Pitfalls & Pluses of a Rural Business
I was recently approached by a developer who had questions regarding the pros and cons of running a web design & development company from a rural location, away from the metro areas. I’ve outlined my responses to his questions here.
Question: If you don’t mind me asking, how did you start? Did you work on the [Olympic] peninsula and built a set of clients then start out on your own or?
BLUETUX started out as a two man shop, run from a modular home on 11th street in Port Angeles Washington. We were young(er), eager to succeed and had little competition in the local market. The other local companies were not at all versed in web standards and enjoyed a fairly profitable existence due to the undereducated customers, and the fact that there were maybe 2 -3 knowledgable “web master” companies out there.
By offering superior quality, lower prices, and much better support, we filled up our client list fairly quickly. We made many mistakes, burnt a few bridges, but even today, about 8 years later, we have 90% of our original customer list from those early days and they’ve been with us through thick & thin! We’re proud of that fact.
The fact that Port Angeles is one of the most wired rural areas in the PNW didn’t hurt our business either. There is an immense need for quality design, development & marketing skills for the small businesses, and the fact that those companies are rural shouldn’t preclude them from this need.
We attempted to educate our customers, both to the technology available to them, but also to the options when starting a new project. We operated on the philosophy that if we provided quality service, not service with the highest price tag, our customers would see us as their partners and continue to work with us far after their website had been launched.
Because Port Angeles and Sequim are such small towns, the word of our quality and service was spread through word of mouth, making our strategy a great one for long term business growth.
Question: What’s the tech scene like on the islands/peninsula/west-west-side?
The tech scene is limited. There, I said it. There are plenty of well-meaning individuals and groups, but it just doesn’t compare to just about any metropolitan area. You’ll occasionally find some seasoned veterans who’ve managed to escape the rat-race and are setup to work remote for their clients, but beyond them and the few rare quality connections, you will find yourself feeding off the national / metro scene.
Problems with the Rural Scene
Low hourly rates will kill you – Many young companies start off with the intention of offering great, fair rates that aren’t a rip-off to the customer. They look at established companies and go, “Why are they charging $80/hr, that is such a rip-off!” Their strategy will be to to undercut the other firm by offering lower hourly rates, and take as many customers as possible. This approach is naive and will prove very difficult to maintain the instant you try to grow. In a rural area, where word-of-mouth is so important, if you establish your company with a low hourly rate, you will generate quite a following. However, the instant you raise your rates, you’ll see a direct backlash from some of your clients. Really, you don’t want to work with the bottom feeders who are always looking for the lowest rate. However, if you set that expectation with your clients, expect some backlast, and word-of-mouth loses it’s effectiveness as a strategy if it’s all negative talk.
Small projects – In the 5 or 6 years that our company spent in Port Angeles, we never got any local big-ticket projects. The scale of the work is 2-3 month long projects at best. You’ll have to look beyond the local for those types of projects.
Expect alot of RFPs – MOST of the larger projects we worked with where procured through the RFP process that is so popular in municipal and government type projects. It wasn’t till more recently that we completely stopped responding to RFPs. One of the best decisions we’ve ever made!
Everything is personal – All of your business connections will become personal in a rural setting. Again, word-of-mouth plays a huge part of how well your business does. Treat one person poorly and you’ll adversely affect 10 other potential connections in the community. If someone doesn’t like you, neither will many of their friends. Small town politics are a huge issue.
Making Rural Locations Work
If you are planning on starting a business in a rural setting, here are a few proven suggestions for making it work! I’ve made a few assumptions about the reader, like: that they know how to conduct themselves politely and correctly in different situations, and that they know the basics of business operation.
Get involved, the minute you walk in town – Nothing beats a friendly smile, a warm hand-shake and a willingness to pitch in and help others. Become an active, member of the local chamber, participate in a service club, and be as helpful as your time will allow.
