By Jay Jung, President & Founder — Embarc Advisors
In every nation, small businesses are the Davy Crockets and Daniel Boones of the economic landscape. While larger corporations and entities mirroring those of the Carnegies and Rockefellers always appear taller, that is only because they stand on the shoulders of the pioneers who came before them.
Small businesses are vital to a nation’s economic growth. Thanks to their ability to adapt and innovate, they can more quickly and easily move into areas in need of development, consume underutilized assets, and boost economies around the globe. Abundant research reveals that small businesses provide the lion’s share of employment in all types of economies compared to larger organizations. In fact, when looking at advanced nations worldwide, 90% of enterprises are in the small business sector.
Large corporations may look like the economy’s powerhouses. But, in reality, it is the small businesses that are the force creating jobs, alleviating poverty, driving innovation, and reducing income inequality.
Small businesses and the US economy
Where would the US economy be without small businesses? The US Small Business Association (SBA) says that small businesses with 500 or fewer employees amount to 99.9% of the enterprises in the United States. It also finds that small businesses make up 99.7% of US companies with paid employees. Furthermore, small businesses were responsible for 62% of the new jobs created between 1995 and 2020. During 2019, the SBA reported that small businesses accounted for 44% of the nation’s combined economic activity.
Small businesses bolster local economies all across the US. Whereas large organizations concentrate their wealth in select cities, small businesses blanket the nation with paychecks and additional revenue from taxes, putting money back into small communities and big cities alike.
These smaller enterprises provide a spark of economic growth and fan the flame where no opportunities previously existed. As the pioneers in the economic space, they shoulder the greatest share of risk and clear the way for further growth and prosperity.
The economic impact of small businesses is magnified even further when one considers that every massive organization got its start somewhere; Microsoft, Amazon, and countless other mega-corporations all began as an idea in someone’s garage. Today’s business giants grew into the companies they are because they were once innovative and nimble. At one time, they were willing to brainstorm and gamble on ground-breaking solutions. As today’s larger corporations, however, they grow too unwieldy to continue implementing transformative innovation. For this reason, today’s big businesses constantly buy up promising startups to reinvigorate their ranks with fresh talent and ideas.
In times of economic uncertainty, this agility and flexibility prove essential. Large corporations lumber through layoffs and bailouts, while small businesses pivot to meet customer needs. For example, following the recent pandemic, we witnessed the creation of new small businesses rise to a record high. Following the global lockdown, the SBA received almost 1.4 million applications for business licenses in 2021, amounting to 400,000 more than in 2019. These new small businesses offer the shot of hope our unsteady economy so desperately needs.
Small businesses pioneer tomorrow’s frontier for the American Dream
The opportunity to move into an untamed space and stake a claim to economic growth is still possible in our country’s current socio-economic climate. Every time a small business opens its doors, another patch of economic wilderness is seeded for the American Dream to take root and flourish. Although contemporary entrepreneurs may opt to ride in Teslas, rather than on Conestoga wagons, they share similar hardships with those early pioneers. They dare to chase down riches where there once were none and make space for us to share those economic gains.
Small businesses pop up all around us. We sit back and watch them take their fates and fortunes into their hands and venture into the unknown. We look on as these entrepreneurs build startups from the ground up, knowing some will thrive and some will fail.
So often, we applaud the efforts of entrepreneurs, yet continue to order from online mega-marketplaces, eat at chain restaurants, and shop at super stores. We leave their fate in the hands of angel investors and government support, not imagining we can make a real difference.
The truth is that, just as small businesses have collective power as a whole, our combined wealth as consumers has a massive impact. It decides the fate of every small venture in our communities.
Instead of falling back on convenience with every purchase, think of your money going a few steps further. Consider the economic comfort you currently owe to the small businesses in your immediate community. After all, your consumer support enables small businesses to keep their doors open and create opportunities directly benefiting you. Small businesses are vital to your economy. They keep the American dream alive and well for us, our children, and all other generations to come.
