Growing Rural Business – An Innovative Approach to Development
Author: Robert (Bob) Lee
Published by Robert Lee at Smashwords
Copyright 2011 Robert Lee
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Table of Contents
Changing Demographics, Changing Worlds
Blazing Your Way Through The Bureaucratic Maze
Sustainability, Innovation and Opportunity
Concept to Conclusion: The Process
Introduction
Rural development and rural economic development virtually are synonymous. In rural communities, economic development is tied to infrastructure. Countries that have recognized this fact and acted upon it have seen rural business successes disproportionately larger than those in urban settings.
In his inaugural address to Congress, Barrack Obama pointed out the need to develop technology infrastructures such as high-speed Internet for all of the USA, and emphasized school and the transportation network development as integral to recovery of the 2009 US economy.
In Canada, health care, seniors housing and hospital services in rural communities are viewed as essential elements of attracting and maintaining population and business bases in remote and rural settings.
In China, the need for training & education services and all forms of advanced transportation logistics solutions drive the economic growth inland from coastal centres.
Consequently, rural economic development is tied intricately to the maintenance and development of essential infrastructure. To view business development strategies in isolation from social services and infrastructure development would be foolhardy and myopic. By viewing growth as an eclectic mix of needs, opportunities emerge. Recognize, for example, that the mere building of a housing complex employs myriad labourers, or that investment in a training facility offers support services, by way of skilled workers, to potential businesses.
At the same time, rural developers must eschew the concept that they are developing “rural businesses.” To succeed, they must be developing businesses that, incidentally, are located in a rural environment, with the contingent benefit afforded by the unique advantages that a rural environment offers.
As a developer of rural opportunities, I have had the privilege of being involved in a host of projects, from tourism to retail, environmental to social services. I was able to spearhead successful community-driven, community-owned and community-funded projects. I also concede to being involved in as many unsuccessful attempts at development as I was involved in successful ones. Failure provided an opportunity to learn why we had failed, and adjust our focus for subsequent projects. Fortunately, the strategies employed and the people with whom I had the good fortune to work alongside were the reasons why our development success to failure ratio was 5.5 times the industry average.
It is true that many communities succeed with little effort, little formal direction and loads of luck. However, rural economies are suffering, as residents slowly drift toward the city and toward the perceived opportunity and advantages that an urban environment offers. That trend is based on several fallacies, though. Rural communities possess as good an intellectual base, almost as good an infrastructure base, and a far superior inventiveness capacity than urban areas. We just fail to believe sufficiently in those truths.
In one small rural region of 70,000 people, I have seen a company develop into an international supplier of its unique products, another develop several patented & successful energy inventions, a third find a truly unique market for old combines rebuilt into farmyard tractors and another company establish an capitalize on its reach into the entire North American market for its processed agricultural goods. The jobs created by those four companies (a very small fraction of the collection of unique businesses in the region) would extrapolate to almost one percent of the workforce of the entire USA, if that success could infiltrate every corner of rural North America!
There is more than an opportunity for development in the rural communities. Rural North America could be on the cusp of driving economic recovery and opportunity, without ever putting plough to turf!
Rural development, though, requires direction. This book provides a roadmap to success, and warning signs as to how to avoid the ditches, hazards and roadblocks that have hampered development historically. It discusses how to identify and categorize the opportunities that you encounter, how to make the most of your opportunities, and how to maximize strategies for funding and growth. A key area of the book deals with how to handle conflicts, and how to navigate through the various bureaucracies that you will encounter.
The final chapter will look at the steps necessary, from concept to conclusion, to make your project a success. We will present separate hypothetical development dilemmas, and look at the most effective strategies to complete them.
Identifying Needs
In 2003, the Manitoba, Canada government announced that it wanted to encourage the construction of ethanol facilities in rural areas, as part of its “green energy” commitment. Almost immediately upon the news release hitting the airwaves, at least fourteen communities and rural businesspeople indicated their intention to pursue this opportunity. As of November, 2010, only one had achieved the objective, and it was already home to a pre-existing ethanol facility.
In 2004, as well, the province of Manitoba offered to provide support to rural investors that wanted to establish biodiesel facilities. Thirty-one parties jumped on the bandwagon. By 2010, a mere three had been established, with only modest outputs.
In 2006, Manitoba, in response to the BSE crisis, began working closely with a wide-ranging group of cattle producers to set up a federally-inspected kill facility. When the USA market opened a few years later, the idea died.
In 2007, Greensburg, Kansas was obliterated by a tornado. After almost two years of planning, they rebuilt, as an entirely “green” community, attracting investors and businesses to this new eco-oasis.
Why did Greensburg (population 1,280) succeed, while Manitoba (population 1.3 million) failed in its economic initiatives? Quite simply, the rural entrepreneurs in Manitoba failed to take a sequential approach to planning, opting instead to forego the identification of needs in order to capitalize on “free money.”
In each of the rural communities that failed to implement their development objectives in Manitoba, there were significant gaps in resources that had been ignored in the rush to grab a business opportunity. The small successes that were achieved were the result of proper planning, responding to needs, and sequentially approaching the opportunity, to maximize probability of success.
