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Unraveling the Challenges of Small Local Businesses

05 June 2023

I’ve used this quote before, but it bears repeating. Albert Einstein said, “The world as we have created it is a

Jay Conrad Levinson said "Small businesses fail when they ignore the importance of marketing. You can have the best product or service in the world, but if people don't know about it, they won't buy it."  It is true that lack of marketing and advertising are main factors of business failures across the country, but let’s explore a few other reasons that may contribute to the downfall of many small local businesses.


We know that small local businesses play a vital role in fostering economic growth, creating jobs, and building vibrant communities. However, their journey to success can be particularly difficult in smaller markets. Let’s explore the reasons behind the failure of small local businesses in small markets. We’ll utilize a few analogies and logical analyses to shed light on this intricate phenomenon.


When running a small business, one can feel like a small fish in a limited pond, struggling to find sustenance amidst intense competition. Similarly, smaller markets present businesses with smaller customer bases, limited purchasing power, and a reduced demand for niche products or services. Consequently, small local businesses often face challenges in achieving economies of scale, which hampers their ability to compete against larger enterprises that benefit from bulk purchasing and mass production.


Much like a spider web constricting its prey, smaller markets can entrap local businesses within a web of limited resources and opportunities. These markets often lack diverse talent pools, specialized infrastructure, and access to investment capital. Consequently, entrepreneurs may find it challenging to acquire skilled employees, upgrade technology, and innovate, thus impeding their overall growth prospects.


Just as a stone creates ripples on the surface of a pond, similarly, external factors can have far-reaching consequences for small local businesses in smaller markets. Economic downturns, shifting consumer preferences, and changing industry dynamics impact these businesses more profoundly than their larger counterparts due to their limited resources and less diversified customer bases. They lack the cushioning ability to absorb shocks, making them vulnerable to external shocks.


Sometimes a small business must feel a bit like David as he faced an uphill battle against Goliath. Small local businesses often confront fierce competition from larger corporations. These giants possess substantial market power, extensive marketing budgets, and established supply chains. This disadvantage can make it arduous for small local businesses to capture market share, attract customers, and sustain profitability, leading to their eventual demise.


Analogous to a maze with hidden paths, smaller markets suffer from lack of information providing resources, where local businesses struggle to reach their target audience effectively. Limited advertising and marketing budgets, lack of digital presence, and inadequate access to market intelligence and data can hinder small business’s ability to effectively connect with customers. This information gap perpetuates their invisibility, ultimately resulting in decreased sales and market share.


Infrastructure acts as the backbone of any business ecosystem. In many cases in smaller markets, inadequate infrastructure can create a significant hurdle for small local businesses. Inadequate transportation networks, limited warehousing facilities, and unreliable power supply can disrupt supply chains, increase operational costs, and impede growth opportunities. The lack of infrastructure support further undermines the ability of small businesses to compete effectively.


As you can see, the failure of small local businesses in smaller markets can be attributed to a complex interplay of factors, including limited customer base, constrained resources, fierce competition, lack of the ability to market and advertises effectively, and inadequate infrastructure.


For smaller communities to combat this, they must recognize these obstacles and adjust accordingly.  Strong local communities aren’t strong by accident, they are strong because they are hyper supportive of small local businesses and have developed the attitude of teamwork. They understand that raising the water level raises all the ships in the harbor and work hard to build an environment of business success.   By nurturing an environment that fosters innovation, promotes infrastructure development, builds upon the entrepreneurial spirit, and encourages collaboration, they create a more inclusive community where small local businesses can thrive and contribute to their growth and vitality.


John Newby is a nationally recognized Columnist, Speaker, & Publisher. He consults with Chambers, Communities, Business & Media. His “Building Main Street, not Wall Street,” column appears in 60+ newspapers and media outlets. As founder of Truly-Local, he assists chambers, communities, media, and businesses in creating synergies that build vibrant communities. He can be reached at: John@Truly-Local.org