Small businesses are an important part of the economic landscape, helping to create jobs, drive innovation, and increase the economic diversity of local areas. The benefits of small businesses to local economies are numerous and often overlooked. This article will explore the many ways in which small businesses can contribute to local economic development and why they are so important.
What Is a Small Business?
A small business is defined by the Small Business Administration as a business with 500 or fewer employees. This can include sole proprietorships, partnerships, Limited Liability Companies (LLCs), corporations, and even franchises.[1] Although the definition may vary slightly between countries, the majority of the world considers around 500 employees or less as the definition of a small business.
Why Are Small Businesses Good for Local Economies?
Small businesses are beneficial to local economies in a variety of ways. Here is a list of the top five reasons why small businesses are such a valuable asset.
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They Create Jobs: Small businesses help create jobs, as they often require employees to fulfill their daily tasks. They also help sustain economies by hiring local employees, which not only provides jobs for local residents but strengthens the local labor market.
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They Stimulate Innovation: Small businesses are often associated with innovation, as entrepreneurs often look for creative solutions to problems and new ways to do business. This helps spur economic development in the area, as new ideas can often lead to more efficient processes and better products that can provide a competitive advantage.
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They Add Economic Diversity: The presence of small businesses can also add to the economic diversity of a region. Having a wide variety of businesses with different economic activities can help create stability, as one industry’s downturn doesn’t necessarily have to mean another’s rise.
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They Help Existing Businesses: Small businesses often band together to pool resources and aid one another in achieving their goals. This collective effort can help existing businesses succeed, as members of the collective often provide resources and advice to one another.
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They Have a Positive Impact on the Community: Small businesses tend to have a positive effect on the local community. These businesses usually have close ties with local charities and organizations, often volunteering their services or providing donations. Additionally, they often spend their profits in the local area, which helps to build a strong local economy.
Small businesses are an integral part of the economic landscape, playing an important role in local economic development. Not only do they create jobs and stimulate innovation, but they also help create economic diversity, support existing businesses, and have a positive impact on the local community. It’s easy to see why small businesses are such important contributors to local economies, and why they should be valued and supported.
