Small Businesses Are the Backbone of the Economy

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11 Aug 2020

Small Businesses Are the Backbone of the Economy

Small businesses don’t get a whole lot of attention in the business world. Business reporters seem to only give press to big businesses—their profit and loss data, their newest product, a corporate scandal. Yet, 99 percent of all businesses in the United States are small businesses. Small businesses are the lifeblood that keeps the American economy functioning.  

Small Business: The Engine That Keeps the Machine Running

According to a report issued by the Small Business Administration (SBA) in 2019, small businesses account for 44 percent of economic activity in the United States. Small businesses create two-thirds of new jobs and deliver 43.5 percent of the United States’ gross domestic product (GDP). In addition to keeping the economy running, small businesses also lead the way in innovation. Small businesses produce 16 times more new patents per employee than large patenting firms do. Small tech startups with fewer than 5 employees account for a large number of these patents. Not only that, but small businesses reflect the diversity of the United States population in a way that the employee base of large corporations do not. 36 percent of small businesses are owned by women. 9 percent are owned by veterans. 14.6 percent of small businesses are owned by people of color. This includes 2.3 million Latinx business owners, 1.9 million black business owners and 1.6 million Asian business owners.

Winning Against the Odds

Despite providing the economy with an overwhelming number of benefits, small businesses don’t receive the same government support as large corporations. Small businesses do not receive the same tax breaks that are provided for large corporations. Small businesses also don’t receive the same local and state incentives for things like production facilities, or research and development. Large companies can receive federal bail-out money in times of financial turmoil, an option that is not available to small businesses. Small businesses have the odds against them but continue to thrive. They bring jobs and revenue to the local economies by offering jobs, local products, paying sales and property tax, and using local vendors and supporting services. In fact, a recent study shows that for every dollar spent at a small business, 68 percent funnels back into the community. Compare that to the 46 percent that funnels back from large businesses. Many surveys even show that individuals have more trust in local small businesses than they have in larger business concerns.   Small businesses don’t get a whole lot of attention. CEO’s of large companies fill the cover of magazines. Large businesses typically consume the business news with their financial data. Yet, small businesses are the epitome of what is keeping America going. Small businesses are the unsung heroes of the United States economy.