The Disadvantages of Small Towns

The geographic location of your business has a significant impact on your overall success. While there will be pros and cons anywhere, consider the disadvantages of small towns before you decide to open your business in one. You may decide it's worth the risk, or you might choose a more bustling spot for your company.

The industries in a small town are typically fewer and less diverse than those in a larger city. For example, small-town industries may include agriculture, tourism and food service. A large city's industries will generally include a wider selection. How your business fits into a small town depends on your industry; many companies don't have a style or theme conducive to success in a small town.

The proximity of a small town to a larger city will help determine consumer habits. If a small town is close enough to a large city, consumers may travel there to make purchases if it's possible to save money. This practice would leave local shops with less business. A small town may be successful in retaining local sales if traveling to a larger city isn't convenient or local government develops small-town loyalty among residents.

Fewer people living and doing business in a small town generally means less business volume. Even with a prime location in a small town, you will not have the same sales from traffic as a comparable business in a large city. Companies in larger cities usually experience a higher average volume of productivity than those in smaller communities, according to a 2012 paper published by Spain's Center for Monetary and Financial Studies. This higher production may be due to more interaction that increases business productivity or simply a natural advantage of the location in the city.

Because of lower business volume, businesses in small towns often have smaller operating budgets compared with those of companies in large cities. This will often make it necessary to offer smaller salaries, benefits and incentives to employees. Smaller employment packages make it more difficult to attract and retain higher-quality employees to a small-town business. If more educated and experienced employees prefer to live and work in a large city, your business may need to accept less education and experience in employees.