to the entrepreneur coming from the outside who is unaware. This could include categories entrepreneurs value such as the cost of doing business, economy, general ease of starting up, infrastructure, workforce, quality of life, technology and innovation, business friendliness, education, cost of living, and access to capital. Mercedes Delgado Visiting Associate Professor of Technological Innovation, Entrepreneurship, and Strategic Management at the MIT Sloan School of Management What are the pros and cons of starting a business in a small city? Both large and small cities can have comparative advantages in particular fields. For example, the city of Victoria in Texas is small but has a high specialization in Oil and Gas and Distribution and E-commerce with a meaningful presence of related firms in these fields. Generally speaking, small cities have the advantage of less competition and the disadvantage of smaller pool of inputs such as skills, capital, and suppliers. The latter could limit the growth potential of the firm, but could be resolved by connecting with larger cities through expansions or buyer-supplier networks across cities. Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? For startups in the local economy (e.g., retail, restaurants), the size of the city is less relevant since these businesses often do not scale up and rely on lower skills. For innovation-driven startups trying to commercialize their technology, the answer depends on who the customer is and where they are located. Business-to-business firms (e.g., enterprise software for business services) will benefit from being close to the relevant buyers, and they can be found in small cities and nearby. Business-to-consumer firms (e.g., fit wearable) will benefit from having access to a meaningful number of early adopters, and this is often easier in larger cities. What tips do you have for an entrepreneur starting a business in a small city? The place of birth of a firm is not random. In my work with Michael Porter and Scott Stern, we find that startups are more likely to be born in strong industrial clusters (concentrations of related industries and firms and supporting institutions). For example, a startup with a technology in Oil and Gas is more likely to be born in a place with high presence of other firms in Oil and Gas (like some cities in Texas). Thus, I would recommend an entrepreneur to assess and build on the clusters in your city and in nearby cities. Universities and local suppliers can be essential to accelerate the development of a technology, and a startup’s beachhead market could be proximate. However, if an idea is generated that does not fit a city’s comparative advantage, the start-up should consider to relocate. When site selection occurs, a deep dive into the candidate cities and their relative inputs and customers should be taken into consideration. What can local authorities do to encourage entrepreneurial activity in their small city? Prioritize initiatives to strengthen established and emerging industrial clusters in the particular city and its nearby cities. A small city that is integrated into the clusters in nearby cities can have better access to inputs and demand and spur start-up activity. These initiatives should focus on developing the labor occupations needed in the clusters and the infrastructure to allow for efficient movement of knowledge, people, goods, and services. Briana Sell Stenard Assistant Professor of Management and Entrepreneurship in the Stetson School of Business and Economics at Mercer University What are the pros and cons of starting a business in a small city?

• Pros of starting a business in a small city include lack of competition from larger “chain” stores, opportunity to fill a niche for the community, the hometown feel of contributing to/being part of the local business community/Chamber of Commerce, and lower start-up costs including property, permitting fees, impact fees, labor, etc.
• Cons of starting a business in a small city include smaller workforce pool, inherent lack of foot traffic, and lack of resources (i.e., marketing agencies, business to business suppliers, business referrals, etc.)

Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city?

• This depends on the type of tech start-up, but most can be anywhere because of the on-line or virtual nature of their business. For them, it will be whether or not they can attract the workforce talent.
• As far as retail and restaurants, they have to fill a need for the local economy. Make sure the business fits the feel of the community – if it is a tourist area, a boutique fits better than a thrift store.

