If you open your business in a small city or town, you have a huge advantage.
Product businesses need a big audience. Service businesses need a connected audience. And in a small town, everyone is connected.
I joke that my city of 65,000 is a “great big small town”. It often feels like we have one degree of separation between citizens: if I don’t know you personally, I know one of your friends or family members. That means reputation spreads FAST. It means stories stick around. And in smaller towns of less than 10,000 people, everyone knows everyone.
In the Founder Phase of entrepreneurship, that’s a huge advantage. If you run a great business, local people really WILL talk about you. If you run a poor business, local people really WILL talk about you. You have a huge opportunity to succeed, and help your community. But you have to proceed with more caution than you would in a big urban center.
Opening a business in a small town means that retention is more important than sales.
A gym in Manhattan can afford to lose 20 members every month, because they’re drawing from a huge pool: they can attract 20 more to take their spot, no problem. And if the ten clients they lost had a bad experience, the new clients probably won’t hear about it.
In a small town, that’s not the case. In a city of 65,000, you can’t afford to have unhappy local clients.
I opened my second gym with a “hardcore” attitude that attracted very few people. Most of my early clients left pretty quickly, and told their friends that CrossFit was crazy, or dangerous, or both.
Conversely, Kaleda Connell opened a very similar gym (CrossFit Degree) in a smaller town of 7,500. She provided a beautiful, positive experience right from the start, and achieved in 3 years what took me 10. Same gym, same clientele, same program; different approach. You don’t need a bigger pool of potential clients; you just need to keep the ones you get.
Staffing can also be easier in a smaller center than a large one. Most great hires are made through connection: your best staff might have friends or families who are looking for work. These candidates share the same values, work ethic and background as your best staff. That’s much harder to root out in a big pool of strangers.
Overhead is also usually much lower in a small town. Rental space and taxes are cheaper for you AND your staff. Cost of living is generally lower, meaning you and your staff can have a great lifestyle for less money. Self-satisfaction and happiness scores are generally higher in small towns.
Finally, competition in smaller centers is probably far less. The fear of market saturation paralyzes many new entrepreneurs. Instead of opening the best new spa, they think “This town can’t support any more spas” and move away or work for someone else. This fear is unfounded, but actually prevents competition.
In Founder Phase, it’s easier to open in a small town. Rent prices are lower; early sales come from personal connections. In Farmer Phase, it’s easier to build a business in a small town, but ONLY if your client turnover rate is small. And in Tinker Phase, it’s easier to build a platform of wealth in a small town, because real estate prices and taxes are generally lower. I own three commercial rental properties with a total value of around $1.25M. It would be hard to buy one property for that price in a city with over 500,000 people.
In our mentorship practice, we frequently speak with small-town founders who think they’re at a disadvantage. “There are only 5000 people in my town!” is a pretty common complaint on our free help calls. But a small town can be a huge advantage if you focus on strong connections instead of high volume.