Why Are Small Businesses Important for the Economy and Community

Small businesses are the backbone of any economy and community, and for good reason. They create jobs and stimulate local economies by providing goods and services that meet the unique needs of their customers.

According to a study, small businesses account for 99.7% of all employers in the United States. This means that without small businesses, many communities would be left without employment opportunities.

Small businesses also have a significant impact on the local economy, with a single small business generating an average of $1.3 million in economic activity each year. This is a staggering amount, especially when you consider that small businesses are often family-owned and operated.

In addition to their economic impact, small businesses also play a vital role in shaping the character and identity of their communities.

Small businesses are the backbone of a thriving economy. They generate a significant portion of economic activity in the country, with a 2019 report from the U.S. Small Business Administration finding that small businesses accounted for 44% of all economic activity.

Small businesses also create a substantial number of jobs, with two-thirds of all jobs in the U.S. being generated by small businesses in 2019. This is a crucial aspect of economic growth, as it provides employment opportunities for people in local communities.

In contrast to large corporations, small businesses tend to generate higher incomes for people in a community. This is because small businesses often outsource functions such as accounting and supply to local professionals, who then spend their money in the same community.

A key benefit of small businesses is their ability to innovate and try out new ideas quickly. With fewer levels of hierarchy to navigate, small businesses can respond to changing consumer needs and market trends more effectively.

Here are some key statistics that highlight the economic importance of small businesses:

Small businesses are the backbone of job creation in the US. They account for roughly 66% of all jobs created in the last 25 years, adding a net 12.9 million new jobs.

Small businesses are more likely to hire and fire than big companies, but over time, they add more jobs than they take away. In fact, they created a net 12.9 million new jobs in the last 25 years, while large businesses only added a net 6.7 million jobs.

During the COVID-19 pandemic, small businesses played a crucial role in job creation. They created 5.5 million jobs in the four quarters following the initial decline, which was a 60% recovery from the pandemic-era decline.

Small businesses also create opportunities for individuals in local communities. They are more likely to hire based on personal merit and professional experience, giving hard workers a chance to succeed even without extensive experience.

As small businesses flourish, so does demand for local professional services, creating opportunities for professional service startups in a local community.

Small businesses have been a game-changer for women and minorities, providing a platform for them to achieve financial success and pride in their accomplishments.

The number of businesses owned by women and minorities has seen a substantial increase over the past two decades. According to the U.S. Census Bureau, the growth in businesses owned by women and minorities between 1982 and 2007 was significant.

In fact, 5.3 million women-owned businesses generated $1.4 trillion in sales in 2007, accounting for 39% of all U.S. businesses. This is a testament to the entrepreneurial spirit of women in the United States.

Minority-owned businesses also saw a significant increase during this period, with 3.1 million businesses generating $345 billion in sales. This growth has been driven by the increasing number of minority entrepreneurs who are taking advantage of the opportunities presented by small business ownership.

The COVID-19 pandemic has also highlighted the importance of small businesses in providing opportunities for women and minorities. In 2021, Americans created 5.4 million new businesses, with many of these businesses being started by women and minorities.

This growth is a positive trend that is likely to continue, providing opportunities for women and minorities to achieve financial success and pride in their accomplishments.

Here is a breakdown of the number of businesses owned by women and minorities in 2007:

Building a strong foundation for job creation and opportunities is crucial for businesses to thrive. Business.com's "Building Better Businesses" section offers valuable insights on business strategy and culture.

Entrepreneurs and small business owners can benefit from learning about building a solid business plan, which is essential for securing funding and attracting investors. A well-crafted business plan can make a significant difference in a company's success.

Business strategy and culture are intertwined, and understanding how to balance both is vital for job creation and opportunities. This means creating a positive work environment that fosters innovation and growth.

By focusing on building a strong team, businesses can create a culture of collaboration and mutual respect, leading to increased job satisfaction and retention. This, in turn, can lead to a more productive and efficient workforce.

Business.com's network provides valuable resources and insights for entrepreneurs and small business owners, helping them build better businesses and create more job opportunities.

Small businesses are the backbone of local economies, and it's essential to understand why. They help stimulate local economies by keeping as much business local as possible, working with fellow small businesses, and using local goods. This focus benefits the community as a whole, generating more local tax money that improves schools and other local services.

Small businesses also create jobs, with two-thirds of all jobs in the U.S. being generated by them in 2019. This is a significant contribution to the national economy, with small businesses accounting for 44% of all economic activity in the country that same year.

A study by Stephan Goetz found that small businesses directly benefit local economies, whereas large businesses can actually depress them. This is because small businesses tend to generate higher incomes for people in a community, whereas big box and large corporations often outsource services to professionals outside the local community.

Small businesses also bring innovation to the table, with a direct connection to consumers and a willingness to try new ideas. This leads to the development of new products, concepts, and processes that benefit the local community.

Here are some key statistics that highlight the importance of small businesses in local economies:

By supporting small businesses, we can help stimulate local economies and create a healthier environment for these businesses to thrive.

Small businesses have a unique ability to adapt to changing economic climates. They're often at the front line of making adjustments to keep their customers happy, which leads to stronger customer loyalty. This is particularly evident in times of economic downturn, when consumers tend to stick with their local favorites.

In fact, small businesses can develop more patents per employee than larger companies. During a recent four-year period, small firms generated an impressive 26.5 patents per hundred employees, compared to 1.7 patents per hundred employees for large firms. This kind of innovation is what drives the development of new products and services.

Small business owners are also adept at finding new ways of doing old things. They create supportive environments that appeal to individuals with the talent to invent new products or improve the way things are done. This can lead to breakthroughs like the invention of the airplane, air-conditioning, and the defibrillator, all of which were developed by small firms.

Small businesses are uniquely positioned to adapt to changing economic climates due to their direct connection to the community.

This connection allows them to respond quickly to shifting consumer demands, making adjustments to keep their customers happy in a way that larger companies often can't.

In fact, customer loyalty tends to be much stronger in small businesses, as consumers make an effort to continue supporting their local favorites even in times of economic downturn.

Small businesses are incredibly innovative, often outpacing their larger counterparts in terms of patents and new products. According to the SBA, small companies develop more patents per employee than do larger companies, with a staggering 26.5 patents per hundred employees over a recent four-year period.

Fast decision making is a key factor in small business innovation, allowing them to quickly pivot and change their operations in major ways with minimal investment. This agility enables small businesses to test new ideas and approaches, often with remarkable success.

The airplane and air-conditioning, defibrillator and DNA fingerprinting, and even the zipper are just a few examples of groundbreaking innovations that originated in small businesses. These innovations have had a profound impact on society and the economy.

Small businesses also tend to offer environments that appeal to individuals with the talent to invent new products or improve the way things are done. Their research programs are focused, and their compensation structures reward top performers.

The success of small businesses in fostering creativity has inspired large companies to take notice, with many now adopting similar approaches to spark innovation. Some large organizations have even created separate work units dedicated to generating new ideas and products.