How Small Businesses Contribute To The Economy?

Byspymaker

Small businesses are necessary for both local and national economy. According to the report of the small business administration, such start-ups generate 44% of the economic activity. Also, in year 2019, it has created almost two-third jobs in United States.

During pandemic small business has become the backbone of the economic recovery by creating various job opportunities. Unfortunately, most businesses gets fail in the first year. Therefore, if you will invest some time in finding the right business idea, you don’t need to sell a small business.

Job Creation

Job creation is the first way through which small businesses contribute to the growth of economy. According to the SBA, in past 25 years, small start-ups has created approximately 12.9 million job opportunities, which is almost 66% of total jobs created during that period.  While on the other hand large scale businesses has only added 6.7 million jobs during the same period.

Studies tell us that more than 9.1 million people have lost their jobs in first two quarters of 2020 (during the covid-19 pandemic). Fortunately, in next 4 quarters, till the second quarter of 2021, small businesses have created almost 5.5 million jobs, which was 60% recovery. Also, such start-ups have created 1.5million jobs, alone in year 2019.

Innovation

Small businesses are known for their innovations. Such start-ups are out of bureaucracy, and are often adapt the market changes quickly than the large businesses. These businesses have ability to change their major operations with small investment.  As compared to the large-scale businesses, they probably do more experiments with:

  • Ideas
  • Technology
  • Processes

As a result, they are always has an edge of innovation in their respected industry that helps them to meet the customer’s requirements.

Creates Competition

 Small scale businesses also create a healthy competition, which helps in the growth of economy. They act as an alternative to the large businesses that dominate the markets and limit the customer’s choice.

As small businesses rely on the customer loyalty, they provide wider range of product options and better service than big companies. This competition increases the innovations and helps the customers to get the products at affordable and fair price.

Increased Taxes

Although small businesses does not pay higher taxes as larger companies, but still the amount they pay is significant. Small businesses pay variety of taxes to the government including property tax, sales tax and income tax. Government uses this amount to fund the infrastructure projects and public services, which is beneficial for everyone in the society.