Small Town SMBs Are Confident Even Without Big City Profits

Most small to mid-sized businesses (SMBs) in small towns and the suburbs are confident about their chances of survival in the coming years. In fact, these businesses have better revenue trajectories than their big city counterparts. Data suggests that small town SMBs are uniquely embedded into the fabric of their communities. This positions them for success despite the smaller population of consumers in the area.

These are some of the findings detailed in “SMB Growth Report: Small Town and Suburban SMBs,” a PYMNTS Intelligence exclusive report. This edition examines the economic factors impacting the survival of SMBs in small towns and suburban areas (with populations of 25,000 to 100,000) and in big cities (with populations of 500,000 or more). The brief draws on insights from a survey of 547 SMBs across industries conducted June 6 to June 24.

• Key Findings
• Conclusion
• Read More
• Methodology

Key Findings

Small town and suburban SMBs are nearly as confident in their survival as big city SMBs.

Small town SMBs face some disadvantages compared to their big city counterparts. For example, these businesses are likely to have less foot traffic. Considering this, we looked at the likelihood that businesses would survive over the next two years. We found that 78% of small town and suburban SMBs say they are highly likely to survive. For big city SMBs, 83% say the same. This suggests that SMBs in different markets build on their own strengths.

Small town and suburban SMBs have smaller revenues and profit margins than big city SMBs — but better revenue trajectories.

The location of small town and suburban SMBs generally means they have smaller revenues and profit margins than SMBs in large cities. For example, small town and suburban SMBs are 36% less likely than their big city counterparts to have profit margins over 25%. The more-than-25% profit margin is a reality for one-third of those in the big city but just one-fifth of those in a small town.

Concerning total revenue, small town SMBs are, perhaps predictably, somewhat behind their more urban competition. Overall, these businesses generate about 12% less revenue than SMBs in larger cities. Those in small towns are more likely to generate less than $150,000 in revenue per year than big city ones.

The good news for small town SMBs, however, is that they are the least likely to report decreasing revenues in the last year — indicating that smaller revenues do not necessarily mean bad news. These businesses are more likely to have stable or increasing revenue than big city ones. The data suggests that, while the revenue may be smaller, small town SMBs are nimbler in adapting to local needs.

Small town and suburban SMBs do not need as much financing as SMBs in larger cities.

The survival of any SMB may require external financing at times. But small town SMBs report less of a need for financing than big city ones. The presence of more external market pressures to react to may help explain why big city SMBs are 31% more likely to use financing out of necessity than ones in small towns. Location notwithstanding, more than one-third of SMBs in both locations sought financing in the last year.

When they do need financing, fewer small town SMBs report facing obstacles. They are less likely than big city SMBs to say that high fees or interest rates prevent them from obtaining financing. In fact, big city SMBs were twice as likely to say that a rise in interest rates deterred them from getting financing compared to small town SMBs.

The data suggests that these businesses are adaptable to the dynamics of their local economy. In the last year, small town SMBs were the most likely to say they simply did not need to use credit or borrow finances in the first place.

Conclusion

Small town SMBs have nearly the same confidence in their survival as ones in the big city. Despite smaller profits and lower revenues, these businesses possess a unique understanding of the nature of their local communities. Further, with less of a need for financing, these businesses are better able to adapt to changes and may be buffered from the economic strife that can impact their counterparts in big cities.

Read More

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Methodology

“SMB Growth Report: Small Town and Suburban SMBs,” a PYMNTS Intelligence exclusive report, is based on a survey of 527 Main Street SMBs in the U.S. generating annual revenues of $10 million or less conducted from June 6 to June 24. The SMBs analyzed represent various industries, including retail, professional services, construction or utilities, personal and consumer services, and hospitality. The report explores how Main Street SMBs of different types of areas are performing and how their particular needs shape their outlooks.