There are several key requirements that form the foundation of every successful business, whether it is a rural or urban venture.
One of those is transportation infrastructure. While a cursory look at the city versus the country network of road, air, water or rail transportation system seems to favour the city, this may not necessarily be the case.
Take, for example, air transportation. Any city is going to have a better air cargo movement network than a small town, right? Wrong! Look to the northern regions of North America – near north of Canada or the state of Alaska.
While larger passenger jets may be limited to national or international airports, it is the smaller propeller planes that are most effective at serving remote communities, both for passenger service and cargo movement. Those planes have limited access to larger airports.
In addition to being better suited for regional airports found in smaller centres, the lighter aircraft also are better positioned to be used in cross-docking scenarios, where semi-trucks haul goods to the regional airport and where goods are transferred to the smaller cargo planes. This sharing of transportation services cuts fuel & operating expenses for the supplier or buyer of goods, while providing additional jobs for long haul truckers in the area.
Here, an apparent need for transportation infrastructure may be best answered uniquely, with an existing advantage to the rural airport, if cross-docking facilities are available at the regional airport.
Let’s look at another scenario, where the apparent urban advantage is no advantage at all.
In rural areas within the capital region of a larger city, highways are often of reasonable quality, leading into the urban area. While we assume that trucking firms naturally would gravitate to the city, having eighteen-wheelers manipulating through city streets is an inconvenience to those drivers. On the other hand, a rural community near the city would be well-placed to propose setting up a trucking headquarters near, but not in, the city. To stimulate this business outflow from the city, the community may want to offer to provide supplementary services, such as high-speed Internet, subsidized telephone services or other essential services top-ups. Typically, the lower tax rate in those outlying areas offers adequate stimulus.
Unfortunately, many rural developers automatically accept that, because they are located outside the city, they are at a competitive disadvantage. This inferiority attitude holds back action on many potential developments.
The availability of Internet high speed, through wireless or Wimax networks, has proven to be the great equalizer for rural business development. It hass allowed suppliers to access markets more readily, while, at the same time, opening the doors to huge opportunities (these will be discussed in the chapter on Opportunities). Today, where high-speed Internet is available, rural communities compete on a technologically level playing field with cities and regions world-wide. The need, though, is in teaching country residents how to make this infrastructure work for them.
Where high-speed Internet is not readily available, or where the bandwidth is insufficient for commercial operations, developers will need to assess how to efficiently provide this service for potential business. While it may or may not be the role of the local authority or development agency to provide the service, incoming business will need to know how to access it.
Infrastructure in rural communities often requires development or upgrading of water services facilities.
A local Canadian economic development partnership had been struck in 1999, involving a rural municipality and an incorporated town. They had established sewer/water infrastructure that provided water and waste infrastructure to the town, with the lagoon for the system being located in the adjacent rural municipality. The RM used the lagoon for dumping of transported waste from local holding tanks. The primary advantage, though, went to the town, which appropriately had borne the lion’s share of the cost of construction.
When a major retailer of farm equipment expressed an interest in locating near the town in the municipality’s designated industrial park area, expansion of the water services to the site was integral to the deal that drew them to the region. Recognizing the value to both municipality and town, the two parties quickly agreed to extension of services to the farm implement dealer, with the RM and town each picking up a portion of costs, the business owner paying a share and the province topping up the funds needed. In exchange, the town gained a portion of the revenues from the new business. The agreement was mutually beneficial.
Unfortunately, shortly after, we were able to recruit two new businesses who wanted to establish and expand operations in the industrial park area. They were both drawn by the availability of water services. The province agreed to provide additional funds to support the expansion of services.
Recognizing the potential for quick cash, the town immediately revised the terms of an oral agreement with the RM, demanding that the municipality share existing tax revenues from businesses that had previously built in the industrial park region. Reluctant to part with a significant revenue stream to which they rightfully felt the town was not entitled, the municipality withdrew from the planned water services extension. Both new business opportunities were lost, and the park failed to attract any new customers for the next four years.
The example highlights the need for infrastructure to meet new business demands, but, more significantly, highlights the need for cooperation, and preparatory work on shared services agreements where neighbouring authorities will be involved.
On the other hand, two examples of productive cooperation step forward.
The city of Portage la Prairie and the adjacent municipality of Portage saw an opportunity to attract a large national food processor to the area. However, the preferred site of the new processing facility was two miles west of the city boundaries, in an area with no water services. Even though the cost was quite high, the two jurisdictions entered into a shared services/revenue formula that resulted in the construction of a multi-million dollar facility, employing nearly two hundred people.
In the Interlake region of Manitoba, three jurisdictions entered into discussions, and an informal agreement on expanding infrastructure (roads and water services) into one of the municipalities near the small city of Selkirk, in order to attract an OSB (wood fibre) manufacturing plant. This plant would have provided more than 800 direct and indirect jobs, with construction costs in the tens of millions. While those authorities were able to cooperate, a severe economic downturn and decreased demand for the lumber products resulted in cancellation of the initiative. The illustration of cooperation, though, will serve those governments well in future development undertakings.
