Why Small Businesses Matter: The Vital Role They Play in the US Economy

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Small businesses are the backbone of the American economy. They play a crucial role, serving as the foundation for innovation, employment, and economic growth. By offering goods and services tailored to the needs of local communities, these enterprises enhance the overall welfare of the nation. Not only do they contribute to the economy on a national level but also have a significant impact on local communities.

Small business contribution to the economy: A closer look 

The contributions of small businesses to the economy are substantial, ranging from job creation and innovation, to wealth generation. While they may not be as visible as large corporations, they make up a significant portion of businesses in the United States, with 33.2 million active small businesses contributing to the economy in several ways:

Job creation

Small businesses are often referred to as the engine of job creation in the United States, and for good reason. These businesses create jobs at a faster rate than larger companies, making them an important driver of employment growth in the country. In fact, small businesses have created 12.9 million net new jobs between 1996 and 2021, accounting for 66% of net new jobs created since 1996, according to data from the Bureau of Labor Statistics.

One reason small businesses create jobs is that they have a greater need for employees as they grow. Unlike larger companies, they often don't have large teams or resources. So, each new employee can have a significant impact on the business. This means that when a small business is doing well, they are likely to hire more employees to keep up with the demand.

They also tend to have a stronger connection to their local community. As a result, they are more likely to hire locally and provide jobs to those who live in the area. This not only benefits the business by creating a loyal customer base, but it also helps to strengthen the local economy by providing jobs and income to residents.


Small businesses are renowned for their risk-taking attitude and their willingness to pursue unconventional ideas. They are more nimble and adaptable than their larger counterparts, allowing them to quickly respond to changing market conditions and consumer demands. 

Often established by entrepreneurs with new ideas, small businesses are responsible for many new products and services developed each year - in 2021 they were responsible for over 90% of the patents issued by the U.S. Patent and Trademark Office in 2021. Entrepreneurs are known for their ability to identify opportunities and take risks to capitalize on them. They are also more likely to have a personal investment in the business, which motivates them to pursue innovative ideas.

Local economies

The contributions of small businesses are crucial for enhancing the growth of local economies. Spending money at local businesses not only benefits the business owner but also contributes to the local economy. In fact, studies have shown that when $100 is spent at a local business, approximately 68% of that amount stays within the local economy. This is significantly higher than if the same amount was spent at a large business, where only about 48% would remain local. 

Local businesses provide a range of benefits to their communities, including creating new jobs, generating revenue, offering unique products and services, and providing essential services. By patronizing local businesses, individuals can play an active role in supporting the growth and sustainability of their community.

Shopping small is shopping sustainably 

Shopping with local, small businesses is an easy way to reduce your environmental impact. Produce sold by small businesses generally requires less transportation to reach you, meaning it often has a much lower carbon footprint than products sold by chain stores. This also helps support local farmers and manufacturers. 

Additionally, small businesses may use more sustainable materials in their products or packaging, or implement eco-friendly practices such as composting or recycling. By choosing to shop at small businesses, consumers can support a more sustainable and community-focused economy.

Small businesses benefit local communities 

As well as keeping money within the local economy, shopping at small businesses creates strong ties within communities. Local business owners are often deeply rooted in their communities and invested in their success, whereas large corporations are typically run by executives who may not live or work in the neighbourhood.

As a result, small businesses are more likely to contribute to community development initiatives and support local organizations through donations, sponsorships, and volunteer work. By supporting small businesses, community members can help create a more vibrant and connected local community.

Promote diversity by shopping local 

Small businesses often reflect the unique cultural and ethnic makeup of their communities, offering a range of products and services that cater to diverse tastes and preferences. Secondly, small businesses are often owned and operated by members of underrepresented groups, who may face barriers to entry in larger corporate environments. By supporting these entrepreneurs, consumers can help create more equitable business communities. Finally, small businesses tend to prioritize personal connections with their customers, which can foster a sense of belonging and inclusion.

By choosing to shop at small local businesses, consumers can help create a more vibrant and diverse economy that reflects the needs and values of their community.

Ways to support small businesses 

It is important to support small businesses by shopping locally and investing in their products and services. By doing so, we can help ensure that local businesses continue to thrive and contribute to the growth and prosperity of the American economy.

Buy from them: This is the most obvious way to support a small business. Even if ordering that book you really want to read is slightly cheaper online, buying it from your local bookshop will positively impact your local economy. There are also lots of ways to support small businesses online, platforms such as Etsy make shopping small easy!

Support them on social media: Supporting a small business doesn’t always have to mean spending money. Liking, sharing, and commenting on their posts helps increase their brand presence and audience. 

Purchase gift cards: Gift cards allow you to introduce your favorite small businesses to friends and family. Many small businesses also allow you to purchase gift cards online making them an easy but still thoughtful last-minute gift!

Leave a positive review: Leaving a positive review on TripAdvisor or Google helps build brand trust and encourage future customers to shop small 

Visit local markets and craft fairs: Markets and craft fairs are usually attended by local small business owners and are the perfect opportunity to purchase a unique item from a local seller. 

The bottom line

Small businesses are an essential part of the US economy, and they contribute to it in several significant ways. They create jobs, provide innovation, and support local communities.

Their resilience and adaptability have been put to the test in recent times, with rising inflation and cost of goods. Yet, despite the challenges, small businesses have continued to innovate and find ways to provide essential goods and services to their communities. 


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