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Rural entrepreneurs: what are the best indicators of their success?

Erick Eschker (Department of Economics, Humboldt State University, Arcata, California, USA)
Gregg Gold (Department of Psychology, Humboldt State University, Arcata, California, USA)
Michelle D. Lane (School of Business, Humboldt State University, Arcata, California, USA)

Journal of Small Business and Enterprise Development

ISSN: 1462-6004

Article publication date: 15 May 2017

Abstract

Purpose

New small businesses are the cornerstone of many small rural communities. They provide needed products and services, new opportunities for employment, and general vitality. The economic impact these businesses have on their town and county are important indicators of an area’s success. The purpose of this paper is to examine newly started small businesses that are within three or four years of age or less, and examine factors that may have led to their success or failure. Here, sources of advice, means of financial support, and background experience of the firm’s founder have been found to be correlated with the business success.

Design/methodology/approach

The analysis using Probit regression yielded four models wherein female owners, family help with a business and Hispanic ownership had significant models predicting performance all of these were negative relationships. The factors correlated with business success as proposed are presented. Of course correlation does not imply causation, which means that the authors cannot be sure that a factor that is associated with business success will lead to business success. But, this is an important first step in determining whether there are significant differences between successful and unsuccessful businesses.

Findings

The findings showed that experience with previous business ownership had a distinct impact and the marketing efforts were also important for profitability. The other factors were not significant. A second phase to the analysis using Probit regression yielded four models wherein female owners, family help with a business and Hispanic ownership had significant models predicting performance all of these were negative relationships. This represents the difficulties that are encountered with these groups in garnering the support and financial means they need to succeed. It was also interesting that the use of a business plan did not help the businesses succeed.

Research limitations/implications

Using a Probit Regression and χ2 analysis of the data is the most appropriate and accurate analysis for a date set of this type. There is much more to be accomplished with rural entrepreneurship and the use of these techniques would be appropriate for this type of data.

Practical implications

Business plans are important for the business founder to predict potential costs and profits. In this study however, the authors did not find that having a business plan differentiated business’s performance. If it can be replicated, it will be important to find out what is unique about rural areas that lead to this finding. If business plans do not help, then what type of preplanning will help? If this finding is correct, business development agencies may wish to cut back resources devoted to writing a business plan, and devote them to other areas. Being a member of business network group also is not associated with business success.

Social implications

The growth of rural entrepreneurial businesses is well documented. These businesses provide many social impacts to the local community not only by providing products or services need but also by providing employment. This research is imperative to providing the best success plan for these businesses as the proliferate.

Originality/value

There has been very little research on rural entrepreneurship. This study takes a unique look at a rural community and the success or failure of their businesses over a one-year period when most small businesses succeed or fail. There is much more to be done on examining the tools they need to be successful.

Keywords

Citation

Eschker, E., Gold, G. and Lane, M.D. (2017), "Rural entrepreneurs: what are the best indicators of their success?", Journal of Small Business and Enterprise Development, Vol. 24 No. 2, pp. 278-296. https://doi.org/10.1108/JSBED-07-2016-0112

Publisher

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Emerald Publishing Limited

Copyright © 2017, Emerald Publishing Limited