While most entrepreneurs don’t give it a second thought, choosing a location for your business is one of the most important decisions that you can make when starting out. Your location not only determines your access to resources and customer base, but also your proximity to markets and suppliers. So selecting whether to set up in an city or a small town or rural location can ultimately determine the success of your company.
Profitability gap
When World Wide Worx looked at the factors determining the success of SMEs in their SME Survey 2014, location was found to play a big role, particularly when it came to the profitability of a business. The research showed that businesses in urban areas or headquartered in cities, are more likely to be profitable than those located in smaller towns or rural areas.
“Simply put, more people means more commerce”
Of businesses located in the city, 26% of SMEs are strongly profitable and 44% are just profitable, while the numbers for SMEs located in towns show that 11% are strongly profitable and 47% are just profitable.
As you can see, the biggest gap is between strongly profitable city businesses and strongly profitable SMEs in towns, which according to World Wide Worx, is evidence that while opportunities are present in small towns and rural areas, it is more difficult to translate the same opportunities into a profitable business. This is mostly due to less access to resources and customers. Simply put “more people means more commerce” they report.
The role of technology
Despite the advantages that telecommunications and technology tools provide – e.g: freedom and mobility – they still have their limitations, particularly when it comes to the “personal touch”, that the advances cannot provide. Arthur Goldstuck, MD of World Wide Worx, says despite telecommunications and internet services, “successful SME offices are still best placed in urban areas”.
It’s not all gloom and doom, town and rural-based SMEs. According to Goldstruck, there are still gaps left by large businesses to translate into opportunity.