Get simple, and low-tech – You’re not going to win any friends by showing up at meetings dressed up like you just got off 5Ave in New York. Dress appropriately for the situation / town, and don’t overwhelm your customers with high-tech gadgets. Small rural areas are going to have older, less technically savvy business owners (from my experience) and though they may be impressed with your wizardry, they’re going to respond to more traditional tech and service in a more positive way because it is familiar.
Be honest – Don’t ever, ever lie about the size of your company, capabilities, or experience. You might be able to get away with it in a bigger town, and sure, you might be able to get away with it for awhile in a small town… but when you slip up, the consequences will be much more personal.
Develop work pipelines with Metro areas - The absolutely best situation you can find yourself in for design & development work is to live in a rural area, but still work on Metro / regional projects that pay better. You get the benefit of living in the place you want, and charge the higher rates. Developing pipelines with companies / customers in metro areas and cultivating that will help you keep your sanity, and keep your sales pipeline full. As local clients will be smaller, you can use them to fill the cracks instead of trying to put the hard sell on the locals.
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No doubt there are many more bits of advice, and stories I could tell. However, what started out as 2 simple questions grew to much more than that and I have to draw a cutoff point somewhere.
If you have specific questions about how to do something, or would like to know about specific experiences that we might have ad, let me know in the comments below.
Sam, thanks for this article. I’m a one-woman web shop on Lopez Island and I’ve had very similar experiences to yours, working here in the San Juans.
You are so right about how important word-of-mouth is in rural areas. I have had to do very little advertising, as most of my work comes from referrals or just general awareness of what I do. Getting work through “the grapevine” is definitely an advantage from working in a small town!
I’m currently dealing with the issue surrounding raising my rates. Right now I have decided to maintain a two-tier approach to charging clients: the lower tier is a bit higher than what I charged when I first started out four years ago. I still have most of my clients from that time, and they are “grandfathered” in to the lower rate. New clients are being charged a rate that is higher, but still below the going rate for local metro firms. I have found that my oldest clients have accepted small, incremental rate increases.
This fall I landed my first good-sized Seattle job. It was a nice change to be able to work with a metro-level budget! Because I have been used to working on very thin margins, it wasn’t difficult to bid the job at a high enough rate that I could spend the time and create a really high-quality product. The clients were very happy with my work and they felt that my rates were very reasonable.
Working for several years with very low budgets, I’ve become very efficient. I’ve developed a workflow that let me create standards-compliant, high-quality websites for a reasonable cost to the client. However, after working with the Seattle firm I see the benefit of building a metro client list! It’s a high priority for me in the coming year.
Thanks again for sharing your perspective on working in the “boonies.” Best of luck for your business in 2010.
Sam, what a GREAT analysis. It’s really hard to keep up that small business feel when you’re trying to establish a professional organization that can handle the big projects. I definitely feel, however, knowing your work that you really know what you’re talking about here, and that small businesses would definitely benefit from paying attention to your advice.
Thanks for the info!
Great info, Sam.
They have another article specific to web design in general, but again its a good example for most business types:
http://buildinternet.com/2009/12/a-discussion-on-hourly-rates-in-web-design/
I love reading good articles and it’s the only useful thing i can contribute to the discussion :P
Great read Sam.
Chip! That’s an absolutely goldmine! Awesome link!
I came across this set of articles this morning and I think it supports your post very well.
http://buildinternet.com/pricing-bootcamp/
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Agreed. Charge rates that are fair to your industry and represent the quality of your work. It’s a huge mistake to undervalue your work.
And I’ve done the whole marketing myself at “a-lower-price-with-far-better-quality-of-service” thing, only to find it a pain when my rates changed….luckily Quickbooks allows me to set different prices and rates for different customers. Nevertheless, it’s naive and you’re only undercutting yourself in the end by saying your work and quality isn’t that valuable.
Good advice and I can attest to most of that via the computer repair business…it’s tough in rural areas like Sequim….all the more reason I’m looking to expand and relocate. We’ll see how that goes ;)