Although small businesses may not be able to generate as much revenue as large companies, the value and role that they play in the local economies should not be underestimated. They are major contributors to the economy and are, in fact, building blocks for the large corporations in the country. Research indicates that small businesses account for 97.7 percent of all employer firms in the United States. This is a clear indication that entrepreneurial firms should be provided with the right climate and resources to grow as they are major players in the economy. Here are some of the main ways that these businesses affect local economies today
Encourage Innovation
Some small businesses are born out of great ideas that many people do not believe in yet. Most corporate giants in the world today started as an idea that seemed too ambitious. These have grown into large enterprises that are a force to be reckoned with in the economic world. Small businesses represent innovators who have ideas and chose to implement them. It is through innovation that entrepreneurs create resources that generate wealth and empower the existing businesses with the potential for generating more revenue.
There are many small businesses today competing for the same customers and resources, and this has encouraged innovation in those sectors. The result is the emergence of new technologies, marketing strategies, business ideas and models, and new products, all of which aim at market retention and an increased competitive advantage in the flooded market. These changes have brought about significant economic growth at the local and national level.
Create Employment
Small businesses are defined as any organizations that employ less than 500 workers, and for this reason, one can overlook the role they play in job creation. Statistics indicate that between 2009 and 2013, small businesses accounted for 60 percent of the net new jobs in the United States. Additionally, these firms have paid 44 percent of the total U.S. private payroll since 1995. The emergence of more startups means the creation of more job opportunities locally, and this contributes to improving the living standards.
Small businesses facilitate growth in the local communities where they are established. For example, if you live in a small city in Utah and work in a firm that provides Utah divorce lawyers, the chances are that you will send your earnings right there in the town. The revenue and resulting taxes spread across the community and are used to enrich it. With several small businesses established across the United States, economic development is realized at the local level.
Stability during Economic Crisis
The economic climate is always changing, and when tough times hit, large corporations are usually affected most. This is because they accumulate a lot of revenue and stand to lose much during periods of economic crisis. On the other hand, small businesses are highly adaptable to the changing economic climate. This is primarily because most of the firms are usually customer-oriented. Even when issues such as inflation, economic recession, or political instability arise, the local consumer remains loyal to their favorite small businesses. The companies can stay afloat, generate revenue, and grow even under an unstable economy. Any state with numerous small businesses will be less shaken in times of economic crisis as compared to one which has more large corporations.
Future Economic Growth
Small businesses don’t remain in their simple, small structure forever. Every large player in the economy today started as a small business. Startups are the future of the economy because they possess great potential for growth and expansion in the local, national, and international marketplace. As they grow, they create more job opportunities, generate more revenue for the state, and further help the local communities in which they are established. Encouraging startups is one of the best ways to future-proof the economy.
Small businesses play a significant role in making a nation great, and their impact on the local economy is evident. There is a need to provide resources and create an ideal environment for the growth of small businesses to realize exponential economic growth in the present and future.
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