In one of the regions in which I guided development, one of the most pressing needs was for that of trained staff for office support roles – bookkeeping, secretarial & word processing. Immediately upon identifying the need, we began the process of training sixteen individuals. Within three months, four were employed by local firms, one set up her own office support business, five took over the duties that had been outsourced out of the area, and one relocated to a nearby city to utilize her newly acquired skills. Clearly, we had correctly identified and responded to a need for trained staff.
Your local staffing & training requirements may be of a more technical nature, or may be a need for skilled trades. Regardless, as you develop your strategy for attracting specific business types, you will simultaneously uncover the need for training of specific staff to facilitate the relocation or establishment of businesses within the region.
In 31 years of dealing with small business, I found an eagerness of small business owners to embrace the idea of outsourcing of jobs. Once the benefits of increased skill set availability, decreased tax responsibilities, elimination of recruitment issues and awareness of lower costs versus hiring of employees for specific jobs were outlined, most entrepreneurs enthusiastically responded to the concept. Ironically, those same small business people and farmers, once they were placed in a position of responsibility on development boards or elected office, responded adversely to outsourcing.
Some of those people expressed concern that outsourced jobs would go to people outside the area. While that may be true to some extent, the selection of outsources would always remain in the hands of local people.
Whether or not a job iss to be outsourced, though, is irrelevant. When those positions where a specific skill set is required arise, it is imperative that the need be met if a project is to be completed successfully. Take, for example, a machine shop requiring a CNC operator. If one is not available locally, that position can be filled on a term or piece-work basis by a contractor.
If a prospective business wishing to locate in your community sees that the skills he needs have been addressed, you increase the likelihood of his business moving to your area. At the same time, over the long term, those skilled employees or outsourced workers may opt to relocate, as well, to be closer to his/her place of work.
In identifying needs for prospective businesses, you should evaluate and explore sources of outsourced work, as part of the skill set evaluation. Compiling this data tells new business that your community is intent on providing the best opportunities for neophyte undertakings.
Identifying needs serves purposes other than to establish the human and physical resources that are lacking for prospective business. It is an axiom that many rural residents are resistant to change. This truism also applies to urbanites, but is less noticeable because of the greater pool of people from which those resisters come. Nonetheless, involving local people in the evaluation process serves to show that each resident’s opinion counts. People who appear to be naysayers at first often become the most enthusiastic supporters of a cause.
One individual with whom I developed a close business relationship was extremely pessimistic about the prospects for development of a seniors housing complex. Within a few months, he became one of its primary proponents, and was instrumental in devising a local investment program for the initiative.
Another individual, in a biodiesel research project, appeared to be a strong supporter. It was later discovered that he was spending a great deal of time criticizing the undertaking behind the local group’s collective back. He felt, it seemed, as if he was not being given sufficient respect within the group.
Although the primary objective with involving local people in the needs identification process is not to sway supporters, it is an ancillary benefit. The main goal is to learn of needs, or solutions to those needs, that other group members may have overlooked. Often, I have found that an informal and a formal survey of area residents turned up resources and personnel to which we were oblivious.
One of the best ways to begin your needs analysis is to look outside your area – often far outside. You should be looking at those communities that have consistently been successful in their development efforts, as well as at communities that are dying. The constant between the two is the question, “Why?”
Let us first look at the benefit of evaluating dying communities.
One presenter at a seminar I attended in eastern Canada talked about driving through a part of the Maritimes, and seeing this one small town of a several hundred people. Its main street was dotted with businesses that were boarded up, and its few side streets had a considerable number of older homes, in relatively poor shape. He saw no evidence of children at play, no industry, no focus, and no infrastructure development. This town (now village-sized), had declined from 1,800 people to 900 in less than a decade.
Thirty miles away, he drove through another town of 1,200 people that had grown from 700 people eight years earlier. He found a new main road, all the side streets were tarred, the main business area was bright and inviting, and a couple of farm businesses, that appeared to be new, had sprouted outside the town.
What had led to the death of one community and the life of another, so close together? We will discuss some of the contributing factors involved in a later chapter, but it is critical, in this section, to note that the reasons for decline or growth of those rural areas should be evaluated, to see if there are any applicable lessons for your community’s prospects. Understanding needs, met or unmet, in other communities is important in ensuring that your community benefits from those examples.
One of the elements to consider in a community is the trend toward focusing on dying jobs, or emerging opportunities. Take, for example, a rural North Dakota community. In a quick tour of this virtual ghost town, we found two buildings that spoke volumes about the community’s demise. The first was an old, square facade building, with a faded “Blacksmith” sign painted on it. Until ten years earlier, it had slowly evolved into a small mechanics shop, then a small motor repair shop, then a welding area, then a storage building for the grocery next door. The building next door, too, had been a grocery and hardware store until a lumber yard twenty miles away forced the closure of the hardware store. When the neighbouring town put up a modern grocery, the 1,200 square foot local grocery folded, as well. Two businesses that failed to keep ahead of the times, but, instead, chose to remain attached to old ways of doing business, had failed to survive.