How Small Businesses Drive The American Economy

Martin Rowinski is the CEO of Boardsi, a corporate board recruitment company, and an investor and author.

Just as enough tiny droplets of water slowly fill a bucket, the growth of small businesses fills the U.S. economy. Big corporations might get a lot of attention when it comes to creating jobs, but small businesses employ more people and are more resilient when times get tough. Before coming up with something innovative that propelled them into growth, all big businesses once started out small. Not only are small businesses driving the U.S. economy, but they also keep the American dream alive.

According to the U.S. Small Business Association (SBA), small businesses of 500 employees or fewer make up 99.9% of all U.S. businesses and 99.7% of firms with paid employees. Of the new jobs created between 1995 and 2020, small businesses accounted for 62%—12.7 million compared to 7.9 million by large enterprises. A 2019 SBA report found that small businesses accounted for 44% of U.S. economic activity. Without small businesses, the American economy and workforce would be a pretty wild landscape to imagine.

Not only do small businesses provide more jobs, they also bring careers and opportunities. Successful small businesses put money back into their local community through paychecks and taxes, which can support the creation of new small businesses and improve local public services. No matter how small it starts—one, two, five, 10 employees—within that town, the city or the county, your small business creates new economies where once there was nothing.

Small businesses are also better able to focus more energy on their customers and their needs, which can make them more adaptable to change in times of economic uncertainty. A global health crisis may have rocked the economy, but the formation of new U.S. businesses intending to hire employees rose to historic peaks in 2021, with nearly 1.4 million applications by September and over 400,000 more than at the same point in 2019. When tough times for big businesses lead to layoffs, small businesses become an opportunity.

Small Businesses Help All Businesses

To become big, all businesses once started out small. In 1978, when the track-and-field coach and his former student who founded Blue Ribbon Sports by making running shoes with a waffle iron changed their company name to Nike, they never imagined it would become the massive multinational corporation that it is today. The two high school friends and devoted computer tinkerers who ended up founding their own software company in 1975 under the name Microsoft could never have expected how large their once small business venture would soon become.

Small businesses grow because they draw innovation, attracting talent that brings inventions or new solutions to old ways of doing business that larger corporations have less flexibility to incorporate. This is why big companies today want to acquire small businesses, for their innovators. Apple and Google may be known for their innovation, but they also buy up small startups with innovative new technology to boost this development.

Big businesses and even big government projects depend on small businesses as subcontractors, vendors and customers. Federal bills focusing on new jobs to come out of a recession talk a lot about building bridges and freeways, but less about the small businesses across the country that bid for these contracts and carry them out. No matter where you find significant economic development, small businesses are behind it.

Small Businesses: The American Dream

The opportunity for people to found, run or work for small businesses is the pathway to achieving the American dream. It creates an environment of mythical energy where desires are fulfilled and innovation is at its peak. Creating small businesses, becoming profitable and hiring people to share in those economic gains is what makes this country free. Foreigners who lack those same opportunities in their own country come to America seeking their own dream—and I should know: I’m one of them.

Because of their importance, big business campaigns should consider their ability to support small businesses, therefore encouraging thriving economies. A strong economy supports both big and small businesses, but no society can thrive without the presence of small businesses. Corporations are reliant on small businesses to allow them to continue to succeed. By helping your neighbor, you ultimately are helping yourself (and your business). Businesses, in particular, should consider supporting small businesses by, for example:

• Sourcing ingredients for your restaurant from local farmers.

• Selling small businesses’ products in your storefront.

• Sharing social media posts from small businesses.

Small businesses are everywhere, but everyone in the U.S. has the right to create their own from the ground up, as well as the necessary access to the technology, investors, loans and government support to help out. This well-developed support system attracts a huge pool of dreamers: immigrants with the hopes of achieving their lifelong goals, creating something new and finding success. For them, arriving here is like diving into a crystal-clear pool of opportunity—they can see it and go after it. Small businesses make this possible.

While government aid is necessary to continue supporting small business growth, so is consumer support. Inexpensive products delivered to your home from Amazon are nice, but also consider supporting small businesses. Don’t be so quick to judge and leave negative reviews because of one bad day. Instead, make an effort to put money back into the main drivers of our economy and look to them for employment opportunities to help them keep their doors open. The more we encourage small businesses, the longer we keep the American dream alive.


 

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