THE IMPORTANCE OF SMALL BUSINESSES TO LOCAL ECONOMIES

Most organizations worldwide are small by size, but their importance to both developed and developing economies and societies is indisputable. 

According to the World Trade Organization, small-and medium-sized enterprises (SMEs) represent over 90 per cent of the business population, 60-70% of employment and 55% of GDP in developed economies.

SMEs therefore do not just significantly contribute to the economy – they ARE the economy.

A small business is defined as any company with fewer than 500 employees.  Amazingly, small businesses represent a whopping 99.7% of all employer firms.

It is also estimated that since 1995, small businesses are responsible for creating 64% of all new jobs in the United States.  Without small businesses across all fields, millions of Americans would be out of a job.

Employing Local Workers

Small businesses contribute to local economies by bringing growth and innovation to the community in which the business is established.

Small businesses also help stimulate economic growth by providing employment opportunities to people who may not be employable by larger corporations.

Small businesses tend to attract talent who invent new products or implement new solutions for existing ideas.

Larger businesses also often benefit from small businesses within the same local community, as many large corporations depend on small businesses for the completion of various business functions through outsourcing.

Small businesses create job opportunities and drive the country’s economic growth in smaller geographic areas.

They make the market more competitive. A local farmer, for example, may offer cheaper products because he doesn’t have to spend money on shipping.

Similarly, an agile start-up may be able to innovate new technology faster than a bulky bureaucratic counterpart, thereby forcing changes in thinking and behaviour.

Opportunities for Women and Minorities

Small business is the portal through which many people enter the economic mainstream. Business ownership allows individuals, including women and minorities, to achieve financial success, as well as pride in their accomplishments.

While the majority of small businesses are still owned by white males, the past two decades have seen a substantial increase in the number of businesses owned by women and minorities. 

Winning Against the Odds

A recent study shows that for every dollar spent at a small business, 68 percent funnels back into the community. Compare that to the 46 percent that funnels back from large businesses. Many surveys even show that individuals have more trust in local small businesses than they have in larger business concerns.  

Small businesses don’t get a whole lot of attention. CEO’s of large companies fill the cover of magazines. Large businesses typically consume the business news with their financial data.

Yet, small businesses are the epitome of what is keeping America going. Small businesses are the unsung heroes of the United States economy. 

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