When we check business headlines every day, it is usually the big names from around the world that make the headlines. Although big businesses are very important for a country’s economy, small businesses also have a major impact on the economy, especially at the local level. Despite small businesses not making headlines, they are very important to the local communities by providing different economic benefits.
Small businesses are the backbone of any country’s economy because they tend to create more opportunities for the local communities and generate more income for the locals than big businesses, which can actually put pressure on the local communities since a major share of the revenue goes to non-local business owners.
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Where a large business may have people from different countries to manage services like accounting, supply, and maintenance, a small business outsources all of these services locally to help the locals, who are more likely to spend the money in the same community. The impact of small businesses on the economy is usually undermined but we will be highlighting some of the ways by which small businesses help the local economy:
The first way by which small businesses help the local economy is by job creation. Only a handful of people can be employed by large organizations, leaving a lot of unemployed individuals in society. Small businesses help the local economic growth by providing employment opportunities to people who may not be employed by large organizations and big companies.
For the growth of an economy and community, the circulation of money within the community is very important. Small businesses provide jobs to locals only instead of hiring people from elsewhere, helping the people make a living for themselves.
Large businesses are also dependent on local businesses for the completion of various tasks. Large corporations and businesses outsource many of their functions to local businesses, which further creates more job opportunities for the locals. Whether it is a huge software firm that outsources software development of programs like Scrabble Word Finder to a local software house or a huge clothing brand that outsources the task of manufacturing new shirts, it ultimately helps in creating job opportunities for the locals.
They Bring Innovation
Small businesses have to stand out among the crowd, especially among the big brands, and have to be highly innovative. They have to bring out something unique and different from their competition in order to gain the attention of customers or otherwise, they could go out of business. This is the reason why most small businesses tend to be highly innovative and unique so that they can make a name for themselves. Words With Friends was able to make a name for itself because it brought innovation to the popular word game Scrabble and made it better.
Keep Money Circulating In The Local Economy
As stated earlier, money circulation is good for the economy, and when customers buy something from a local business, a majority of that money is going to end up circulating in the local community. The reason behind this is small business owners usually get their raw materials or tasks done by the local community. For instance, if a local restaurant needs a logo change, it would most likely find a local graphic designer to design the new logo. Similarly, small business owners also prefer to dine or shop locally and spend money in the local community, keeping the money in circulation.
Contribution To The Local Government
Local businesses also help the governments in the form of different taxes. When a consumer buys something from a local business, he is giving money back to the local community and this circulation of money is important in the growth of a local economy. A local business that is performing well in the locality and is generating high revenue, will have to pay higher taxes than usual, be it in the form of property taxes or income taxes.
This tax money will be used to help the local departments such as schools, police, hospitals, etc. A local business that is thriving will also increase the value of the nearby property and it will force other business owners to open their businesses nearby. Small businesses also help the local economy by collecting sales tax and this money can be used to fund different local projects.
Remember, small businesses don’t always stay small. Once a small business starts generating good revenues, it then becomes a major name in the national and international marketplace. The majority of the big names in the marketplace such as Nike, Google, Microsoft, Amazon, etc all started as small businesses and they changed the whole world. The good thing about a small business growing into a large business is that it remains in the community in which it was established and this also helps the local economy as it creates a market that favors the development of additional businesses.