It has called for a new fund to support towns to develop their own strategies.
It also says trying to attract big department stores is a "weak strategy" given the current problems experienced by House of Fraser and Debenhams.
It comes as the Welsh Government launches a campaign to encourage the public to support the retail sector.
The FSB says the focus on city deals with financial backing for the regions around Cardiff and Swansea Bay risks ignoring small towns where 40% of the population lives.
Vacancy rates were 13% in town centres in Wales in 2017 compared with 11.1% in England and 11.9% in Scotland.
Ben Cottam, from the FSB, has written to the Finance Secretary Mark Drakeford highlighting the UK chancellor's Budget announcement of two initiatives to help high streets in England - a business rate relief element and the "Future of the High Streets Fund".