Small towns may also lack a ready infrastructure or a steady pool of qualified workers, says Tom Mason, an economics professor at Rose-Hulman Institute of Technology in Terre Haute, Indiana, who has studied entrepreneurship for more than 15 years. "You might like living on the side of a mountain," Mason says, "but if your business starts growing and you need a couple of people to grow it with, where are [you going to find them]?"
For Elwood, Indiana, business owner Ed Escallon, the answer lies hours away. Many of his employees live in large cities, while Escallon's small manufacturing company, Terronics Development Corp., remains rooted on a farm in the town of 15,000.
"We were looking for a place outside the smokestacks," he says, referring to General Motors' dominance of Indiana's landscape and economy. Escallon, 53, left a job in industrial Muncie, Indiana, 13 years ago to build his 14-person company, which now reaps more than $1 million yearly.
The struggle to find employees constitutes one concern for rural entrepreneurs; getting along with the neighbors is yet another. While the added tax dollars and employment opportunities a new company provides a small town are quite welcome, the success a firm might bring can also have some undesirable effects. A successful company may supersede existing firms in importance and influence, taking away employees and even driving up home prices. Towns sometimes offer economic incentives to lure new business owners--money local companies might view as ill-spent.
"It could go both ways," says Terry Besser, a sociology professor at Iowa State University in Ames, who has conducted a study of how firms do business in 30 small towns across Iowa. "It could be that the town is so happy to see [the new business], they welcome this person with open arms and provide all kinds of assistance and knowledge of the local market." On the other hand, she says, outsiders sometimes start operating in a town without a firm knowledge of the way business is done there. They might find navigating their new home's social world difficult as well: Small towns can often prove cliquish.
When Bob Wersen moved his electronic components manufacturing firm, Panel Components Corp., to Oskaloosa, Iowa, from Santa Rosa, California, in 1993, he went out of his way to get involved.
Despite more than one hometown businessman expressing disdain for the newcomer, Wersen plunged into daily life. "I went out of my way to meet people in town on their terms," he says. "I reached out to people whenever I had the opportunity. I maintained a very visible presence. We made every attempt to communicate publicly with the community about [our business] and the hiring process."
Wersen relocated to Oskaloosa as a matter of business survival. "We needed to be in a different facility to lower our cost structure," says Wersen, 55. "Since I was going to have to make some changes anyhow, it looked like a good time to relocate."
A chance 1991 meeting at a plastics convention with the executive vice president of the Oskaloosa Chamber of Commerce led Wersen to the town, which offered a friendlier regulatory and political climate than Santa Rosa, as well as a better cost structure. In addition, Oskaloosa and the State of Iowa offered Wersen forgivable loans totaling $275,000 and 100 percent financing on a new building.
After Wersen made his decision and returned to Santa Rosa to give his employees the news, he faced a new obstacle: No one wanted to move with him. And yet, Wersen says, between the outgoing employees in Santa Rosa and the new team he developed in Iowa, his customers were never aware the company had relocated.