Small businesses are the driving force of the U.S economy as they create more than two-thirds of the net new jobs and push U.S. innovation and competitiveness. An Office of Advocacy report shows that they account for 44 percent of U.S. economic activity. Even though this share has declined gradually, it is a significant contribution.
According to the SBA, a small business is one that is owned and operated independently, has fewer than five hundred employees, and exerts little influence in its industry, and (U.S. Small Business Administration, 2011).
The meaning of small businesses to local communities is deeply rooted in buying and selling with friends and neighbors. In certain towns and villages, small enterprises are the only sort that can thrive when serving a reduced population. Small restaurant businesses use restaurant financing services to acquire equipment or get loans. In major cities, small businesses also sell a more varied inventory or specialize in delivering exclusive or personalized customer services, and to do so, they rely on services like flexible funding to meet their requirements. They also provide new job opportunities and act as the building blocks for the larger US businesses.
Keeping it Local
Small businesses usually work hard to keep business as local as they can. This includes working with and helping other small businesses, using as many local products as possible, etc. This emphasis tends to stimulate local economies. It also supports the whole society. Performance in small industries means more local tax revenue, which continues to enhance schools and other local programs.
Small businesses retain a significant portion of their earnings and channel them back into other community projects. Large corporations do provide some local jobs, but it is the small businesses in the area that provide the most local employment. For every Walmart, there are hundreds of smaller shops employing local area residents.
With resources open and available to big corporations, you would expect them to launch nearly all the new products that have entered the market. According to the SBA, small businesses produce more patents per employee than larger companies. Over the past four years, big companies have produced 1.7 patents per hundred workers, while small firms have produced 26.5 patents per employee. They get help from flexible funding to acquire small business loans, or for equipment financing.
Creating Jobs Locally
Perhaps most noticeable in employment figures is the importance of small business growth in local economies. According to the SBA, since 2000, small businesses have created 4 million more jobs than large businesses. Also, they represent approximately 99 percent of all national companies that have paid employees. Small companies prefer to attract workers who work in the proximity of the areas in which they work, thus increasing local job rates.
Alternatives and Competition
Another explanation why small business owners are vital to the economy is that they offer both alternatives and competition to larger companies. For example, a local farmer selling on a roadside stand, on his house, or through a farmer’s market might set cheaper rates than a grocery store, since he does not have to pay shipping charges. It also offers local people a different variety of vendors which guarantees that the money goes straight to the local economy. The option of opening new restaurants to compete with big food chains has become easy as there are many restaurant financing options available to small business owners.
Small companies are very different from the big boys in a few ways. They have varying budgets, different working procedures, and they rely on different facets of their businesses. This diversity contributes to greater economic stability. The more diverse the economy is, the better it can deal with fluctuations and changes.
With 30.2 million small businesses established around the country, the impact of small businesses on the local economy cannot be overlooked. Statistics published by the United States’ Small Business Administration (SBA) has shown that businesses working in local neighborhoods are the backbone of the American economy as a whole. Not only do they bring value-added goods and services to customers, but they also fuel local markets with tax dollars, improve jobs, and build neighborhood pride and growth. This not only tells you that the role of small businesses in the country is a big one but also a vital one, so go on, and support your local businesses whenever you can!
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