What tips do you have for an entrepreneur starting a business in a small city? My tip for an entrepreneur starting a business in a small city is to do your research. Find out the traffic patterns, study the area, get a feel for what the community needs. Check the Chamber or local business association membership and talk with their staff about the businesses in their community that are successful and what is missing. Talk with city development authority staff. Find out all the costs associated with starting a business in the community. Ask if there are any incentives (Opportunity Zones, Development Grants) for locating in a city. What can local authorities do to encourage entrepreneurial activity in their small city? Most states have programs that encourage Main Street developments which come with a toolbox of incentives. Local authorities should do the work necessary to make as many of the grant/incentive programs available in their communities. They can also recruit. Some cities have entrepreneurial programs that work with the Small Business Administration and their local chambers to teach people how to put together a business plan and then start a business. Many cities have public or private entrepreneurial incubators. All of these can help spur entrepreneurial activity in a small city. Yas Motoyama Director of Research and Policy at Ewing Marion Kauffman Foundation At a first glance, there are advantages of starting new businesses in larger cities.  Our research has found that, in general, places with larger population enjoy higher rates of entrepreneurship. It is probably because there are more markets and opportunities. Larger areas also have more entrepreneurship support services, provided by the public or non-profit sectors. On the other hand, being small is beautiful, and smaller places have their distinct advantages for entrepreneurship. I categorize them in two ways. First, people are more aware of what is going on in the city and are more willing to help others. Sociologists will say the degree of separation is small. This closeness and willingness is important for entrepreneurs because starting a new company comes with many challenges, and entrepreneurs need help and must learn. With the small size, people may know other people or organizations that support entrepreneurs, and people are willing to introduce or make connections. Second, small places offer their own quality of life, such as affordability, no traffic congestion, lower crime rates, people being nice to each other, easy access to nature, a great environment to raise kids, etc. My current research, as well some works by other scholars in the past, suggest that entrepreneurs start companies where they are located. In other words, it's not like entrepreneurs think "I want to start a new company, and where should I do it?" So I would not want to see a headline like: Starting your own company: large vs. small city? No, this should not be a game to steal entrepreneurs or startup companies from other (big) cities, or making a rationale calculation about which is better, but a chance to educate, empower, and nurture people who are already living at your place (i.e., small cities) toward entrepreneurship. Then, the public sector officials should identify and understand their own advantages and disadvantages, and strengthen their advantages. Do not try to superficially offer what big cities have. It will be a losing game of offering neither big nor small cities. Thomas N. Duening El Pomar Chair for Business & Entrepreneurship, and Director of the Center for Entrepreneurship at University of Colorado Colorado Springs What are the pros and cons of starting a business in a small city? Starting a business in a small city has some obvious challenges. There will be fewer local customers, fewer investor and bankers, and fewer advisors and support people. On the other hand, there will be fewer competitors and the customers that you do win will likely be personally known and loyal over the long haul. Would some types of small businesses--e.g., a retail store, restaurant, or tech startup--do better than others in a smaller city? There is no general statement to make on this. Each of these types of businesses can do fine, depending on local service gaps. Did a major retailer like Wall Mart just leave town? Time to set up a general purpose store. Did a well-known mom and pop restaurant close after 50 years? Time to fill the gap with a new one. What tips do you have for an entrepreneur starting a business in a small city? The same tips I would give to any entrepreneur: create value for people. If you find a way to create consistent value for people, it doesn’t matter where your business is located. What can local authorities do to encourage entrepreneurial activity in their small city? Local authorities can reduce the regulations that are required to start a business. Too often I hear small business people complain about the hassles they must endure to get building permits, appropriate licensure, or approval from this or that government official. Over regulating in the futile attempt to create a perfect community is likely to reduce entrepreneurial activity and, paradoxically, actually lead to a more stagnant community and economy. Bruce McDaniel Professor of Economics and Sam M. Walton Fellow at the University of Northern Colorado What tips do you have for an entrepreneur starting a business in a small city?

1. There will always be a lag from start to smooth operation. Be patient.
2. 'Find a need and supply it"
3. Get sincerely involved in the community.

What can local authorities do to encourage entrepreneurial activity in their small city? Startup help like an incubator to subsidize rent and share ideas with other startups.

Methodology

 

Sources: Data used to create these rankings were collected from the U.S. Census Bureau, Bureau of Labor Statistics, Federal Deposit Insurance Corporation, Areavibes, Yelp, Indeed, U.S. News & World Report, Tax Foundation and LoopNet.

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