Starting a Business? Go Rural, Think Small

Question: How many people does it take to support an insurance agency?

Answer: At least 1,089. One to run the agency and 1,088 townspeople.

The population required to support different businesses varies greatly but insurance agencies have one of the lowest thresholds at 1,088, according to researchers at South Dakota State University. Only churches and full-service restaurants have lower thresholds. Businesses such as home centers, floor covering stores and appliance stores have high thresholds.

The researchers say that threshold levels help identify the businesses most likely to flourish, or at least survive, in rural towns. For example, a sporting goods store, with a threshold level of 23,027, will probably be more successful if it is located along a highly traveled highway. On the other hand, a full-service restaurant, with a threshold of 953, can succeed in a town with a population below 1,000.

Retail businesses and services with threshold levels below 3,000 are generally more easily supported by rural communities. Insurance agencies and brokerages, gasoline station/convenience stores, and grocery stores are some of the businesses that are most likely to succeed in rural communities.

Businesses with the lowest population threshold levels:

Businesses with the highest population threshold levels:

The researchers acknowledge the limitations of using population threshold alone. Clearly, other factors contribute to the fate of businesses, including access to a highway and residents’ disposable income. But retail threshold levels can be useful in determining which businesses are likely to survive, or if a new enterprise might do better with a secondary enterprise.

Source: Threshold Levels for Selected Rural South Dakota Retail and Service Businesses, by Saileza Khatiwada, Michael McCurry and Trevor Brooks, Rural Life and Census Data Center, South Dakota State University, College of Agriculture and Biological Sciences, December 2008