Why Small Businesses Are Important to Our Economy and Communities
At the heart of America’s growth and prosperity are small businesses. Small and mighty, these businesses are vital not only to our communities, but at a broader economic level.
Here’s why keeping the doors at a small business open matters for the U.S. economy and local communities. Plus, we take a look at some of the challenges small businesses face and how you can help make a difference and support small businesses.
How Small Businesses Impact the National Economy
Often referred to as the backbone of America, small businesses have created two-thirds of all net new jobs over the last 25 years. The health of small business employment is crucial to the overall health of the labor market.
Carolina Martinez, CEO of CAMEO, said small businesses function as an economic lifeline — especially for disadvantaged communities. For women, immigrants and people of color — who are often excluded from other means of wealth-building — entrepreneurship can be a path to prosperity.
Martinez uses the example of the median net worth for Black business owners. It is 12 times greater than that of Black people who do not own businesses.
“Women and people of color are at the heart of the post-pandemic small business boom and can help underserved entrepreneurs climb the ladder of opportunity and bring entire communities with them,” said Martinez.
Take Our Poll: Do You Tip For Service?
When the local economy is strong, it contributes to the larger, broader economy in a positive way. Gabe Krajicek, CEO of Kasasa, said small business success means more local money and tax dollars circulating in the local economy. This money goes towards helping improve schools, green spaces, public transit, healthcare and other local services.
How Small Businesses Impact Local Communities
Did you know every $100 you spend at a local business means $68 stays in your community? If you shop at a chain store, only $43 out of $100 spent will stay in your community, according to the Andersonville Study of Retail Economics.
“Local restaurants, stores and small businesses not only bring joy to our Main Streets but keep money in the community, provide a stronger tax base and make our communities more vibrant,” said Martinez.
When community members support and invest in their local small businesses, they are investing in their communities and themselves. On a community level, Krajicek said small businesses are rooted in the local landscape. They create and build a vibrant identity and culture, making everyone who resides in the community happier and connected to their neighbors.
“Small businesses bring growth, creativity and innovation to the community,” said Krajicek. “This diversified marketplace leads to more human connection and inherent happiness.”
Small Business Challenges: How You Can Help
Starting a small business isn’t without its challenges. Of the businesses nominated for GOBankingRates’ Small Business Spotlight 2022, many we interviewed were candid with their struggles.
A microbrewery in Southern California dealt with several equipment delays before they could open their doors to the public. A breakfast restaurant owned by a husband and wife duo absorbed costs to keep rising inflation from impacting their menu prices.
From running a business during a global pandemic to dealing with inflation costs, small businesses are working hard to weather the storm. They are resilient and believe they will make it through to the other side. The good news is despite these challenges we, consumers and loyal patrons of these beloved establishments, can support small businesses.
“When going out to eat, shop, or partake in other activities, community members should try to identify their local options,” said Krajicek. “By choosing to stay local, community members are keeping money flowing within their community, ultimately helping to keep their local businesses afloat.”
Underserved entrepreneurs, Martinez said, are often excluded from the resources and networks necessary for success. However, there are incredible, affordable and reputable resources out there to help small business owners in need. Some of these places include Women’s Business Centers and Community Development Financial Institutions; which connect underserved communities with free and low-cost business advising and access to affordable capital.
“One of the best ways we can support small businesses is to encourage our philanthropists and lawmakers to fund these life-changing institutions,” said Martinez. “Business owners that receive coaching and small amounts of capital are more likely to succeed, create two additional jobs within two years and be in business five years down the road.”
As consumers do their part to support small businesses, it is equally as important for small business owners to recognize and support their fellow entrepreneurs. Community members supporting one another, Krajicek said, creates a sustainable environment where everyone thrives.
More From GOBankingRates