Why are Small Businesses Important for the Economy

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Why Are Small Businesses Important for the Economy?

Considering the United States is home to seven of the world’s top 10 highest-value companies, it may seem odd to say that small businesses are what keep the perpetual wheel turning. Think of the American economy, and the mind jumps to tech giants and financial titans. Nevertheless, the Davids, not the Goliaths, of the business world keep this country going. 

SMEs (small and medium-sized enterprises) account for more than 99% of the US workforce and provide well over half the nation’s jobs. Small businesses are an asset, and their survival is essential for the world economy to thrive.

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What Impact Do Small Businesses Have on the World Economy?

Worldwide, over 90% of registered businesses are small, independently owned ventures. Small or medium-sized enterprises employ almost 70% of the global population. The sheer volume of job opportunities created is enough proof of how essential these companies are. If they were all to go under in favor of large-scale corporations, unemployment rates would reach unprecedented highs, and the global economy would crumble.

Small businesses also lead the market in niche products and specialized industries. More personalized service is what most people find in an SME, particularly one in their community. When visiting a locally owned company, the level of care and attention afforded to customers is far beyond anything a big operation could achieve. Additionally, the detailed knowledge of nearby areas, people, and products that small businesses can gather gives them a huge advantage, one that big companies cannot match.

Another advantage is the ability to adapt. Giant corporations often do not have the luxury of being able to change quickly under tense circumstances. The more structure and infrastructure a company has, the harder it is to switch it up. Small businesses “travel light” and can roll with the punches a little more fluidly. Although there may not be the same capital behind the venture, there is a better chance of bouncing back after a change. 

The economy grows with communities. A neighborhood tends to grow and develop as more local businesses open, expand, and employ people in the area. More than two-thirds of each dollar earned by a small business gets poured back into the town it is in, triggering a cycle that vitalizes the local economy and betters the country as a whole.

How Else Do Small Businesses Impact Communities?

The economy is only one area where SMEs are invaluable. Communities with successful small businesses thrive and rapidly become excellent places to live. A town that gets behind its local enterprises is more likely to see growth, opportunity, and prosperity.

In many towns, young people who want to succeed and find employment feel the only option is to move onwards and upwards to a big city. If the job market becomes stagnant and there is no appeal to draw anyone in, towns die out, and generations of memory are lost. 

Encouraging and supporting local businesses is beneficial to everyone in the area. It opens up job opportunities, allows for social mobility and climbing, enhances the sense of community in a neighborhood, and brings in money to the area.

The Importance of Diverse Business and Competition

One of the primary ways SMEs boost the economy is by providing new, innovative ideas and adding competition to the market. Both diversity and contest are essential to maintain a healthy and fair economy. 

A monopolized market is not healthy. Without opposing companies, there is no need for competitive pricing and services. The more enterprises there are vying for the top spot, the more creative they have to be. Quality of goods and services is improved, customers get better deals, and the marketplace stays busy and booming.

The entire US economy is based on this very principle. Free enterprise and open markets are what opens the way for new, exciting ideas and the development of future Fortune 500s. The diversity of the more than 400 million SME’s worldwide is what drives forward that innovation.

Final Thoughts

Small businesses are often called the backbone of the world’s economy, but it is equally accurate to call them the heart. The local companies that create jobs in rural towns, offer practical apprenticeships to young workers fresh out of school, embed themselves in the central structure of a community, and thrive alongside it are the life force that keeps the economy going. 

When so much about the financial future is unknown, supporting local businesses is more important than ever. Recent times have seen the world’s economy take a hit and employment rates right along with it. Rebuilding is possible, but only with the help of the little guys. 

Without small businesses, the blood stops pumping, and the economy dries up. They are the backbone, the heart, and the soul of this country. We should all do our bit to ensure their survival.

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