While small businesses do not generate as much revenue as large corporations, they are extremely important to the United States’ economy. This economic importance can be seen in many ways. Small businesses contribute in a large way to the job market and the tax revenues used in local communities to fund schools and other publicly available services.
For sake of discussion, small business is defined as any business with 500 employees or less. According to the US Small Business Administration (SBA) small businesses represent 99.7% of all employer firms. Since 1995, small businesses have generated 64 percent of new jobs, and paid 44 percent of the total United States private payroll, according to the SBA. The level of economic importance begins to be evident when these numbers are taken into consideration.
The numbers simply do not lie when it comes to the economic importance of small businesses to the US economy. They bring growth and innovation to the communities where they exist. 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. This further amplified the economic importance of small businesses.
Small businesses tend to be more agile, quickly adapting to changing economic environments. This is explained by the fact that these businesses are often very customer-focused. By patronizing small businesses, consumers are giving back to their local economy. A thriving local business will wind up generating more revenue resulting in it paying more in taxes. This includes local taxes that go to fund schools and police and other services. The economic importance of these things cannot be stressed enough.
These businesses don’t always stay small. They grow into large corporations, but remain local to the area they had their birth. This further strengthens the local economy. It can be said that small businesses are the lifeblood of local economies.