The smaller your town, the better your chance to compete in or even dominate your market. If you can't conquer your own block, then you can't conquer around the corner from your own block. And if you can't conquer around the corner from your own block, than you can't conquer your neighborhood and town. And well, if you can't conquer your own neighborhood and town, then the chances of you competing on a national/global scale are very slim.
If you’re based in a small town or a small media market, don't look at your small town as a minus. Instead, focus on it being a plus for you. You've got home field advantage.
Identify the product that has the best chance for success. This doesn't always mean your best product, or the product that you like the most. This can be just one beat, one song, a mix tape, a hook that you wrote for somebody, etc. The idea is to take any success, no matter how small, and convert it into a larger success.
Clearly identify your goal(s). Are you a beat-maker/producer who's trying to sell beats? Are you trying to get an in-house production job with a reputable label or production company? Are you a producer/M.C. trying to promote and sell your own songs? The clearer you are about your goals, the more achievable they become.
Establish and solidify yourself as one of the top 5 beat-makers/producers* in your town. Also to that end, seek out the other top beat-maker/producers in your town. Try to establish an alliance with them. If they are not interested in building an alliance with you, move on and do NOT share your plan, strategy and/or pivotal connections with them.
*Ed. Note: although beat makers and producers are mentioned here, this advice can be applied to all musicians.
Dive into someone else's established fan base. Be sure that that fan base already digs your type of music. Remember, fan bases aren't built by simply selling stuff to them. Therefore, whatever you sell to your fans, it’s also a good idea for you to offer something to them for free. Whether it's merchandise or advise, always give your fan base something. Also, remember, once you build your fan base, do not ever treat them as just a consumer. Instead, try viewing them as friends who you share a common interest with.
Where there is no market, create one. In a small town, you have to focus on the two groups that will give you the benefit of the doubt: high school students and college students. Most small towns in America have at least one or two central high schools. Moreover, most towns are within 50-100 miles of a state run university or community college. Get cozy with the college radio station(s) that are nearest to you. If that can't be achieved, help a high school student start a hip hop-rap music club or even a hip hop-rap production club.
Every achievement that you reach, make sure you publicize it. Remember, if you can't exchange the town that you're in for one of the hot-bed music towns like, New York, Atlanta, Houston, Miami, or LA, then take over the town where you're at. If you make the right amount noise, you'll be able to compete for the top spot in your town and/or market. Next stop, national exposure and an expanded fan base.