Small businesses are the lifeblood that keeps America’s economy running. According to a 2019 report released by the Small Business Administration (SBA), small businesses represent 44 percent of U.S. economic activity.
Small businesses thrive in the United States because most states have low barriers to entry for legally creating businesses. The country also enjoys a stable geopolitical climate, and the infrastructure is well-developed. So the ease of doing business in America is greater than in most other countries.
Small businesses are important for a number of reasons: job creation, exports, innovation, and more about maybe the biggest impact they have is in their local communities.
Successful small businesses return money to their local communities via payrolls and taxes, which can support new small businesses to emerge and enhance local government services. Small businesses also provide new job opportunities and are the foundation for America’s largest corporations.
How Innovation Drives Small Business Growth
Small businesses grow because they draw in innovations, drawing in the kind of talent that brings inventions or new solutions to older ways of doing things, which larger corporations are less flexible about including. Between crowdfunding ideas, using technology to automate routine, repetitive tasks, and an increase in telecommuters, small-business owners are able to stay lean in starting and building a company since they do not need to make major investments in big office spaces, production, and full-time staff.
Large companies may receive much of the spotlight when it comes to creating jobs, but smaller businesses are able to hire a larger number of people and are more sustainable when times are hard.
There are currently over 30 million small businesses in the U.S., and it is estimated that two out of every three new jobs created in the economy are created by small businesses. With deep roots in their communities, small businesses and their employees are the engines that power America’s economy: they create two of every three new jobs, and they employ almost half the nation’s private workforce.
Important Metrics for Small Business Growth
A report from the Small Business Administration indicates that small businesses represent almost 44 percent of U.S. economic activity, creating two-thirds of the nation’s new jobs. Across America, small businesses are popping up at rates outpacing overall corporate growth. In the past 10 years, minority-owned businesses have made up over 50% of the two million new businesses that have started across the country, creating 4.7 million jobs.
While states such as California and Texas are doing better than others, states such as Alaska and Missouri are leading in diversity and closing the gender gap in the ranks of entrepreneurs. Missouri, Colorado, and Maryland trail behind Alaska, where women-owned businesses account for over 22% of businesses in each state.
While women-owned businesses made up slightly less than 15% of businesses in Vermont, women-owned businesses made up only 14.7% and 13.4% of businesses in Utah and Idaho, respectively. Looking at all industries, Nevada had the highest proportion of female employees among small businesses in administrative services, support, and waste disposal, as well as arts, entertainment, and recreation, whereas Vermont had the highest proportion of small business employees in education services, information, and retail trade.
Some Notes on Fast-Growing Sectors
The health care and social assistance industries dominated much of the South, Midwest, and Northeast, and the lodging and food services industries employed more small business employees in Florida, Georgia, South Carolina, and a number of Western states. There are over 11.3 million women-owned businesses nationwide – 38% of all firms and growing five times faster than the national average.
This remarkable growth is heartening, but it is happening in spite of the institutional barriers facing women entrepreneurs, including a tax code that has sidelined industries where women-owned businesses have thrived, and a financing gap estimated at $300 billion worldwide for women-owned small businesses. Reflected are 2.3 million Latinx entrepreneurs, 1.9 million Black entrepreneurs, and 1.6 million Asian entrepreneurs. While they have provided an overwhelming amount of benefits to the American economy, small businesses have not received as much support from the government as big corporations.
Small businesses also may be able to serve niche markets that might be unprofitable to larger corporations. Because there are many different types of technologies serving businesses differently, it is important that small-business owners evaluate their needs and how their companies could operate more effectively. Local businesses collect sales taxes on the basis of where they are located, and they can serve as a basis for special taxing districts aimed at one-off projects, like light projects and sidewalks, that enhance historical commercial districts and bring additional customers.
The Benefits Conferred by Prosperous Small Businesses
A prosperous local business will bring in high levels of income, meaning that businesses pay higher taxes, including property taxes for local properties. A thriving small business can also increase the property values across a community, improving each homeowner’s net worth, all the while raising more property taxes for the local government. Institutions that reduce the costs of doing business, whether by embracing a tax policy, startup costs, or regulations, will foster entrepreneurship.
Community development leaders and interest groups generally focus on policies active for entrepreneurs, such as tax credits for some types of small businesses or subsidies from various federal agencies, typically in the form of loans and grants to promote economic development or small businesses. With passive policies, it is the government’s job to provide an environment that is friendly to entrepreneurs, regardless of the particular businesses or groups of individuals.
Business ownership allows individuals, including women and minorities, to attain economic success and also to take pride in personal achievement. According to a Small Business Administration study, small firms have supportive environments that are approximately thirteen times more innovative per employee compared with less innovative environments that larger firms have traditionally operated in (Baumol, 2005).
In doing this, one firm called the Yowie Group supports the economy by providing jobs supporting the production of chocolate in a factory in New York, NY. Outside the factory jobs, a business called Yowie Group has a small, yet powerful, operations team that is less than 20 members strong. I work at a company called Yowie Group, a tiny business trying to have a bigger impact across America and Australia, helping kids understand Australia’s wilderness conservation.
I saw small business owners being disproportionately affected during the pandemic, and Small Business Council has taken a leadership role in communicating how our small businesses are continuing to play a crucial role in a recovering economy, thanks to United Chamber’s efforts in advocacy and involvement.