Most small to mid-sized businesses (SMBs) report increasing revenues in the past year, and fewer report contracting margins or difficulty finding staff. Despite this general optimism, a divide is forming between two groups of these businesses: those in big cities and those doing business in small towns, suburbs or rural areas.
In general, big-city SMBs are more likely to report steady growth and increased profits, while those not located in these urban areas show increased concern. These worries come from several sources, including workers returning to the office and not patronizing local SMBs, economic concerns and access to finance.
These are just some of the findings detailed in “The Urban-Rural Economic Divide: How Location Affects SMBs’ Outlook,” a PYMNTS Intelligence report. This edition examines the urban-rural divide in SMB growth optimism and draws on insights from a survey of 511 SMBs conducted from Jan. 7 to Jan 23.
Overall Optimism Among SMBs
Fewer SMBs overall report decreasing revenues, but rural ones are more likely to do so.
PYMNTS Intelligence research finds that the portion of SMBs reporting increased revenue has stayed relatively stable in the past few years. In June 2022, 49% of SMBs surveyed reported growing revenues and 50% reported the same as of January 2025. The number of SMBs reporting stagnant revenue had a similar slight increase, with 29% reporting it in 2022 and 32% reporting it in 2025. However, the share of these businesses reporting decreased revenue has declined from 22% to 17%. These trends combined form an overall rosy outlook on SMB revenue throughout the survey period.
However, a significant divide in outlook begins to coalesce when these businesses are grouped by area. Those in rural areas are twice as likely as those in big cities to report decreasing revenues, at 30% compared to 15%. Additionally, rural SMBs are less likely to report growing revenues than those in other locations in the last three years. This trend has many possible explanations, including a shift from working from home to working in the office following the pandemic. As workers moved from their rural homes to big-city offices, they stopped patronizing local restaurants or shops as frequently.
Hotels and restaurants were also more likely than most other industries to report increasing revenues, at 56%. However, they were also the most likely to report decreasing revenues. This suggests a more volatile industry than others, which might stem from elastic demand. Travel and dining out are typically considered luxuries, and most consumers only do so when they have money to spare. This stands in contrast to other industries, such as groceries or toiletries, which consumers must purchase no matter what.
Varying Opinions on Long-Term Survival
Urban SMBs Are Driving Overall Optimism
SMBs as a whole are now more optimistic about their survival in the next two years. When asked in July 2022, nearly 7% of these businesses said it was slightly or not likely at all that they would survive this period. This share fell to just 5% when surveyed in January 2025.
However, this does not show the whole picture, and big-city SMBs primarily drive this overall trend. When divided by location, big-city SMBs have declined here in recent months, falling from 5% in November 2024 to 4% in January 2025. All other SMB groups, including small cities, small towns and rural areas, said it was less likely they would survive the next two years. Rural SMBs were particularly pessimistic: The share that said they would not survive doubled from 5% in October to more than 10% in January.
It should be noted, however, that this still represents a small minority of these businesses. It shows that 90% of rural SMBs are confident they will survive the next two years, showing an overall high level of optimism in the SMB space.
Economic Outlook Worries SMBs
SMBs concerned about long-term survival cite poor economic conditions first and foremost.
Regardless of location, SMBs that worry they will not survive the next two years share the exact reasons for believing so. At the top of the list is poor economic conditions. Between 46% and 51% of concerned SMBs cited this as their top reason, depending on their location. The only other factor that came close was increasing competition, which was the primary reason for just 43% of those in small cities specifically. Other prominent factors among concerned SMBs were increasing material or equipment costs, inability to secure financing and rising staffing costs such as salaries, benefits and payroll taxes.
When these businesses were broken down by industry, poor economic conditions remained the consensus reason for concern about surviving the next two years. Approximately half of all these businesses in construction, consumer services, retail, professional services and hospitality listed this as their biggest concern. Some factors worried some industries much more than others. For example, nearly 30% of retailers were concerned about supply chain disruption, compared to 20% of construction firms. Meanwhile, 40% of professional services said staffing costs were their top concern, compared to 14% of retailers.
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Methodology
“The Urban-Rural Economic Divide: How Location Affects SMBs’ Outlook” is based on a survey of 511 SMBs conducted from Jan. 7 to Jan 23. The report details the varying opinions on long-term survival from SMBs in numerous areas.
