Small businesses are the foundation of financial prosperity for both local and national economies in the rapidly paced American economy.
These businesses, which are most commonly defined as having less than 500 employees, enhance the economy in many aspects such as employment creation and nurturing of community.
In this article, we are going to explore all the ways in which small businesses support and drive the U.S. economic growth.
1. Employ Local Workers
The most important function of small businesses is job creation. SBA stated that small businesses generated 12.7 million net new jobs during 1995-2020 while large businesses created 7.9 million.
Small businesses contribute to decreasing levels of unemployment and supporting general economic stability in their communities. In addition, small enterprises tend to focus on training their workers and skill development, which is the basis for further economic growth.
2. Strengthen Local Economies
Small enterprises play an important role in strengthening local economies. Although they market their products and services to the local consumers, they do also buy from other businesses located near by. Thus, they multiply effect that further stimulates the local economic growth.
This growing circulation of money within the community results in a more stable and resilient local economy, which promotes the growth of other small businesses and generates employment.
3. Serve Local Communities
Small business owners more often than not have an intimate knowledge of what local communities want and like.
In order to satisfy customers, they will tailor their products and services to meet these diverse demands and, in this regard, a more personalized and interactive experience will be provided rather than one that would be found within the larger corporations.
This customer-centered approach fosters solid relationships which result in customer loyalty and repetitive trade that promotes long-term economic growth.
4. Drive Economic Diversification
Small enterprises are an ultimate source of economic vitality in terms of their diversity of products because they belong to various fields. This diversity makes the economy more innovative and helps to minimize economic crises.
5. Support Local Government With Tax Revenues
The tax revenue from small businesses benefits the local government and provides funds for education, infrastructure, and public safety.
The amount of funds that is received in the form of property taxes, sales taxes, etc helps to improve the prosperity of the community.
6. Embrace Change and Adaptability
An advantage small businesses have is their ability to adapt, which larger companies tend to lack. They may change their business models, products, or services to meet market changes or capture new opportunities.
Such flexibility makes small businesses survive in times of downturns and prosper in times of growth, thus, contributing to the general stability and resiliency of the economy.
7. Inspire Local Entrepreneurship
Small businesses are a source of motivation for young entrepreneurs. The successes and failures show that persistence, innovation, and risk-taking may result in benefits.
They create a vibrant and innovative business environment that sets an example for others to follow, further contributing to the economy.
8. Support Big Corporations
A lot of small businesses are suppliers to larger corporations, therefore these companies can focus on their core competencies. A mutually beneficial relationship between small businesses and corporations fosters growth and creates new opportunities, thus boosting the entire economy.
9. A Small Business May Grow into a Corporation
Profit-seeking is the core of small businesses. The motivation pushes them into making something for society and shines in their profession to distinguish themselves. Hence, certain small-sized businesses have the capacity to develop into big companies, thus, stimulating the economy and generating more jobs.
