Small businesses are major drivers in the U.S. economy, spurring local job creation and innovation while also fostering entrepreneurship among women, minorities, veterans, and other portions of the population.
Nationally, small businesses account for 48 percent of all American jobs and contribute 43.5 percent of U.S. Gross Domestic Product (GDP). Even though these businesses are considered the “backbone of the economy,” small businesses have faced an economic and existential crisis during the COVID-19 pandemic.
How did Small businesses Become The Backbone Of The Economy?
Despite offering an enormous amount of advantages to the economy, small firms do not receive the same level of government backing as major firms. Small businesses are not eligible for the same tax incentives as bigger enterprises.
Small enterprises are often not eligible for the same municipal and state subsidies for things like manufacturing facilities and development research. In times of financial distress, large corporations can get federal bailout funds, but small enterprises do not have this choice.
Contributing to Local Government with Taxes
When consumers patronize local small businesses, they are essentially giving money back to their local community. A thriving local business will generate high levels of revenue, which means that the business will pay higher taxes, including local property taxes.
This money is then used for local police and fire departments as well as schools. A thriving small business also can improve property values throughout a community, improving every homeowner’s bottom line while generating more property taxes for local governments.
Why Are Small Businesses Important?
Small business constitutes a major force in the U.S. economy. There are more than twenty-seven million small businesses in this country, and they generate about 50 percent of our gross domestic product (GDP) (Office of Advocacy, 2010).
The millions of individuals who have started businesses in the United States have shaped the business world as we know it today. Some small business founders like Henry Ford and Thomas Edison have even gained places in history.
ECONOMIC GROWTH
Small business brings a great deal of innovation to any field. Small businesses are usually in more direct contact with consumers and the general population. This means they are more attuned to what products and services would best serve the common good. With fewer levels of hierarchy to wade through, small businesses are also generally more open to trying out new ideas in a shorter time frame.
All of this innovation benefits the area a business is based since they start from home out. New products, concepts, processes, and so on, get their start in the communities they come from.