90% of Rural Small Businesses Confident in Future

With this week’s news that optimism has returned to small- to medium-sized businesses (SMBs), we took a look at its roots.

While attention often focuses on the growing disparity in outlook between urban and rural SMBs, new PYMNTS data reveals a persistent, nuanced optimism across the entire sector, even as core economic anxieties unite businesses regardless of location.

This insight emerges from “The Urban-Rural Economic Divide: How Location Affects SMBs’ Outlook,” a recent PYMNTS Intelligence report based on a survey of 511 SMBs conducted from Jan. 7-23. The study provides a detailed look at varying opinions on long-term survival across numerous geographic areas.

Overall, the research found SMBs generally optimistic about long-term growth, with fewer reporting decreased revenue — a drop from 22% in June 2022 to 17% in January.

Most SMBs also reported increasing revenues in the past year, alongside fewer instances of contracting margins or staffing difficulties. However, this positive sentiment is countered by a significant geographic divergence: big-city SMBs expressed confidence, while those in small towns, suburban, or rural areas showed increasing concern about their future. These worries stem from factors like workers returning to offices, economic uncertainties and challenges in securing financing.

This underlying narrative of shared concerns amidst varying degrees of optimism is further illuminated by specific data points critical for financial services professionals:

• Despite a rise in pessimism among rural businesses regarding two-year survival — with the share doubling from 5% in October to over 10% in January — the report noted that 90% of rural SMBs remained confident in their ability to survive this period. This demonstrates a substantial level of resilience across the broad SMB landscape.
• When SMBs, regardless of location, expressed concern about their long-term survival, poor economic conditions emerged as the overwhelming primary reason, cited by between 46% and 51% of worried businesses depending on their geographic area. This highlights a pervasive macro-economic sensitivity that transcends regional differences. 
• Beyond general economic worries, the report revealed how specific operational concerns disproportionately affect different industries, even when poor economic conditions remain the consensus top concern across sectors. For instance, 40% of professional services firms identified rising staffing costs, including salaries and benefits, as their top concern, a stark contrast to just 14% of retailers who cited the same. This offers critical understanding of nuanced pressures facing different business segments.

The report further dissected other prominent factors impacting SMB sentiment.

Increasing competition was a significant concern, identified by 43% of SMBs in small cities. Other frequently cited challenges among concerned SMBs include rising material or equipment costs and the inability to secure vital financing.

The hospitality sector, including hotels and restaurants, presented a volatile picture; while 56% reported increasing revenues, they were also the most likely to report decreases, suggesting high susceptibility to elastic consumer demand for discretionary spending. This contrasts sharply with essential industries like groceries.

Understanding these varied — yet often shared — anxieties, coupled with underlying resilience and subtle shifts in optimism, is crucial for financial institutions, payment providers and FinTechs seeking to develop targeted solutions for the diverse, evolving needs of the SMB market.

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